Form a Nevada LLC
Business Formation
Registered Agent Service
Tax ID / EIN
Legal Services
Start up Coach
Taxes and Bookkeeping
Business Credit
Operating a franchise business is an excellent way to build your wealth, although it comes with legal, financial, and reputational risks. All three can be more difficult to handle for franchisees who manage multiple locations, especially those without a proper business structure.
Nevada LLCs can increase your overall protection through your franchise’s lifetime. You can operate with a single LLC from the start, but expansion to other locations may require establishing new LLCs. In this article, you’ll learn whether you should take this step and how it helps you manage the challenges of running a franchise business.
Key Takeaways
- Forming a Nevada LLC for each franchise location helps isolate potential risks. A legal or financial challenge faced by one location won’t affect others.
- Nevada has a strong corporate veil, increasing the overall protection of franchise owners as a result. Plaintiffs must prove that an LLC was used to commit fraud or a similar offense for courts to disregard its existence.
- You can form and operate Nevada LLCs for multiple franchise locations by yourself, with partners or managers, or under a holding company. Each LLC should be well-governed and conduct proper record-keeping.
- Maintaining multiple Nevada LLCs can cost you more than the initial state fee of $350. Registered agent service fees, legal or tax services, and other expenses can increase your overall costs.
- Franchisors may permit or discourage the use of separate LLCs for franchise locations. Review your franchisor’s Franchise Disclosure Document (FDD) and franchise agreement first for clarification.
Start your Nevada LLC in
24 hours guaranteed
You don't need to live in Nevada to enjoy the best asset protection and audit defense a Nevada LLC can provide.
Should Franchise Locations Have a Nevada LLC?
Franchise locations should have a Nevada LLC to isolate the risks that can affect their operations. When one LLC operates at one franchise location, it handles the legal or financial challenges it faces. Other locations with separate LLCs aren’t exposed to these issues.
Establishing multiple LLCs suits food service, fitness, childcare, and healthcare-related franchisees the most. A slip-and-fall accident at a restaurant, a staffing issue at a gym, or a non-compliant clinic can create costly and disruptive problems. If franchisees operate at multiple locations under a single LLC, plaintiffs can easily pursue personal and business assets upon judgment.
One question you may have about forming Nevada LLCs for franchise locations is how many you actually need. This episode of Ask NCH has the answer.
How Does a Nevada LLC Increase My Protection?
A Nevada LLC increases your protection by separating you from any debt or liability that it incurs, ultimately protecting your personal assets. Under NRS 86.371, an LLC’s owners (members) or managers aren’t personally liable for the debts or liabilities of the company. This rule applies to each franchise location with a separate Nevada LLC.
Nevada’s liability protection framework supports the legal separation between an LLC and its members or managers by imposing a high burden of proof for “piercing the corporate veil.” Plaintiffs must prove that an LLC was used to commit fraud or serious misconduct to hold its members or managers liable and reach their personal assets. Failing to follow proper formalities or mixing personal and business finances can expose you to this risk.
How Does Ownership Work Across Multiple LLCs?
Multiple LLCs for franchise businesses can be owned by:
- One or more individuals
- A holding company
If you choose to run franchise locations by yourself or with partners, consider forming member-managed LLCs. Franchise owners can also adopt a manager-managed structure; this arrangement delegates an LLC’s management to trusted and experienced individuals.
Alternatively, some franchisees set up a holding company with multiple LLCs for their franchise locations under it. The holding company acts as the “parent” company, and each LLC it manages is its subsidiary. It oversees each subsidiary’s operations rather than conducting business itself.
One advantage of establishing Nevada LLCs under any of these arrangements is that they’re not required to disclose their members or managers in public records. You can list nominees or a registered agent (a person or company that receives official documents on behalf of an LLC) in these filings to protect your privacy while operating a franchise business in Nevada.
How Much Does It Cost to Maintain Multiple Nevada LLCs?
The cost of maintaining multiple Nevada LLCs for a franchise business varies significantly. You pay a total of $350 in state filing fees for each LLC, potentially increasing your overall costs to more than $1,000. Other expenses such as registered agent service fees add to this amount, so setting an adequate budget and structuring your franchise business properly is important.
| Number of LLCs | Estimated Annual Costs |
|---|---|
| Single LLC | $350 + other expenses |
| Multiple LLCs | $350 + other expenses (per LLC) |
| Holding company with subsidiary LLCs | Varies depending on the number of LLCs formed |
NCH’s LLC formation specialists have broken down the cost of maintaining Nevada LLCs in the long term here.
How Does Each LLC Under a Franchise Business Operate?
Each LLC under a franchise business operates with well-established internal governance and a separate set of internal business records. In general, Nevada LLCs need a written operating agreement with clear terms about their operations and other properly maintained records such as meeting minutes, financial statements, and documents related to existing contracts.
An operating agreement is a document that describes each LLC’s:
- Ownership or management structure
- Allocation of profits and losses to members
- Decision-making process
Clauses about these areas and other important provisions should be aligned with each franchise LLC’s overall operations.
Will I Be Allowed to Form Separate LLCs?
You may be allowed to form separate LLCs for franchise locations, depending on the terms of your franchisor’s Franchise Disclosure Document and franchise agreement.
Some franchisors permit the use of multiple LLCs for franchise locations, while others require only one. Additionally, there are franchisors who prefer an entity other than LLCs. Read your franchisor’s FDD and franchise agreement carefully to confirm whether you’re allowed to form separate LLCs and that the franchisor would work with each entity.
Related Resources
- Read the following guides for more information about Nevada LLC governance and compliance.
- A Business Owner’s Guide to Nevada LLC Governance
- What Internal Records Should Nevada LLCs Maintain
- How to Create an Internal Record-Keeping System for a Nevada LLC
- How to Keep Your LLC Compliant During Business Expansion
Frequently Asked Questions
Forming separate LLCs for franchise locations can help isolate potential liabilities. A legal or financial challenge faced by one location won’t affect your franchise’s other locations. In contrast, running multiple locations under a single LLC exposes them to serious risks.
Yes, you can form a holding company for multiple franchise LLCs. This structure creates an additional layer of separation between you, your personal assets, and any liabilities incurred by the LLCs under it.
No, Nevada LLCs aren’t required to have an operating agreement by law. Still, operating without one can create significant issues, including legal claims.
Each franchise LLC should maintain internal records such as:
- Copies of its formation documents
- A custom operating agreement
- Financial statements
- Tax records
- Business licenses and permits
- Copies of currently effective contracts
Keeping these documents shows that each LLC operates under proper formalities.
If a franchise LLC fails to conduct proper record-keeping, it risks losing its level of protection. Courts can disregard the LLC’s existence and pursue personal liability, allowing plaintiffs to seize personal and business assets.
To form Nevada LLCs for multiple franchise locations:
- Name each LLC under your franchise.
- Appoint a registered agent for each location.
- File each LLC’s formation documents with the state.
- Draft separate operating agreements.
- Get an Employer Identification Number for each LLC.
- Open separate business bank accounts.
- Obtain the necessary business licenses and permits.
You can form a Nevada LLC for a new franchise location in a few minutes or several weeks.
Online registration and expedited processing services are available for faster processing. On the other hand, standard processing of paper filings can take 2 to 4 weeks or more to complete.
Yes, each Nevada LLC under your franchise needs a registered agent. This person or company must have a physical street address in the state and be available to receive documents during regular business hours, Monday through Friday.
The cost of maintaining multiple Nevada LLCs can go over the initial total of $350. For example, five franchise LLCs pay an estimated $1,750 or more annually. The other expenses incurred by each LLC determines the final amount.
Consider working with an experienced LLC formation service provider like NCH. During your consultation with one of our specialists, tell us about your franchise, specific needs, and long-term goals. Your advisor will recommend the appropriate solutions based on the information you’ve provided and help you set them up.
Expert Tips From NCH
- Review your franchisor’s Franchise Disclosure Document with a qualified legal advisor before forming an LLC. Franchisor requirements mostly determine how your business operates.
- Set an adequate budget for LLC formation and maintenance costs before signing a franchise agreement. Restructuring after the agreement starts can be costlier and more complicated.
- Open a business bank account for each LLC after formation. Deposit all business income in this account and use it to cover business expenses.
- Create a compliance calendar that tracks the due dates of each LLC’s annual filings and business license or permit renewals. Appoint a trusted employee or an experienced compliance service provider to manage this calendar for fewer issues.
Open a Franchise LLC in Nevada Today
Franchisees who operate in multiple locations and prioritize maximum protection and long-term growth benefit the most from forming separate Nevada LLCs. Although this strategy can increase your overall costs and administrative burden, using it provides you with an additional layer of protection and a proper operational structure.
If you’re opening a franchise LLC in Nevada, NCH can help you get it right the first time. We provide a proven, structured process that’s designed to reduce errors, delays, and unnecessary costs. Furthermore, our approach to LLC formation is backed by 32+ years in business and 250,000+ businesses formed, focusing on accuracy, clarity, and long-term support.
Get Started with NCH’s Assistance Today
DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.
