As noted here, effective July 1, Nevada will be increasing its Business License fee from $100 to $200. A Business License is just what it sounds like: in order to Do Business in Nevada, you need one of these bad boys.
But are the LLC’s used in TIC investments “Doing Business”? What constitutes Doing Business? Does a Sponsor (or an individual investor) who is left with the job of managing Single Purpose Entities in a TIC investment need to get one of these Business Licenses (in Nevada)?
Well, the quick answer is “Nope.”. These tikes are considered an exception.
According to the Nevada Department of Taxation, any entity not required to file a separate Federal Form 1120 or a 1041 is furthermore not required to obtain a Nevada Business License in order to conduct business within Nevada. And the single-member LLC’s used in TIC investments endure no such requirements.
As stated in LCB File No. R161-04, the Business License requirement applies to any person conducting business in Nevada other than “natural persons”, where “activities of a natural person” is interpreted rigidly as including, in part, any activities performed by “a limited-liability company which is disregarded, for the purposes of federal income taxation, as an entity separate from its owner”.
One might wonder about this language in the Nevada code about LLC’s “disregarded, for the purpose of federal income taxation”. Which LLC’s are which?
LLC’s are Formed under state law, and can be divided, for the purposes of the present discussion, into two kinds: those with one member, and those with more than one member. LLC’s with more than one member have to be classified as Corporations or Partnerships with regards to federal taxation. Any LLC with one member, however, is called a “disregarded entity”, since, with regards to federal taxation, the company is treated as if it were a Sole Proprietorship. It is “disregarded”, as if it didn’t exist. Sometimes they are called “pass-through entities” for this reason; the entity itself doesn’t have to file the 1120 or 1041, the single member (be it another legal entity or an individual) is the one subject to tax requirements.
So, to express this point of this post by way of an analogy–
The rise in Nevada’s business license fee : SPE’s :: a rise in gas prices : bicyclists.
