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NEVADA RESTRICTED LLC AND LP
"I was ecstatic that the Business Law Section was willing to sponsor my Restricted LLC and Restricted LP language as part of Senate Bill 350. I was even more ecstatic to hear that it passed and was signed into law by the Governor! I want to give a special thanks to Rob Kim, Chairperson of the Business Law Section, for his great job of integrating my language into their Bill." -Steve Oshins
2001 - Nevada Charging Order Exclusive Remedy for LLCs and LPs
2003 - Nevada Charging Order Exclusive Remedy for LLCs and LPs (rewrite to remove foreclosure remedy)
2005 - Nevada 365-Year Rule Against Perpetuities
2009 - Nevada Restricted LLC and Restricted LP
Q: What is a Restricted LLC and a Restricted LP?
A: A Restricted LLC and a Restricted LP are special entities that will be allowed under Nevada law, effective October 1, 2009, pursuant to Senate Bill 350. Nevada is the first and only state to allow these types of entities. These entities take advantage of Treas. Reg. §25.2704-2(b) which states that a restriction which is less restrictive than those that would apply under state law will be disregarded in valuing the interest for transfer tax purposes under IRC §2704(b).
Q: In what way do these new Nevada Restricted LLC and Restricted LP statutes exceed the opportunities in every other state?
A: The default statutes now create a ceiling with the Restricted LLC or Restricted LP statutes locking in the underlying assets for 10 years. This is just the ceiling and will create significantly higher valuation discounts than can be obtained under any other state law. The attorney can draft provisions that are less restrictive than this new ceiling, but at the expense of a lower valuation discount. This now offers the drafting attorney a great amount of creativity in the entity design.
Q: Can you quantify the amount of additional valuation discount you expect for a transfer fully utilizing your new law?
A: I posed this question (and other hypothetical questions with fact patterns partially utilizing the new law) to two different business valuation appraisers that I use. I asked both appraisers to provide me with a memorandum that I can cite. One of the appraisers provided a range of an additional 15% to 35% for the additional valuation discount. The other appraiser provided a range of 10% to 30%+ for the additional valuation discount. So, for example, if the valuation discount would have been 35% for a regular LLC, after adding the additional valuation discount, the valuation discount would instead be between 45% and 70%.
Q: How do I access SB 350 so I can read the language in the Bill?
Q: Where can I read even more detailed information about Restricted LLCs and LPs?
A: Go to www.oshins.com and scroll down to the fourth heading under the "PUBLISHED ARTICLES" list. You will find some detailed articles and interviews under the "NEVADA RESTRICTED LLCS AND LPS" subheading.