Nevada Administrative Code Chapter 78A - Close Corporations
📌 Background: NAC Chapter 86
NAC 86 sets rules related to:
Formation and registration – Filing requirements for creating an LLC, registered agent designation, and certificate of formation.
Management structure – Roles of managers, member-managed vs. manager-managed LLCs, and fiduciary duties.
Member rights and obligations – Voting rights, profit distribution, and access to records.
Financial reporting and compliance – Annual reports, business licenses, and state fees.
Dispute resolution and enforcement – Procedures for member disputes, dissolution, and penalties for noncompliance.
🧑⚖️ Case 1: Failure to File Annual Report
Situation
An LLC failed to file its annual report and pay the required fees to the Nevada Secretary of State.
Relevant NAC Rules
NAC 86.120 requires LLCs to file annual reports with accurate information on members, managers, and principal addresses.
Issue
Noncompliance led to the LLC being ineligible to conduct business or enter contracts legally.
Outcome
The Secretary of State issued a notice of administrative dissolution.
The LLC reinstated by filing the delinquent reports and paying fees, restoring legal status.
Lesson: Filing annual reports and fees is mandatory to maintain good standing.
🧑⚖️ Case 2: Member Access to Records
Situation
A minority member requested access to the LLC’s financial records, but the managers refused.
Relevant NAC Rules
NAC 86.190 grants members the right to inspect and copy LLC records for proper purposes.
Issue
The managers claimed the request was burdensome, but the member’s request was within their rights.
Outcome
Member filed a complaint under NAC rules.
Managers were required to provide access to financial records within a reasonable timeframe.
Lesson: Members have a legal right to inspect records; refusal can lead to enforcement action.
🧑⚖️ Case 3: Dispute Over Profit Distribution
Situation
Two members disagreed over profit distribution, claiming the allocation formula in the operating agreement was not followed.
Relevant NAC Rules
NAC 86.210 requires LLCs to follow the operating agreement regarding allocations, distributions, and financial obligations.
Issue
Managers distributed profits disproportionately without consulting members.
Outcome
NAC procedures allowed members to petition for correction.
Managers were required to recalculate distributions and pay the difference.
Lesson: Operating agreements govern profit allocation; deviations without approval are enforceable under NAC rules.
🧑⚖️ Case 4: Improper Manager Actions
Situation
A manager used LLC funds for personal expenses, violating fiduciary duties.
Relevant NAC Rules
NAC 86.230 outlines manager duties, including acting in good faith and in the best interest of the LLC.
Issue
Members claimed a breach of fiduciary duty.
Outcome
NAC allows members to seek removal of the manager and recovery of misused funds.
The court ordered the manager to repay misappropriated funds and resigned from management.
Lesson: Managers must act in good faith; misuse of funds is a serious violation.
🧑⚖️ Case 5: Dissolution Dispute
Situation
A multi-member LLC faced conflict over whether to dissolve the company, with some members wanting to continue operations.
Relevant NAC Rules
NAC 86.250-86.260 provide procedures for voluntary and involuntary dissolution, including member votes and winding up assets.
Issue
Members were deadlocked, preventing smooth dissolution.
Outcome
NAC procedures allowed a court-appointed receiver to oversee winding up.
Assets were distributed according to ownership percentages in the operating agreement.
Lesson: Dissolution disputes can be resolved using NAC procedures and court intervention if members cannot agree.
🧑⚖️ Case 6: Failure to Maintain Registered Agent
Situation
An LLC failed to maintain a registered agent in Nevada, as required for service of process.
Relevant NAC Rules
NAC 86.040 requires LLCs to designate and maintain a registered agent for legal notices.
Issue
Without a registered agent, the LLC could not receive legal documents properly.
Outcome
The Secretary of State issued a notice of noncompliance.
LLC reinstated good standing by appointing a registered agent and updating records.
Lesson: A registered agent is essential for legal compliance; failure can jeopardize the LLC’s ability to operate.
🔑 Key Themes from NAC Chapter 86
Compliance with Filing Requirements – Annual reports, registered agent, and fees are mandatory.
Member Rights – Access to records, profit distributions, and participation in major decisions are protected.
Managerial Duties – Managers must act in good faith and avoid misusing LLC resources.
Operating Agreement Enforcement – Disputes over allocations, governance, or dissolution are guided by the agreement and NAC rules.
Dispute Resolution and Dissolution – NAC provides mechanisms for resolving conflicts and winding up LLCs.
Maintaining Legal Standing – Noncompliance can lead to administrative dissolution or loss of legal protections
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