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When A California Corporation Converts To A California Limited Liability Company, What Happens To Its Nevada Business License?
Thursday, May 23, 2024

NRS 107.028(1)(d) requires that a trustee under a deed of trust be a "domestic or foreign entity which holds a current state business license issued by the Secretary of State pursuant to chapter 76 of NRS". In Mahban v. Prestige Default Services, LLC, 525 P.3d 835 (Nev. 2023), the trustors (Mahban) sought declaratory relief that the trustee (Prestige) had violated NRS 107.028 because the trustee did not hold a valid Nevada business license when serving as the foreclosure trustee.

Prestige was originally formed as a California corporation, but it later converted to a California limited liability company. The California corporation held a Nevada business license. Some time after the conversion, the California LLC obtained a Nevada business license. The question before the court was whether the California LLC had operated without a Nevada business license in violation of NRS 107028(1)(d). The trial court said "no" and the Nevada Supreme Court in a brief, unpublished opinion agreed:

Because the laws of the state where the foreign LLC is organized govern its organization, NRS 86.543, Prestige LLC's compliance with California laws regarding conversion was sufficient to make Prestige Corp.'s conversion to Prestige LLC valid. When a corporation converts to an LLC, the corporation's rights are vested in the LLC. Cal. Corp. Code § 1158(b)(1) (explaining that upon a conversion, the old entity's rights and properties are vested in the new entity); see also NRS 92A.250(3)(c),(f) (providing that in a conversion all of the old entity's property and interests are vested in the new entity). A "right" is defined as "[a] power, privilege, or immunity secured to the person by law," Right, Black's Law Dictionary (10th ed. 2014), and a "license" is defined as "[a] privilege granted by a state or city upon the payment of a fee, the recipient of the privilege then being authorized to do some act or series of acts that would otherwise be impermissible," License, Black's Law Dictionary (10th ed. 2014). Because a Nevada business license is a right that vests in a converted entity, the district court did not err in concluding that Prestige LLC had a vested right in Prestige Corp.'s Nevada business license, and thus, held a valid business license.

The Supreme Court's affirmance is unpublished and readers should consult Rule 36(c) of the Nevada Rules of Appellate Procedure.

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