What is a Series LLC?
By Bazal Razzaq
Updated: July 27, 2023
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- What is an LLC?
- How to change your LLC name in 2023?
- How to set up an LLC as a Non-US resident
- What Is A Foreign LLC?
- Mastering the Art of Maintenance: Things To Do After Setting Up An LLC
- Exploring the Basics: What is a Single Member LLC?
- The Power of Partnership: Unleashing The Potential of A Multi Member LLC
- C Corp vs LLC – Which Business Structure is Right for You?
- A Guide to Business License: Everything you need to know
- Unlocking the Benefits of an LLC (Limited Liability Company)
- Which is the best state to form an LLC in?
- Operating Agreement 101: A Key To A Successful LLC
- One LLC, Multiple Streams of Income: can you have multiple businesses under one LLC?
- Articles of Organization Made Easy: Everything You Need to Know
- What Is A LLC Annual Report: A Comprehensive Guide for Business Owners
- Exploring Eligibility: Who Can Be LLC Members?
- What Is A Domestic Limited Liability Company?
- What is An EIN, and Do You Need One?
- What Is a Registered Agent, and Why Does Your Business Need One?
- How to start a business with no money in 6 steps
- Member Managed vs Manager Managed LLC – Which Structure Fits Your Business?
As we’ve discussed earlier, an LLC or Limited Liability Company is a special business entity, but only for America. It’s a US-specific business type allowed by state law. It actually has the best of both worlds, the freedom of a partnership and the asset security of a corporation. This legal structure protects its members/owners from personal liability for business lawsuits and debts. So what happens when the term “series” is added to LLC? Let’s understand!
A Series LLC is a business structure where one main company can have multiple smaller “series” companies. An LLC can have multiple sub-LLCs. Each series operates independently and has its assets and liabilities. It’s like having several separate businesses under one big umbrella company.
The best part about an SLLC is that each series’s debts, lawsuits, and obligations are generally set apart from those of the other series within the LLC. For example, if one series has a problem like being debt-ridden or getting sued, the other series that are a part of the parent company will not be affected or face any consequences.
This structure is useful for people who want to manage different businesses or assets but want to keep them organized and protected within a single legal entity.
Where Can You Form A Series LLC?
Out of the 50 states in the United States, you can create an SLLC in 19 of them. These states permit the formation, as in, they have laws that recognize and allow the creation of SLLCs as a legal business structure. We’re listing them below for your convenience and comfort,
- Delaware (the first state to allow SLLC formation)
- North Dakota
- Puerto Rico
- District of Columbia
The list and the state requirements keep changing. So, it’s important to be aware of the changing standards. For example, California doesn’t permit creating SLLCs, but they do allow them from other states to operate there.
What Do You Need To Form Your Series LLC?
Before you begin starting an SLLC, here’s a list of details you need to have:
- The name of your LLC
- The official business address of your LLC
- The name and address of the registered agent who will form the SLLC for you.
- The proper designation of who will manage the LLC, members or managers.
- The names and addresses of the managers of the SLLC
- A clear understanding of how long your LLC will be active. If you don’t know the exact date, mention it as “ongoing” or, in most states, “perpetual.”
- Specify the kind of business or industry your LLC will operate in. In many states, you can simply state, “all legal business activities.”
- Make it clear in your filing that you are creating an SLLC. The details and notifications required may vary depending on the particular state where you’re forming it.
- File separate forms for each cell or sub-LLC associated with the SLLC and each manager, as required in some states like Illinois.
Once you’ve covered all these details, you’re officially ready to form your LLC.
How To Create A Series LLC?
- Pick A Name for Your Series LLC: Obviously, the very first step is to shortlist a name for your company. Similar to a traditional LLC, you need to follow certain guidelines and rules when naming your SLLC. They are:
- Avoid using a name that’s too similar to or the same as other registered business names.
- Also, don’t forget to include “LLC” or “Limited Liability Company” in your chosen name to indicate its business structure.
- Use the term “protected series” within the name of each LLC.
- Make sure that the name of the master(parent) LLC is different from its sub-LLCs.
- Include the full name of the primary parent LLC in each child SLLC’s name.
- Add the name of the assets held by each sub-LLC needs in their names, helping everyone understand the assets owned by the child series, including the public and creditors.
Here’s an example of how you can name your SLLC,
If your Master LLC Name is Joanne Enterprises, LLC
Your child SLLC name should be something like,
- Joanne Enterprises Protected Series – Real Estate Assets
- Joanne Enterprises Protected Series – Technology Division
- Joanne Enterprises Protected Series – Investment Portfolio
- Joanne Enterprises Protected Series – Hospitality Ventures
In the above example, the parent LLC is “Smith Enterprises, LLC,” and each child series within it uses the term “Smith Enterprises Protected Series” followed by a specific identifier for the type of assets it holds (e.g., Real Estate Assets, Technology Division, Investment Portfolio, and Hospitality Ventures). This naming approach distinguishes the master LLC from its child series while providing a clearer picture of the assets owned by each series.
- Assign a Registered Agent:
A registered agent is an individual or entity authorized to receive legal, official, and financial documents on behalf of your LLC. They accept them and then forward them to you.
Similarly, every state where your SLLC operates will require it to appoint a registered agent in that state, and the agent for each sub-LLC will be the same as the Parent LLC(at least in the same state).
- Decide on the Management Structure: You usually have two management options,
- Member-Managed: The owners/members of the company will manage it themselves.
- Manager-Managed: The company will be managed by managers who are appointed or hired specifically for that role.
In this specific situation of an SLLC, you need to make this decision for the overall company and each individual sub-LLC within the company. Different series can have different owners/members and managers, so you must choose if each series will be managed by its members or appointed managers. It gives you more flexibility for each part of your SLLC to have its own management setup.
- Complete The Required Paperwork: To officially form your SLLC, you need to file your Articles of Organization(known as “Certificate of Formation” in some states) document with the Secretary of State or equivalent state business registration agency. You must specifically mention/include a clause that your LLC can set up sub-LLCs in your Articles of Incorporation form and other formal documentation. You’ll also have to provide the name of your Series LLC, details about your registered agent, and your signature.
Some states may require filing a different form for SLLCs, and the specific forms, fees, and requirements will also vary depending on the state.
In states with an allowance for an SLLC, you can create individual series by simply updating your Operating Agreement. Let’s discuss a little more on that!
- Draft An Operating Agreement for Your LLC: An Operating Agreement for your SLLC Operating Agreement is like a set of rules for your company. In most states, you can use this document to create or close a series within your LLC.
It also decides how your company will be managed, who owns what part, and how money is shared. Because it’s crucial, getting help from a knowledgeable lawyer is a good idea. Each series within the LLC may also have its own operating agreement.
Here’s what you can include in your LLC Operating Agreement:
- Formation and the main purpose of your LLC
- Series Structure
- Members and Managers
- Capital Contributions
- Profit and Loss Allocation
- Voting rights and responsibilities
- Management Authority
- Meetings and Voting Procedures
- Transfer of Interests
- Amendments to the Operating Agreement
While we understand that creating a Series LLC may sound like a complex process if you have no prior expertise and don’t know where to start. But we’re also confident that regardless of the complexity of the business structure, there’s nothing that would confuse you when you have our expert guide and a professional lawyer helping you every step of the way!
Before we conclude, here are the two tips that will help most of you immensely.
- In case your particular state doesn’t allow the formation of an SLLC, it would be best to form an independent LLC or have separate LLCs for each state to stay on the safer side.
- It’s always a good idea to look up the rules and requirements of your state to find out more about how to create an SLLC and file taxes correctly.
That being said, the world of Series LLC is much more complex than just this blog, and BLS strives to help you every step of the way in your LLC journey. Feel free to explore our website for more in-depth articles, resources, and tools to assist you in this exciting process!
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Frequently Asked Questions (FAQs)
An SLLC offers several advantages, making it an attractive choice for certain business owners:
- Liability Protection
- Cost Efficiency
- Administrative Simplicity
- Flexibility and Versatility
- Asset Protection
- Business Expansion
Delaware was the first US State to allow the formation of an SLLC.
A Series LLC consists of a “Master LLC” that serves as the parent company and individual “series” that act as separate business units, or sub-LLCs. Each series can have its own assets, liabilities, and business activities, providing a level of isolation between them.
Forming a series LLC involves filing necessary formation documents with your Secretary of State or equivalent government agency, like the Articles of Organization. Each series/ sub-LLCs may require separate operating agreements detailing its rights and responsibilities.
Tax treatment varies by the state and the kind of federal laws your LLC may be dealing with. In some cases, each series is taxed independently as a separate entity, but in most cases, the master LLC handles tax filings for all the series. You should work with an accountant or tax advisor to figure out the best approach for your company.