The series limited liability company (LLC) is a type of LLC that, depending on the particular statutory provisions, may allow for the segregation of certain liabilities, assets, profits and control within a single entity. Those who are considering forming or are presented with a series LLC in a transaction may find these ten facts of interest:
- Series LLCs are somewhat controversial due to unresolved issues such as the treatment of series LLCs by foreign states that do not have provisions in their LLC statutes for series LLCs and the uncertainty regarding whether series LLCs will be treated as separate and distinct entities for bankruptcy purposes. However, despite these obstacles, they continue to be formed and used in a number of jurisdictions.
- According to a recent report of the Study Committee on Series of Unincorporated Business Entities, dated May 23, 2012, submitted to NCCUSL, there is a combined total of around 10,000 series LLCs in the states of Delaware, Nevada and Utah. Illinois has approximately 5,000 series LLCs and, within those 5,000, there are 13,000 individual series.
- With the recent addition of Kansas, there are at least nine states which provide for a series LLC: Delaware, Illinois, Iowa, Kansas, Nevada, Oklahoma, Tennessee, Texas and Utah. The District of Columbia and Puerto Rico LLC statutes also contain provisions for series LLCs.
- A few other states such as Minnesota, North Dakota and Wisconsin have series provisions in their LLC statutes, however, these provisions do not provide for an internal liability shield between the LLC and the series.
- In a majority of jurisdictions allowing for series LLCs, including Delaware, there are no requirements for Secretary of State filings related to the individual series other than a statement about the series in the LLC’s Certificate of Formation.
- In the District of Columbia, Illinois, Iowa and Kansas, the name of the series must include the name of the master LLC.
- The District of Columbia, Illinois and Kansas require the filing of a Certificate of Designation to establish a particular series.
- In addition to listing the name of the series, the Illinois and Kansas certificates include information concerning the management of the LLC. The District of Columbia Certificate of Designation includes the name of the series, the principal office and the registered agent. Interestingly, while the D.C. Department of Consumer and Regulatory Affairs does not index the individual series in its database (meaning it cannot be found by searching the series name in public record, but can only be found by searching the name of the master LLC and reviewing the Certificate of Designation), the agent for the series can be different than the agent for the master LLC. In Illinois and Kansas, a foreign series LLC is required to file a Certificate of Designation. In D.C., there is no qualification provision for foreign series LLCs, thus no Certificate of Designation is filed.
- The Certificate of Designation can also be used to amend the previously filed certificate or dissolve the series in Illinois and Kansas.
- A few state filing offices have suggested that an assumed name certificate should be filed for the series name, although there are no specific statutory provisions requiring it. It is unclear whether some states may consider that a series LLC is doing business under a name other than its true (master) name.
*Please note that this article is provided for informational purposes only and should not be relied upon as legal advice. Please review any relevant state statutes and seek competent legal counsel within a specific jurisdiction.