Series Limited Liability Company
A Series LLC is a limited liability company that allows for an unlimited number of “Series” to be created and operate as separate entities. Each Series can have different members (owners), management structures, business interests and rights from other Series. Importantly, each Series has its own liability protection and operates like a separate entity with its own name, bank account, books and records and tax identification number. The debts and liabilities of one Series are only enforceable against that Series.
A Series LLC is an ideal solution for investors and business owners who have multiple investments or income-producing assets. Each investment or asset, or group of investments or assets, can be owned by a separate Series.
Flat Fee Series LLC Formation
Linnemeyer Law offers flat-fee arrangements for formation of Series LLCs. These flat fees start at $1,200.00, plus costs. Linnemeyer Law will form your Series LLC quickly, professionally and completely. Linnemeyer Law handles the Series LLC formation process from start to finish. The flat fee quoted by Linnemeyer Law will include everything needed to organize (form) your Series LLC, prepare critical governance documents for the Series LLC and transfer properties and other assets to each Series.
All flat fee Series LLC formations include the services listed below:
+ Initial Consultation
+ Name Availability Search
+ Prepare and File Articles of Organization or Certificate of Formation
+ Prepare and File Certificate(s) of Designation or Certificate(s) of Registered Series
+ Obtain EIN (Employer Identification Number) from the IRS
+ Prepare Initial Member and Manager Resolutions
+ Prepare Operating Agreements for LLC and each Series
+ Transfer of Properties or Investment Accounts to Series LLC
+ No additional cost Registered Agent Service
Flat fees for the formation of Series LLC start at $1,200.00 and increase based on the number of members, the number of Series and the complexity of the business structure.
In addition to the formation of Series LLCs, Linnemeyer Law, LLC provides comprehensive legal representation of small and mid-sized businesses. This includes contract review, commercial real estate matters, mergers and acquisitions, venture capital and private equity financing and many other business and legal services.
Series LLC Formation
A Series LLC is formed by filing Articles of Organization or a Certificate of Formation with the applicable Secretary of State. The Articles of Organization or Certificate of Designation must specify that the LLC is permitted to form one or more Series. After the Series LLC is formed, one or more Series can be created by filing a Certificate of Designation or a Certificate of Registered Series with the Secretary of State. After the Series LLC is formed, an employer identification number (EIN) should be obtained for the Series LLC and each Series.
The umbrella or master LLC and each Series of the LLC must have an Operating Agreement. An Operating Agreement is a confidential written agreement between the members (owners) of a LLC that governs the business and affairs of the company. The Operating Agreement for the master or umbrella LLC will establish the rules applicable to every Series and the procedure for forming additional Series. The Operating Agreement for each Series will contain rules and governance applicable to the specific Series.
After the Series LLC is formed, it must be funded or capitalized by contributing properties or other income-producing business assets to the Series LLC. Properties and other business assets are contributed to the Series LLC by titling the property or business assets in the name of the Series LLC or the appropriate Series. For real property, this includes executing a deed and recording the deed with the county recorder. For other business assets, this includes titling investment accounts of the name of a Series, executing a bill of sale to convey personal property to a Series, executing an assignment of intellectual property rights to assign intellectual property rights to a Series and other instruments of conveyance.
Examples of How Series LLC are Used:
+ Real Estate investors with multiple properties establish a Series LLC and designate a separate Series for each property. The debts and liabilities associated with each rental property are separate. If there is a claim or lawsuit related to one property, only the assets of the Series set up for that property are at risk.
FREQUENTLY ASKED QUESTIONS:
How long does it take to form a series LLC?
For the formation of an Illinois Series LLC, the Secretary of State will provide a response to a non-expedited filing of Articles of Organization within 10 business days. Expedited service requests are available for an additional cost and receive responses within 24 hours, excluding weekends and holidays. A Certificate of Designation can only be filed after the limited liability company has been created through the filing of the Articles of Organization. For the formation of a Delaware Series LLC, regular processing times vary from 3-5 business days to several weeks. We highly recommend expedited filing of all Delaware Secretary of State filings. The Delaware Secretary of State offers same-day service and 24-hour service for an additional fee. The EIN and remaining company documents will be completed as quickly as needed in accordance with client needs.
Does a Series LLC need an Operating Agreement?
An Illinois Series LLC is required to have an Operating Agreement to “establish or provide for the establishment of designated series of members, managers or limited liability company interests having separate rights, powers or duties with respect to specified property or obligations …” See 805 ILCS 180/37-40. It is crucial for all multi-member LLCs to have an Operating Agreement to establish the relative ownership and management rights of the members. For Series LLCs the “umbrella” or “master” LLC should have an operating agreement to establish the rules and terms of governance that are applicable to the umbrella LLC and to establish the rules and procedure for establishment of separate Series. Additionally, each Series LLC should have its own Operating Agreement or Separate Series Agreement to establish the ownership and management of the Series and other rights and preferences specific to the Series.
What are the filing fees associated with forming a Series LLC?
The filing fee paid to the Illinois Secretary of State to file the Articles of Organization for the Series LLC is $400.00. There is an additional fee of $100.00 for expedited filing service. The filing fee for each Certificate of Designation is $50.00. The filing fee paid to the Delaware Secretary of State to file the Certificate of Formation for any LLC (including a Series LLC) is $90.00. There is an additional fee of $100.00 for same-day service or $50.00 for 24-hour service. The filing fee for each Registered Series Formation is $90.00.
What if a company was originally formed as an LLC (not a Series LLC)?
An Illinois LLC that was originally formed as an LLC without the ability to establish Series must file Articles of Amendment with the Illinois Secretary of State. Contact Linnemeyer Law, LLC if you are interested in amending your Articles of Organization to establish authority to issue series for your LLC.
Does each Series need to have its own EIN (Employer Identification Number)?
Yes, each Series should be treated as a separate entity for tax purposes and have its own EIN. The IRS has issued proposed regulations stating that each Series of a Series LLC should be treated as a separate entity and then the classification of that entity would be determined under normal federal income tax classification rules. See Prop. Treas. Reg. § 301-7701-1(a)(5).
What is the tax classification of a Series LLC?
Each Series of a Series LLC can be taxed as a disregarded entity, a partnership, an S-Corporation, or a C-Corporation. By default, a single-member Series will be taxed as a disregarded entity for federal and state tax purposes. As a result of being “disregarded," the Series does not file a separate tax return. Rather, its income and loss are reported on the tax return filed by the single member. A Series with multiple members is taxed as a partnership. A Series taxed as a partnership must file an IRS Form 1065 partnership tax return. Additionally, the Series must also give each member a Schedule k-1, showing each member’s share of partnership income, credits and deductions. Since a LLC is a flow-through entity, each member reports his or her share of income, credits and deductions on their individual 1040 and Schedule E. A single-member Series or a multiple-member Series may elect to be taxed as an S-Corporation (if it meets certain requirements) or a C-Corporation. This is accomplished by filing an election (form 2553 or 8832) with the IRS. The legal status of a Series is not changed by filing an election to be taxed as a corporation, it continues to function as an LLC for all other purposes. A LLC’s election to be taxed as a corporation only changes the LLC’s tax classification. A LLC that elects to be taxed as an S-Corporation must file an IRS Form 1120S tax return and a LLC that elects to be taxed as a C-Corporation must file an IRS Form 1120 tax return.
What are the ongoing obligations after the Series LLC is formed?
All Illinois LLCs are required to file an Annual Report with the Secretary of State. The Annual Report fee is $75, plus $50 per Series. The Annual Report is due on the first day of the month during which the LLC was formed. All Delaware LLCs are required to pay a $300 Annual Tax to the Delaware Secretary of State. The Annual Tax is due every year on or before June 1st. Most other states also require annual filings online with a small fee. Some states also require that every LLC file an annual franchise tax return. Additionally, every Series LLC and every Series needs to file a State and Federal Tax Return unless the Series LLC or Series is classified as being taxed as a disregarded entity. See above regarding the tax classification of a Series LLC.
Does every Series LLC and Series need its own bank account?
Yes, every Series LLC and Series that is established must have its own bank account. Business owners should not “commingle” company and personal funds. Additionally, funds from one Series should not be commingled with funds from another Series. Based on the legal doctrine known as “piercing the corporate veil,” a Series LLC could lose its limited liability protection if company funds are commingled. A business bank account can be opened for the Series LLC the filed Articles of Organization and EIN are received.