Registered Series LLC Vs. Protected Series LLC
Delaware’s limited liability company statute states that LLCs may be comprised in a “series,” each multiple treated as a separate entity with distinct business, debts, members, and management.
In August of 2019, the Delaware Legislature amended the statute’s series LLC provisions. The amendments create a new type of series—a Registered Series LLC— which can be formed through a filing made with the State. The original series LLC is now called the Protected Series.
The logic behind the amendments is to address the issues that prevented the widespread adoption of the series LLC. However, the amendments remove some key benefits of the LLC series—simplicity and a lack of fees. Below we discuss the amendments and their effect on the series LLC form.
The Delaware Series LLC
A Delaware Series LLC is a limited liability company that can establish multiple series under one parent LLC. Each series may have its own business purpose, members, managers, assets, operations, and financial obligations. When Delaware’s legal and recordkeeping requirements are satisfied, the debts and liabilities associated with one series generally may be separated from the assets of the parent LLC and its other series.
This can help a business organize multiple properties and ventures without forming an entirely separate LLC for each one. Note that the parent company’s Certificate of Formation must include specific language authorizing the creation of series, while the LLC Operating Agreement typically explains how the individual series will be established and managed. Under Delaware law, a series may be structured as either a protected series or a registered series.
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The Registered Series LLC & the Protected Series LLC
A Delaware Series LLC can establish protected series, registered series, or a combination of both.
What Is a Protected Series LLC?
A protected series is created through the series LLC’s operating agreement. It does not file its own formation certificate with the Delaware Secretary of State. Because it is established internally, the protected series generally does not appear as a separately registered entity in the state’s public records. Protected series can offer a simpler and less expensive way to divide assets or business activities. However, the LLC must carefully maintain separate records for each series to preserve the intended liability protections.
What Is a Registered Series LLC?
A registered series is formally created by filing a Certificate of Registered Series with the Delaware Secretary of State. It receives its own state registration and has a name that must begin with the full name of the parent LLC. A registered series can conduct business, enter contracts, own property, grant liens, and sue or be sued in its own name. It can also obtain its own Certificate of Good Standing, which may make its legal status easier to demonstrate to banks, lenders, title companies, and other third parties.
Naming a Series LLC
One key difference between a protected series LLC and a registered series LLC is the naming requirements. A registered series must use a name that begins with the complete name of its parent Delaware LLC, including the required LLC designation. Its name must also be distinguishable from most other business and registered-series names appearing in the Delaware Secretary of State’s records.
Meanwhile, a protected series is not created through a separate state filing, so its name is generally established in the Series LLC’s operating agreement. Unlike a registered series, the name of a protected series is not reviewed for availability or placed separately on Delaware’s public business records.
Forming a Protected or Registered Series
Before establishing either type of series, the parent Delaware LLC must have an operating agreement that authorizes the creation of one or more series. A protected series is then created through the operating agreement and the company’s internal records. No separate certificate is filed with the Delaware Division of Corporations for the individual protected series. Instead, the operating agreement can identify the series, its members or managers, its business purpose, and the assets associated with it.
Registered Series require slightly greater documentation and formality for their creation. The requirements include:
- Filing with the State of Delaware and paying an annual $100 franchise fee (per series).
- Complying with certain naming requirements. In order to reduce confusion as to the nature of the registered series and its relationship to the LLC, a registered series’ name must begin with that of the overarching LLC.
- Listing a registered agent and paying respective Registered Agent Fees.
Series LLC Good Standing
A protected series does not maintain a separate good-standing status with the state, as it wasn’t created through an individual state filing. Instead, its status generally depends on the parent Series LLC. The parent LLC must maintain a Delaware Registered Agent and pay its annual Delaware LLC tax by June 1. If the parent LLC loses good standing, its protected series may also be affected.
A registered series has its own good-standing status in addition to relying on the status of the parent LLC. Each registered series must pay a separate annual Delaware tax of $100 by June 1. Failing to pay this tax causes the registered series to lose good standing and results in a penalty, plus monthly interest. The parent LLC must also remain in good standing. If it fails to pay its own annual tax, all registered series formed beneath it lose good standing as well.
Comparing Registered and Protected Series
Below is a short summary of the similarities and differences between the registered and protected series LLCs.
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Protected Series LLC |
Registered Series LLC |
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Costs |
One annual Franchise Tax of $400, regardless of number of series. One Registered Agent fee, regardless of number of series. |
$400 annual Franchise Tax PLUS an additional $100 per series. Separate Registered Agent fee for each series. (May not apply to all Registered Agents.) |
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Naming of Series |
Each Series has a unique and independent name. |
Each series must begin with the primary (overarching) LLC name. |
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Documents Available |
Certificate of Formation, Certificate of Good Standing, etc. only available for Series LLC name. |
Certificate of Formation, Certificate of Good Standing, etc. available each series. |
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Recognition in Other States |
Recognized by some states. Series sometimes treated as individual LLCs. |
Less familiar due to recent inception. Unclear whether will receive more acceptance than Protected. |
Which Type of Series Is Right for Your Business?
A protected series may appeal to businesses that want to establish multiple series with fewer Delaware filings and lower state-level costs. A registered series involves greater formality in exchange for clearer documentation when dealing with banks and lenders. Delaware also permits registered series to complete certain filings and transactions that are not available to protected series.
Neither option is automatically appropriate for every business. Owners should consider the number of planned series and whether forming separate LLCs would provide greater practical certainty.
If you're interested in the Delaware Protected Series LLC or Registered Series LLC, our team is happy to take the lead on the company formation process, so give us a call at 1-800-345-2677 or 1-302-645-7400, and we'll be happy to answer any questions.
FAQs
Is a registered series a separate legal entity?
A registered series is not an independently formed LLC separate from its parent Series LLC. However, Delaware law gives it many entity-like powers. It may enter contracts, hold assets, and sue or be sued in its own name. Its debts and liabilities may also be limited to the assets associated with that series.
Can a Delaware Series LLC have both protected and registered series?
Yes. A single Delaware Series LLC may establish both protected series and registered series. A protected series is generally created through the LLC agreement and internal records, while a registered series requires a Certificate of Registered Series filed with the Delaware Secretary of State. Delaware law defines “series” broadly enough to include either type.
Is a Series LLC less expensive than forming multiple LLCs?
A protected series generally avoids a separate Delaware formation filing and annual state tax for each series, which may reduce costs compared with forming several standalone LLCs. Registered series involve additional filing fees and annual taxes, although their costs may still be lower than maintaining multiple separate LLCs.
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Start my business*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There is 1 comment left for Registered Series LLC Vs. Protected Series LLC
Elaina D'Agostino said: Thursday, March 9, 2023Thanks for talking about the registered series LLC and how its name must begin with that of the overarching LLC to avoid confusion. That's fine since my friend doesn't have a name for his company yet. If it is named closely after an overarching LLC that's already established, then he could attract clients using the reputation it already has.
HBS Staff replied: Friday, March 10, 2023Hi Elaina,
Thank you for reading our blog. We are glad you found it helpful for you and your friend. We wish you much success.