In a Delaware series LLC, each series is treated as a separate entity, meaning the debts, liabilities, obligations and expenses of one series cannot be enforced against another series of the LLC, or against the LLC as a whole.
Each series can hold its own assets, have its own members, conduct its own business and pursue different business objectives, yet they remain shielded from claims of members, creditors or litigants pursuing the assets of or asserting claims against another series.
In addition, a series LLC is treated as only one entity for Franchise Tax and Registered Agent Fee purposes, meaning the LLC is assessed one $300 annual Franchise Tax Fee and one Registered Agent Fee, rather than the separate taxes and fees that would otherwise be applied, individually, to separate LLCs.
While in theory the structure of a series LLC sounds perfect, in reality it is too good to be true. Due to all the uncertainty amongs series LLCs, many business owners have encountered frustrating complications and challenges when trying to utilize a series LLC.
As the series LLC structure gains traction and becomes more popular, more and more buisness owners with traditional LLCs have been inquiring about transforming their existing LLC into a series LLC.
This can be achieved by amending the original Certification of Formation filed with the Delaware Division of Corporations to include an additional article; this article will allow the LLC to establish multiple, designated series of members, managers or membership interests.
The best solution, at the moment, may be what some of our clients have been doing in order to avoid the current uncertainity of the series LLC; they are opting to form their new LLC as a series LLC and simply not utilize the individual series until the above issues are clarified.
This way, the series LLC structure is established and ready to be used in the future, and it will not be necessary for them to amend their Certificate of Formations in order to allow for the series LLC structure.
Since the fees to file a Delaware series LLC are the same as a traditional LLC, we would be happy to help you create a series LLC—which can function as a traditional LLC for the time being—for you.
You can do so online www.delawareinc.com/order/ or, if you have any questions regarding the Delaware series LLC, please feel free to call me at 800-345-2677, Ext 6131 or email me at firstname.lastname@example.org.
Photo credit: Horla Varlan