This article explains the legal details and information regarding the Series LLC, a specially-focused form of Limited Liability Company (LLC) that is found almost exclusively in the state of Delaware. For more information, see the included contact information.
Series LLC Legal Facts:
1) The legislation which authorizes the Series LLC in Delaware can be found within the Delaware LLC Act (6 Del. C. §18-215). This section of the act requires that an LLC (Limited Liability Company) provide notice in its Certificate of Formation that the members intend to establish series of assets and operations within the LLC. Once this is complete, the liabilities of one series within the LLC cannot go against the assets of another series within the same LLC.
2) The operating agreement for the Series LLC has a master agreement in which the members of the LLC assign the names and members for the multiple series under the company. Each of those series has a separate series agreement signed and appended to the operating agreement. This has been described as an umbrella with an unlimited number of separate baskets underneath. Each basket or series holds assets in its own name.
3) A party to a contract (a contract with a third party, not the operating agreement) has the opportunity to limit the rights and remedies available to the other party at the outset. In other words, using a Series LLC is one way to limit the rights of another party.
4) The governing law and/or forum can also be stipulated. (Example: "This agreement is to be governed under Delaware law and in Delaware courts.”)
5) The Series LLC can be used in a variety of contexts outside series states. Examples include:
i. when someone owns containers that are to be shipped overseas
ii. when an entrepreneur with many business ideas wishes to set up an incubator for each separate idea
iv. when a business owner wishes to franchise businesses
v. to provide incentive compensation to employees
vii. to own a group of real estate investments
6) In Delaware and the four other states that allow for the Series LLC, the afforded liability shields will most likely be respected. In non-series states, however, the protection is somewhat speculative. An out-of-state judge may decide not to use Delaware law for matters that are outside the realm of the “internal affairs doctrine.”
7) In Delaware, the Series LLC requires only one registered agent and only one annual report fee of $200 per year (regardless of the number of series).
Chris Einkauf is an operational consultant for Agents and Corporations, Inc. which specializes in incorporating or forming a Series LLC in Delaware and other services geared towards those seeking to register a company in Delaware. |
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