A delaware series llc in other states can be accomplished by registered. Series llc benefits and drawbacks for your business. As mentioned, you cannot form a series llc in california unless you are a foreign entity. Series llcs somewhat demystified statebystate kkos lawyers. Feb 16, 2015 several states, including delaware, treat a series as a person, so that the series is a legal entity separate from the master llc that can enter into contracts, buy and sell property, sue and be. In theory, each series within a delaware series llc should have its own limited liability in the case of lawsuits. Formation of registered series of delaware llcs to be permitted. Series llcs were created several years ago under delaware state law for the purpose of simplifying structured financial transactions and collective investments such as mutual funds. The structure of an llc is governed by the llc operating agreement, which includes setting forth the rights and responsibilities of members, as well as how member disputes are resolved. The series llc is a product of the delaware legislature, the most highly regarded body for drafting corporate laws.
The statutes do not describe an llc series structure as a holding company with whollyowned subsidiaries. The number of series can be increased without filing a registration. This is the same document an ordinary delaware llc submits, but. This cle webinar will add another option to the corporate attorneys arsenal of entities to use for clients looking to limit liability, define ownership rights, and reap tax advantages. The series llc is a product of the delaware legislature, the most highly regarded body. When a protected series of a limited liability company has converted to a registered series of such limited liability company pursuant to this section, for all purposes of the laws of the state of delaware, the registered series shall be deemed to be the same series as the converting protected series and the conversion shall constitute a continuation of the existence of the protected series in the form of such registered series. According to the delaware act, the series is created by the limited liability company agreement del. Once formed in another state, that series llc can register in california. Eccles is visiting professor of management practice at oxford university said business school, and a senior advisor to the boston consulting group. These changes, signed into law as senate bill 183 in july of 2018, include the. The delaware legislature recently adopted amendments to the states entity laws that, among other things, allow a delaware limited liability company llc to divide itself into new llcs, and beginning. Lori smith effective august 1, 2018, delaware amended the delaware revised uniform limited partnership act lp act and the delaware limited liability company act llc act to, among other things. The alfa network is comprised of 125 law firms with nearly 300 offices throughout the united states and. The delaware series llc has undergone a round of important changes set to take effect on august 1, 2019.
It says that a delaware llc can establish, in its llc agreement, series of members, managers, llc interests, or assets. Delaware has allowed for the creation of a series llc since 1996. According to the delaware act, the series is created by the limited liability company. A limited liability company agreement or an agreement of merger or consolidation or a plan of merger or a plan of division may provide that contractual appraisal rights with respect to a limited liability company interest or another interest in a limited liability company shall be available for any class or group or series of members or limited. What to name a series of a series llc texas llc lawyer. A delaware series llc in other states can be accomplished by registered in other states as a foreign entity, theoretically making it available in all states. Under delaware law, an llc can create separate series that can have separate members and managers, maintain separate assets, and. Delaware, however, provides that if a foreign series llc registering to do business in delaware is governed by an operating agreement that establishes designated series of members, managers, llc. Investors based in california may want to do additional research about the delaware statutory.
Under delaware law, any particular series may be dissolved by 23 approval of the ownership interests, or a simple majority if provided for in the operating. Apr 25, 2018 the proposed amendments to the delaware alternative entity acts allow for the division of an llc into two or more separate llcs, the formation of registered series of llcs and statutory public benefit llcs, and the use of blockchain technology to maintain llc and lp records and for electronic transmissions. The series limited liability company is a relatively new statutorily created entity. These changes, signed into law as senate bill 183 in july of 2018, include the creation of a new kind of seriesthe registered seriesthat looks to resolve certain problems arising from previous delaware statutory law. There are currently thirteen states that allow series llcs. Jun 19, 2019 the delaware series llc has undergone a round of important changes set to take effect on august 1, 2019.
May 31, 2019 delaware famously known for adapting its business entity laws to clarify issues of concern to practitioners has done it again by amending the llc act to clarify the applicability of its ucc law to series of delaware series llcs. May 27, 2018 in connection with a division, a dividing delaware llc must adopt a plan of division setting forth the terms and conditions of the division, including the allocation of assets, property, rights, series, debts, liabilities and duties of such dividing delaware llc among the division delaware llcs, the name of each resulting delaware llc and, if. The series llc is a relatively new concept in business ownership, but the concept of multiple llcs has been around for some time. Delaware proposes updates to its llc statute regarding series. In 1996 delaware became the first state to permit the creation of a special kind of llc called a series llc. Since its creation in 1996, most states have adopted this legal entity. Some states have rules controlling the structure of an llc, but delaware law affords an llc great freedom in how it sets up the operating agreement. To date, ten 10 states plus two territories have followed the delaware model of the series llc. The series llc is a novel business structure created in delaware in 1996 as an alternative to forming multiple, independent llcs to segregate and protect a companys assets, though the series llc concept has since spread to more than a dozen other us jurisdictions. This method of liability segregation was first called the delaware series llc because the first state to enact this legislation was delaware in 1996.
Under delaware law, a limited liability company llc may be composed of an individual series of membership interests. Although many states allow for the formation of series llc, few still do not. This uniform approach does not apply to the names of individual series of a series llc if youre unfamiliar with series llcs, see our article on what are series llcs. The term protected series emphasizes that the series is protected against the liabilities and obligations of the llc itself and other series. An llc is not a corporation, but it does provide the same liability protection as a corporation since it is separate. The delaware llc series provides for independent and separate liability of each asset within each series, without creating a separate limited liability company for each asset. This type of entity is referred to as the delaware series llc. Delaware amends its series llc law on august 1, 2019, significant amendments to the delaware series llc law will go into effect. As of april 2005, iowa and oklahoma already had passed similar acts. What is the difference between a series llc and a restricted.
An llc limited liability company is a form of business ownership recognized by all u. Delaware amendments would permit divisions of llcs, formation. While the formation of a series llc may not be for every company, it can be very beneficial for others. Several states, including delaware, treat a series as a person, so that the series is a legal entity separate from the master llc that can enter into contracts, buy and sell property, sue and be. The series has been valid in the lone star state for the past ten years since 2009. The delaware legislature recently adopted amendments to the states entity laws that, among other things, allow a delaware limited liability company llc to divide itself into new llcs, and beginning august 1, 2019, allow delaware llcs to form registered series. Delaware famously known for adapting its business entity laws to clarify issues of concern to practitioners has done it again by amending the llc act to clarify the applicability of its. The delaware series llc is a limited liability company without a. The feasibility of using a delaware series llc in other. When forming a company, business formers have a choice of jurisdiction. Additional series can be formed or dissolved without any public filing by simply amending the series limited liability company agreement equivalent to an operating agreement for other llcs. Statutory public benefit limited liability companies.
The proposed amendments to the delaware alternative entity acts allow for the division of an llc into two or more separate llcs, the formation of registered series of llcs and statutory public. Each series operates like a separate entity with a unique name, bank account, and separate books and records. I think this comes from the fact that the series llc is relatively new delaware was the first state to adopt the series llc in 1996, and many states have adopted it within the last 510 years, as well as the fact that only about of the states have a series llc statutes and those statutes are not in any way uniform. Under delaware law, each series can hold its own assets, have its own members, conduct its own operations and pursue different business objectives, yet remain. A series llc is a unique form of limited liability company llc in which the articles of formation specifically allow for unlimited segregation of membership interests, assets, and operations into independent series. How to operate a series llc in california the attorneys of theta law firm are familiar with the formation, maintenance, and dissolution of various business entities in california. The delaware series llc is the most cuttingedge entity on the market. Under delaware law, a series llc limited liability company may be composed. Businesses choose delaware not for one single reason, but because we provide a complete package of business. A series llc statute effectively instructs the courts to keep the liabilities separate as long as the members have followed the formalities and recordkeeping rules. The series llc is one entity with a group of series each of which is bankruptcy remote from each other series. Delaware, however, provides that if a foreign series llc registering to do business in delaware is governed by an operating agreement that establishes designated series of members, managers, llc interests, or assets having separate rights, powers, or duties with respect to specified property or obligations of the foreign limited liability. This is the same document an ordinary delaware llc submits, but a certificate of formation for a delaware series llc must add an additional notice of the limitation on liabilities authorizing the series llc to establish or form series. Under delaware law and the series acts of other states having series acts, the assets and liabilities of each series will be separate and provided that adequate.
While the formation of a series llc may not be for every company, it can be very beneficial for. Delaware series llc delaware business incorporators, inc. The delaware general corporation law title 8, chapter 1 of the delaware code is the statute governing corporate law in the u. Does each series in a series llc have limited liability. A series llc can make distributions as allowed by state law. Since that time, series llcs migrated to other investments and business ventures, such as real estate. Although an individual series of a delaware series llc has the power and capacity to, in its own name, contract, hold title to assets including real, personal and intangible property, grant liens and security interests, and sue and be sued 6 del. I think this comes from the fact that the series llc is relatively new delaware was the first state to adopt the series llc in 1996, and many states have adopted it within the last 510 years, as well as the. This uniform approach does not apply to the names of individual series of a series llc if youre unfamiliar with. The delaware series llc is similar to a traditional llc with divisions. A series llc is a regular business llc that is set up to hold several properties or interests underneath one llc.
This article is brought to you for free and open access by the journals at university of michigan law school scholarship repository. In connection with a division, a dividing delaware llc must adopt a plan of division setting forth the terms and conditions of the division, including the allocation of assets, property. Originally adopted in 1899, it has been the most important jurisdiction in united states corporate law since the early 20th century. A series limited liability company, commonly known as a series llc and sometimes. The alfa network is comprised of 125 law firms with nearly 300 offices throughout the united states and around the world.
Under delaware law, any particular series may be dissolved by 23 approval of the ownership interests, or a simple majority if provided for in the. Any investor can take advantage of this structure, no matter which state they live or choose to form their llc in. Tax aspects of series llcs american bar association. We hope that this step by step process will assist you in forming your new business entity with the delaware division of corporations. Commentary delaware proposes updates to its llc statute regarding series llcs on april 6, the delaware corporation law section of the delaware bar association proposed some major and minor. When you form a delaware series llc with the delaware division of corporations, the entity you form often called the master llc can be pictured as an umbrella. Code 18215c, a series may not enter into a merger or conversion. Under delaware law, a series llc limited liability company may be composed of individual series of membership interests. The biggest problem with series llcs is that many states including california dont have series legislation and may choose to ignore the laws of the state where the series was created. Each series is effectively treated as a separate entity, meaning the debts, liabilities, obligations and expenses of one series cannot be enforced against another. To do so, you will need to fill out an application. The llc is not necessarily the member or a member of each series. How to form a new business entity division of corporations.
The delaware series llc is a limited liability company without a predetermined shape. Wisconsin passed a strippeddown version of the series llc legislation in 2001. A delaware series llc limited liability corporation allows businesses to delineate liability of individual assets without creating a separate legal structure for each. Delaware series llc how to start a series llc in delaware. Each protected series designated by the company may have assets associated with it that are not associated with other protected series therein. Under the delaware limited liability company act the dllca, an llc can create series of. The delaware series llc is a business structure that draws attention and curiosity from many business owners.
The series llc was first introduced by delaware in 1996. Sophisticated and flexible business planning, 2 mich. Newly passed delaware llc and lp law amendments require. Aug 02, 2018 additionally, one or more registered series of an llc may merge or consolidate with or into one or more other registered series of the same llc, a more practical way to combine the assets and liabilities of two series than previously available under applicable law i. Delaware was the first state to allow the formation of a series llc.
Originally adopted in 1899, it has been the most important. The series llc is a creation of state law and can only be formed in a state that authorizes the formation. Instead of forming distinct llcs for each asset registered as separate organizations with the state, paying separate filing fees, and paying separate annual taxes, the delaware series llc allows. Corporate law professor larry ribstein encapsulates the use of the series llc well in his book, rise of the uncorporation, stating. A limited liability company agreement or an agreement of merger or consolidation or a plan of merger or a plan of division may provide that contractual appraisal rights with respect to a limited liability company interest or another interest in a limited liability company. Businesses choose delaware not for one single reason, but because we provide a complete package of business entity services. Delaware amendments would permit divisions of llcs.
This type of entity is referred to as a delaware series llc. An llc limited liability company is a form of business ownership. To form a delaware series llc, you must complete and submit the certificate of formation with the delaware division of corporations. These amendments were enacted by senate bill 183, which was signed by delaware s governor last year. Theta law firm, llp how to operate a series llc in california. A series within a series llc is not formed under delaware law but rather pursuant to the limited liability company agreement of the series. The delaware series llc is a product of the delaware legislature, a highlyregarded body for drafting business laws. Although many states allow for the formation of series. Delaware enacts amendments to llc act and delaware general.
The series limited liability company series llc farah. State law approaches to name requirements for individual series of a series llc. Investors based in california may want to do additional research about the delaware statutory trust, which offers many of the same benefits of an outofstate series llc, while also providing a way around the california franchise. Under previous delaware law, series of a series llc are established simply by amending the organizations limited liability company agreement. The series limited liability company the series limited liability company series llc was first introduced in delaware in 1996. Powell abstract a series llc is an llc that has one or more series. To date, ten 10 states plus two territories have followed the delaware model of the.