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As specialists at providing incorporating services, it is our duty to stay up to date with new corporate structures and enterprises. Today we would like to share with our readers a few notes on a relatively new corporate structure, called Series LLC. The second part will focus on a State that has become very popular when it comes to incorporating: Delaware. Look for part two next week.
While different States (not that many, just a handful, and not California) have different definitions of a series LLC, there are common general elements that they all share:
A Series LLC is a hybrid of 1) a LLC with internal divisions and 2) multiple LLC subsidiaries owned by a common parent LLC. It has features of each. Often it is set up to be a ‘mothership’ LLC that has the option of setting up as many ‘daughter’ series as the members wish.
First, the Series LLC is like a single LLC with divisions, because the State legislations for the series LLC do not specify whether it is one or more entities under state law, therefore many consider it only one ‘entity’ under state law. In the traditional LLC context a division of an LLC is a glorified DBA within an LLC. With divisions, each separate division is legally connected to the entity without any liability separation. Although the operations are conducted through different ‘departments’, each is just an extension of the traditional LLC. In a series LLC, each series is part of the LLC, not a separately filed LLC.
When the series LLC (we can call them daughters or cells) do business or when they take title to properties, their names are listed as, for example, ‘XYZ Investments, series 1′.They never lose the name of the LLC filed with the Secretary of State of the State of incorporation.
Second, the series LLC organizational structure can be like a parent with wholly-owned-subsidiaries, because each cell is allowed to contract in its own name, sue and be sued in its own name, obtain separate tax ID numbers, and even make separate tax elections, so one cell could be a partnership, another an S-Corp, and another a C-Corp.
One major element to keep into consideration is that, we have read repeatedly that precedents in courts are few, so this is kind of uncharted territory when it comes to lawsuit and how each “cell” could be affected by lawsuits brought to other cells or the mother company. Some sites use the visual example of a carton of eggs, and our graphic designer should get points for not resorting to that tempting image to illustrate the dangers of structuring different enterprises under the same roof.
The Document People is a network of legal document assistants, paralegals and notaries. We offer incorporating services in Los Angeles County and Orange County at the We the People Woodland Hills, We the People Santa Monica, San Fernando, We the People Glendale and at The Document People Torrance, Anaheim and Oceanside stores.
The information contained in this blog – including information of a legal nature – is provided for informational purposes only, and should not be construed as legal advice on any subject matter.