What is a Series LLC?
A Series LLC is a limited liability company that can branch out to form subsidiary LLCs. When you form a Series LLC, the entity you form (often called the “Master LLC”) is like the canopy of an umbrella. Beneath this umbrella, you can add as many divisions (called “series”) to your company as you want. Each series can enter into its own contracts, open its own bank account, and have its own limited liability protection. Different members and managers can be associated with different series, and the series can even choose different tax elections. (One series can be taxed as a partnership, for instance, while another can elect to be taxed as a C corporation or S corporation.) There are currently no limits to how many series you can establish within a Delaware Series LLC.
What are the advantages of a Delaware Series LLC?
- The Court of Chancery
The lack of court decisions concerning the Series LLC may make some entrepreneurs wary, but if the Series LLC is going be upheld as it is written into law, it’s going to be in Delaware where businesses have their own court system.
Delaware Series LLCs file the same forms as a regular LLC, which means much of the members’ personal information isn’t required on the public document. The structure of the series are laid out in the company’s operating agreement, and that document isn’t filed with the state. Most of a Series LLC’s will stay private.
- Multiple LLCs for Less
Currently, a Delaware Series LLC only pays one filing fee and one annual tax no matter how many series are formed within the entity, and the Master LLC and each series can (and must) share the same registered agent. This means a Delaware Series LLC will often pay fewer state fees than organizations that form multiple LLCs instead.
Why form a Delaware Series LLC with a registered agent?
As your registered agent, we’re with you for the lifespan of your business. We’re available during all business hours to receive important notices from the state on your behalf, which means we’re always working for you and your business. Whenever you plan to add a new series to your Series LLC, we can file the forms to make it happen.
NOTE: When forming a Series LLC in Delaware, you must first form a Delaware LLC—you’ll be able to add series from there. (See below.)
How to Create a Series LLC in Delaware:
- Complete a Certificate of Formation
- Include a Notice of Liability Clause
- Submit Your Certificate of Formation
- Create a Series or a Registered Series
- Apply for EINs
1. Complete a Delaware Certificate of Formation for a Delaware LLC
Just as you would when forming a Delaware Corporation or Delaware LLC, you must file formation papers with the Delaware Division of Corporations to create a Series LLC. Note that the Delaware Certificate of Formation document for Series LLCs is the same as the document you’d have to file to form a typical Delaware LLC.
2. Include a Notice of Limitation on Liabilities Clause with Your Certificate of Formation
Add a Notice of Limitation on Liabilities clause to your Series LLC’s Certificate of Formation using the following language:
“Notice is hereby given pursuant to Section 18.215(b) of the LLC Act that the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to a particular series of the LLC, shall be enforceable against the assets of such series only and not against the assets of the LLC generally, or any other series thereof, and none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the LLC generally, or any other series thereof, shall be enforceable against the assets of such series.”
3. Submit Your Certificate of Formation to the Delaware Division of Corporations
You can file your Certificate of Formation with the DE Division of Corporations (along with the state’s $110 filings fee) either online, using the state’s Document Upload Service or via mail:
Delaware Division of Corporations
401 Federal Street – Suite 4
Dover, DE 19901
4. Create a Series or a Registered Series
Once your LLC formation documents are accepted by the state, you can begin to create individual series. In Delaware, you have a couple options:
- Series. Creating a traditional series as part of your LLC doesn’t require any paperwork. Instead, individual series can be added to and removed from your LLC by filing amendments to update your Series LLC Operating Agreement.
- Registered Series. Unlike a traditional series, a “registered series” is a business entity that must file its own formation documents with the state, even though it’s nested under a Master LLC. To form a registered series, you’ll have to file a Certificate of Registered Series form, along the $110 filing fee.
If you plan to form a traditional series (also known as a “protected series”), you should amend your operating agreement to explain the company’s structure, including which managers and members are assigned to each series, and what type of tax structure each series will use.
5. Apply for EINs
Each series in the Delaware Series LLC will need to apply for its own Employer Identification Number (EIN) with the Internal Revenue Service (IRS), as each series is treated as a separate entity for tax purposes. Most banks will also require a separate EIN for each series to open its own bank account.
FAQ: Delaware Series LLC
- What are a Delaware Series LLC’s costs and filing fees?
- Does each series in a Series LLC have limited liability?
- How is a Series LLC in Delaware taxed?
- Do Series LLCs in Delaware need multiple EINs?
- What’s the benefit of forming a registered series?
- Can a Delaware Series LLC do business in other states?
- Can a Delaware Series LLC have different members for different series?
What are a Delaware Series LLC’s costs and filing fees?
The filing fee for the Delaware Certificate of Formation is $110 paid to the DE Division of Corporations. Currently, the fee doesn’t change no matter how many series are established through your Series LLC Operating Agreement. If you form a registered series, however, you will also have to file a Certificate of Formation and pay a $110 filing fee for that registered series.
The Delaware Series LLC’s annual tax is $300 due by June 1 each year. A registered series must also pay an annual tax due by June 1, but the cost to registered series is $75.
Does each series in a Series LLC have limited liability?
In theory, each series within a Delaware Series LLC should have its own limited liability in the case of lawsuits. Additionally, a series’s debts, contracts, bankruptcies, and other liabilities should not affect any other series within the LLC.
Those forming a Series LLC should be aware, however, that the Series LLC legal structure has not been vigorously tested in a court. A court ruling against a Series LLC could invalidate the limited liability shields between the series and their master LLC. However, the Delaware Series LLC would likely be the safest to form a Series LLC, particularly if your Series LLC will operate in Delaware, because the Series LLC business structure originated in Delaware, and any cases concerning the validity of a Series LLC structure would likely land in the Court of Chancery, Delaware’s court for businesses.
How is a Series LLC in Delaware taxed?
Just as each series within a Delaware Series LLC operates as its own entity, each series can choose how it will be taxed. In 2010, the IRS issued its proposed rules for Series LLCs. The IRS clearly stated that each series within a Series LLC will be treated as a separate entity for tax purposes. Each series can have its own tax designation, which means one series could be taxed as an S Corp, while a different series could be taxed as a C Corp, and another could be taxed as a partnership.
Do Series LLCs in Delaware need multiple EINs?
If each series within the Series LLC is operating as its own distinct business, each series will need to file its own tax return. In order to file a tax return, each series needs an Employer Identification Number (EIN). Many banks will also expect each series to have their own EINs to open separate bank accounts.
EINs are obtained through the IRS by filing Form SS-4. You can apply for an EIN online, by phone, or by mail.
What’s the benefit of forming a registered series?
A registered series is an entity that falls somewhere in between a traditional LLC and an individual series. There are two main benefits to creating a registered series:
- Registration. As a “registered entity,” a registered series can obtain a Certificate of Good Standing (as long as the Master LLC is also in good standing). This is often required to do business in other states.
- Cost. Unlike a regular LLC, which must pay a $300 annual tax, registered series are only required to pay $75 each year.
Can a Delaware Series LLC do business in other states?
Only certain states and territories other than Delaware allow the formation of Series LLCs, including Alabama, the District of Columbia, Illinois, Indiana, Iowa, Kansas, Missouri, Montana, Nevada, Oklahoma, Puerto Rico, Tennessee, Texas, Utah, and Wyoming. California has established rules for foreign Series LLCs operating in the state, but does not allow the formation of in-state Series LLCs.
Series of a Delaware LLC can operate outside our state, but do so at their own risk, as the Series LLC has not been tested in court. Each series would need to register as a foreign entity doing business in the state.
Many other states will likely adopt rules concerning Series LLCs once the IRS formalizes its rules.
Can a Delaware Series LLC have different members for different series?
Yes, Series LLC members or managers can be associated with different series. These designations should get made in your Series LLC operating agreement.