What is a Series LLC?
What is a Series LLC?
A Series LLC is one limited liability company with internal compartments or divisions, also referred to as “series.” It has been equated to wrapping multiple LLCs into one large LLC “wrapper” where the assets of each series are shielded from the liabilities of other series and the LLC itself. Each series may also have its own distinct members, different managers, differing ownership percentages, and different voting or distribution rights.
Series LLCs in South Dakota
Series LLCs have been authorized in South Dakota since November 15, 2020. A Series LLC is created in South Dakota by filing Articles of Organization with the Secretary of State and indicating in the Articles that the LLC is authorized to establish one or more series. Each time a series is established, a Certificate of Designation must be filed with the Secretary of State. An existing LLC can become a Series LLC by amending its Articles of Organization to allow for the creation of series.
Once a Certificate of Designation has been filed with the Secretary of State, each series must maintain its own separate and distinct records. The assets of each series must be separately accounted for from the assets of the LLC or other series to help ensure the assets of each series are insulated from the liabilities of the LLC or other series. South Dakota law provides that each series is treated as a separate legal entity, which means each series is allowed to enter into contracts, hold title to assets, give security interests in its assets, and file lawsuits, just as traditional LLCs are.
Benefits of a Series LLC
One of the main benefits of creating a Series LLC is replacing a more traditional holding company structure of one parent entity owning multiple subsidiaries with the administrative simplicity and efficiency of one LLC. Series LLCs are able to separate high risk business lines from high value assets and “cabin” liabilities, all within one LLC. Examples of where Series LLCs may be effectively used include:
- owners of residential and commercial real estate and developments can hold individual properties or parcels in individual series,
- logistics companies can hold each truck or trailer in a separate series,
- construction companies can operate different divisions through individual series, or different pieces of equipment can be owned by individual series;
- Family farms can own individual real estate parcels through individual series, hold the equipment in another series, and run the farm operations through another series;
- Family businesses can hold real estate in one series, the furniture, fixture, equipment in a second series, the intellectual property in a third series and the operations run through a fourth series; and
- Series LLCs can also be used in trust and estate planning by allocating ownership of individual series to different beneficiaries.
There may be many benefits to implementing a Series LLC with your business. If you have questions regarding whether a Series LLC is right for you, consult with the attorneys at Woods Fuller who will help you navigate through this new development in South Dakota law.