As of January 2011, only eight states allow the formation of a series LLC: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas and Utah. It’s a new corporate structure that allows entities to separate while remaining within the same overall structure. His articles have been published on LIVESTRONG.COM, SFgate.com and Chron.com. If your LLC's existing operating agreement is not in writing or there is no operating agreement, it is important to create a written operating agreement. This makes it more difficult for a creditor to deny the existence of the series LLC. We are not Then, you must convert your LLC to a series LLC. On an annual basis, a series LLC can minimize maintenance, administrative, and compliance costs as opposed to those of a master LLC structure. The process varies by state, depending on whether the jurisdiction recognizes series LLCs. Delaware permits a "domestic limited liability company" to enter into a merger or conversion. He also has experience in background investigations and spent almost two decades in legal practice. For the part of the form indicating the amended information, insert language stating the LLC's authorization to create a series LLC, such as: "The operating agreement provides for the establishment of one or more series." Further, a new series LLC operating agreement must be drafted. There are tax ramifications to changing structure and there are very specific provisions that must be included in the certificate of formation. Under a traditional LLC, creditors of one real estate asset are able to attach liability to all real estate assets owned by the LLC. Series LLCs offer the flexibility of a partnership with the protection of an LLC. A filing fee will be required with the document, which can vary greatly. For example, if the series LLC is Arch Bay Holdings LLC and one of its series will be identified as 2010B, the name of the series could be “Arch Bay Holdings LLC Series 2010B P.S.” This naming convention is permitted by all state acts and will help ensure that the series will be respected in other states that adopt the Series Act once it is finalized. You will need to file an Amendment to your Articles of Organization, advising the Secretary of State that the LLC should now be considered a Series LLC, with all of the rights and restrictions that apply. Sign and date the form where indicated. This portion of the site is for informational purposes only. If your jurisdiction does not recognize series LLCs, the process is more complicated. Again, the requirements vary depending on the jurisdiction. LegalZoom provides I have written and spoken on the series limited liability structure. If you have separate businesses, you’re ideally suited to convert to a Series LLC. Stone received his law degree from Southwestern University School of Law and a Bachelor of Arts in philosophy from California State University, Los Angeles. More steps means more complications and more opportunities for a mistake to occur. Printed by authority of the State of Illinois. Your access to the website is subject to our Other things may also need to be changed, depending on the jurisdiction. This prevents the creditor for one property from attaching liability to other properties held by the series LLC. Illinois also requires the filing of a Certificate of Designation form whenever a new series is established within the LLC. In addition, I have converted several limited liability companies to series limited liability companies. Further, Delaware defines a "limited liability company" and a "domestic limited liability company" as "a limited liability company formed under the laws of the State of Delaware and having 1 or more members." In general, LLCs are formed to provide liability protection for the owners, known as members. To amend the LLC agreement and turn your LLC into a Series LLC, you will have to pay $200 more. The Series LLC is a new form of limited liability company that has been authorized by nine states as of 2012. The rules started to recognize the series LLC on July 1, 2012. Delaware Law allows for the conversion of one entity type to another entity type. If you are considering converting to a series LLC, I highly suggest consulting with an attorney first. On July 1, 2017, among a host of other changes to the Illinois Limited Liability Company Act that will go into effect, Illinois will join the majority of states that allow limited liability companies (LLCs) to convert to other entities such as corporations or partnerships (including entities in other states), to domesticate from Illinois to another state, and vice versa. Businesses in Illinois can lawfully establish a Series LLC. Series LLCs aren’t bad for the businesses they were intended for — structured investments — but relying on liability protection holding up among the cells is of concern, especially for high-liability ventures such as real estate.. It’s not as simple as that. In general, you should give each series a unique name; a statement of the assets, members and managers affiliated with the series, and separate financial records for each series. Until there are court cases interpreting series LLC statutes, business owners and professional advisers have little guidance on the viability of the series LLC business structure in a particular industry. selection of forms or strategies. © LegalZoom.com, Inc. All rights reserved. Before converting to and utilizing a series LLC to conduct distinct businesses, I'd thoroughly investigate the ramifications with an experienced Business Attorney. Privacy Policy but not by the attorney-client privilege or as work product. California has yet to permit the formation of a series LLC; however, it expressly states that it allows a series LLC formed in other states to engage in business in California. Stoel Rives, LLP: LLC Monitor -- Texas Joins the Series LLC Crowd, Delaware Division of Corporations: Certificate of Amendment for Limited Liability Company, Illinois Secretary of State: Restated Articles of Organization, Illinois Secretary of State: Certificate of Designation, California Franchise Tax Board: Series Limited Liability Company (Series LLC), Stoel Rives, LLP: LLC Monitor -- IRS Proposes Regulations for Series LLCs. Because a series LLC is fundamentally a segregation of different assets, members and managers within an LLC, good record keeping is necessary to ensure that the series will be respected by the courts and other third parties. For example, an LLC may be formed to own and manage multiple real estate assets. If you previously formed your company as a traditional LLC, it is possible to legally convert your LLC to a series LLC. In each of these states, you can file an amendment or other documentation to legally convert your regular LLC into a Series LLC. Converting Your LLC to Series LLC Even if you operate as an ordinary LLC in one of the states mentioned above, you can’t just convert into a series LLC. This new operating agreement provides how the LLC will now be managed as a series LLC. a law firm or a substitute for an attorney or law firm. Be advised, if you still wish to operate your LLC in the original jurisdiction, you will need to register your LLC in the original jurisdiction, now as a foreign LLC. If you’ve never heard of a series LLC, you’re not alone. This process can typically be done simultaneously. If you started as an LLC before that date, you have to form another LLC. For example, in Delaware a Certificate of Amendment for Limited Liability Company is needed. It is not enough to merely file the amendment to the articles of organization with the Secretary of State. Converting to a Series LLC. Historically, to avoid this problem, individuals formed separate LLCs. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. You CAN later file articles of amendment to convert a standard LLC to one that is authorized to establish series, but the fee is $400 (as opposed to the $150 it normally costs to file articles of amendment). For the unfamiliar, a series limited liability company is an LLC that, in essence, has a “master” LLC and one or more individual “series”. A series LLC allows members to separate assets within the same LLC. explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, Currently, the following states have Series LLC law: Delaware, Illinois, Iowa, Kansas, Nevada, Oklahoma, Tennessee, Texas and Utah. Answer: As long as your LLC was formed in a state that has Series LLC law (Delaware, Iowa, Illinois, Kansas Tennessee, Texas, Nevada, Oklahoma and Utah) it’s a simple process. Generally, the LLC must file an amendment to the articles of organization with the Secretary of State. Illinois Series LLC Statute. This can be obtained from the Division of Corporations. Illinois law specifically states that a series of an LLC "shall be treated as a separate entity to the extent set forth in the articles of organization," and then also provides that each series may "in its own name, contract, hold title to assets, grant security interests, sue and be sued and otherwise conduct business and exercise the powers of a limited liability company…" Obtain the necessary document to amend your LLC's formation document -- articles of organization or certificate of formation -- on file with the state. Maintaining a series LLC. But why convert? If you wish to convert your LLC to a series LLC, a number of legal steps must be taken. Making a mistake with any of these documents may result in a court treating the organization as a standard LLC, not a series LLC. Yes, you can convert an existing LLC into a series LLC. Three Best Series LLC Businesses for Illinois by Marta Truskolaksa.

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