Series LLCs, a unique form of business structure, offer the advantage of segregating your company into different Series with distinct rights and liabilities. Essentially, a Series LLC permits the creation of separate businesses within one overarching LLC. This article will delve into the details of Series LLCs, covering their definition, operational mechanisms, and their permissibility in Virginia. Additionally, we will explore various aspects including formation procedures, conducting a name search, associated fees and costs, benefits, the necessity of an operating agreement, regulatory requirements, tax implications, annual reporting obligations, considerations for Single-Member LLCs, and the asset protection afforded by Series LLCs.
Series LLCs were first invented in Delaware to help the mutual fund industry avoid filing multiple SEC filings for different classes of funds by keeping these filings all under one umbrella while allowing the individual funds’ activities to be conducted separately. This concept is similar to that of the segregated portfolio company or protected cell company which exists in offshore countries such as Guernsey, the British Virgin Islands, Bermuda, the Cayman Islands, Mauritius, and Belize.
A Series LLC is a Limited Liability Company that is organized to segregate its assets into different subdivisions. A Series LLC protects from liability related to each separate Series within the same entity. In Virginia, there is typically one ‘master’ LLC with one or more subdivisions that form a Series LLC.
If one of the Series LLC’s divisions gets caught up in a lawsuit, this will not affect the others. For example, if one Series is sued, the Series LLC will create a protective barrier between the subdivisions ensuring no other Series can be held liable.
For this reason, setting up a Series LLC provides plenty of benefits. It can also be used as an asset protection tool, allowing you to separate your personal assets from those of the business without creating multiple entities or trusts.
Virginia does allow Series LLCs. It also allows single and multi-member LLCs, so you have plenty of choices when choosing to set up your limited liability corporation.
This means that if you want to form a Series LLC in Virginia, you are more than welcome to do so, and the process will be fairly straightforward.
Series LLCs are fantastic for business owners, bringing in a multitude of benefits, it should be noted that not all states permit them to be created. Several states do allow for Series LLCs to be formed. These include Virginia, Oklahoma, Texas, Tennessee, Vermont, Wyoming, Delaware, Nevada, and Utah.
When you form your Series LLC in one of these areas, it means that each Series can have its own set of assets, such as real estate or intellectual property, while still being considered part of the same company overall.
There are no one-size-fits-all answers to which state is the best location to form a Series LLC as it will depend on where you live and where clients/demand for your business is high. If you’re looking to relocate outside of Virginia or expand your business operations to a different state, Delaware is a popular pro-business state and they were the first state to pioneer and support Series LLCs. For this reason, Delaware is typically a good option for forming a Series LLC.
To form a Series LLC in Virginia, you must first establish the company. This can be done by filing articles of organization with the Virginia Secretary of State and paying the required fees. You can submit this document in the way that is most convenient for you, e.g. by mail, online, or in person. The document must contain important information about your business, including:
Once this is done, you must then complete an operating agreement for each Series within your Series LLC, by gathering together all of the people who will be involved in this corporation and allocating suitable roles to each of them.
The important steps to establishing a Series within a Series LLC are:
A Series LLC is an entity that exists as one legal entity but has multiple "Series" or subdivisions within it. This means that, because each Series can operate independently from the others, each one will have its own assets and liabilities that do not blend – legally or physically. This means you can use a Series LLC to protect your personal assets while running your business.
If you are thinking about forming a Virginia Series LLC, here are some things to consider:
From this consideration, you will be able to work out how to use your Series LLC in the best way possible for you, your partners, and your employees. Most people who set up a Series LLC use this to evade financial difficulties across the entirety of their business, and separate assets. They can help businesses stay afloat for longer if they face a crisis.
Series LLCs are a great way to protect your assets and limit liability. However, they also have some tax implications that you should be aware of before forming your own Series LLC.
In general, a Series LLC is taxed as if it were a sole proprietorship or partnership depending on how many members there are in total. If there's only one member then the IRS treats it like any other business entity. However, if there are multiple members then they will be taxed as partnerships based on their ownership percentage of the entire business entity.
Although each division of the LLC will be taxed individually, you will find that in the long run, you may save money. This is because Series LLCs, overall, have smaller tax rates than larger LLCs.
There are many reasons for forming a Series LLC in Virginia. Some of the popular reasons include:
Protecting assets and minimizing liability: The most common reason for forming a Series LLC is to protect assets from creditors in the event of bankruptcy or debt collection. Protection from personal liability for debts incurred by another person within their corporation is a great way to ensure fewer disagreements between the team and that less money is lost.
To manage taxes and succession planning: The second most common reason for forming a Series LLC is to avoid double taxation by separating different types of income into separate entities and then paying taxes on each entity based on its particular type and amount earned during the year. This process is known as tax segregation Also, profits from one subsidiary may offset losses incurred elsewhere within the same company structure.
To manage business lines: Another common reason to form a Series LLC is to separate your businesses into different Series within your company structure, allowing you to keep each line separate when it comes time to sell or liquidate assets. You can also use an LLC to help divide your business into organized categories. If you are responsible for several different types of small dealings under a larger company, then a Series LLC will offer plenty of opportunity to separate these into smaller categories under the same main name.
The risks of Series LLCs are similar to those of other business structures. However, there are some unique risks that you should be aware of before forming your own Virginia Series LLC. In particular, the laws are strict around commercial taxation, you should always remember to stay focused on times and dates for when payments are due. The team in charge of each division should remember to keep the others motivated through the use of a system to ensure each task is completed on time. This will avoid any parts of the LLC underperforming.
As you can see, there are many benefits to forming a Series LLC in Virginia. You can begin the LLC formation process now by clicking “Order” below. The most important thing is to make sure that you understand all of the risks before you start your business. Before proceeding, we recommend you watch the following video Series LLCs to see if a Series LLC is right for you. If you decide that a Series LLC is right for you after watching the video, we still strongly recommend that you first speak with an attorney before ordering this product. Schedule attorney time to better understand what this business structure can do for you.