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By The Wyoming LLC Attorney Team

Aug 14, 2023
  1. Virginia Series LLC

Virginia Series LLC

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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.

What Is a Series LLC?

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.

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Does Virginia Allow Series LLC?

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.

Which States Allow Series LLC?

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.

Which Are the Best States for a Series LLC?

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.

How Do You Form a Virginia 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:

  • Company name For your application to be approved, your company name must be unique in the state of Virginia (e.g. it must not match any other business name formed in the state) and must contain ‘LLC’ or a variation of this in its name.
  • Business address You need to share your principal business address and this must be a street address, not a PO box.
  • Registered agent name A registered agent is an individual or company that will accept official communications from the state and certain legal documents for the Series LLC.
  • Registered agent address Similarly to the above, this must be a street address but some exceptions for non-street addresses can be made if the agent is located in a rural area with less than 2,000 people.
  • A signature and print name The signature and printed name of the individual completing the filing must be on the document.

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:

  • Determine what type of asset protection strategy will work best for your business. Consider if you need insurance alongside your Series LLC, or can you get away with just utilizing the LLC’s strengths alone?
  • Create an entity that meets all applicable legal requirements, by checking through legal documents thoroughly before submitting the request.
  • Select one or more people who will serve as managers for the LLC. These can be yourself, relatives, or business partners.
  • Draft all necessary documents related to management structure – for example, articles of incorporation.

How To Use a Series LLC?

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:

  • What are the benefits of using a Series LLC?
  • What are some risks associated with using a Series LLC?

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.

How Do Series LLCs Pay Taxes?

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. We recommend exploring the services offered by our partners at Bench. Their team of experts handles your bookkeeping and income tax preparation, allowing you to concentrate on the growth of your business.

What Are the Main Reasons for Forming a Virginia Series LLC?

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.

Risks of Series LLCs

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.