A series LLC is a type of limited liability company (LLC) that provides liability protection for each "series" or sub-company within the organization.
This structure can be helpful for businesses with multiple lines of business, as it allows them to keep their different operations separate and shield each from the liabilities of the others.
We spent 2 weeks at a conference with the best lawyers, specialized in Series LLCs, and with them, we created a step-by-step guide for all beginners and entrepreneurs.
What is an Illinois Series LLC?
An Illinois series LLC structure includes limited liability protection for each series and ease of administration. A series can help in separating different lines of business, assets, investment activities, or geographical areas.
Illinois is one of the very few states that allow for the creation of a series LLC.
Pros of Starting an Illinois Series LLC
As a business owner, you must be aware of the few key benefits of starting an Illinois series LLC:
- Limited Liability Protection
As mentioned, one of the biggest benefits of a series LLC is the limited liability protection it provides for each series. This can be helpful in shielding different lines of business from the liabilities of others within the organization.
- Ease of Administration
When it comes to the formation and ongoing operation of a series LLC, Illinois has some of the more flexible rules in place.
Businesses are not required to file separate articles of organization for each individual series created under the parent company. The initial filing fee is also lower than many other states require.
- Flexible Membership
Business owners in Illinois series LLCs can have different ownership requirements for each series they create.
For example, a business with multiple lines of business could require that some series only allow the company's principals to hold membership interests while others permit outsiders with certain qualifications.
- Tax Treatment
A major benefit of a Series LLC in Illinois is how it is taxed. For federal tax purposes, each series is treated as a separate entity.
This can be advantageous for businesses with multiple lines of business as it allows them to file their taxes separately and claim any applicable deductions and credits.
Cons of Starting an Illinois Series LLC
While there are many advantages to forming a series LLC in Illinois, there are also a few potential drawbacks:
- Limited Liability Protection
While the limited liability protection provided by a series LLC is a major benefit, it can also be a drawback if one of the series experiences financial trouble.
The liabilities of the troubled series could then spill over and impact the other series within the organization.
- Difficulty in Lending
Illinois series LLCs can sometimes have difficulty receiving loans from lending institutions.
Banks, for example, may be hesitant to provide a loan to an organization if it does not know which series the loan would go toward or if there are several different organizations handling various lines of business under the same structure.
- Unlimited Duration
Another potential drawback to an Illinois series LLC is that its existence is not limited in time.
This may seem like a benefit, but there are also considerable drawbacks if the parent company goes out of business and stops providing administrative services for the different series within the organization.
6 Steps to Start a Series LLC in Illinois:
To set up your Illinois Series LLC, follow these six steps:
- Choose a Name
- Like any other business, you will need to come up with a name for your series LLC.
- The name must be unique and cannot include words that are restricted under Illinois law.
- The rules for creating a new business name in Texas are slightly different from those in other states.
- In Illinois, you must follow conventional LLC naming rules and include the whole name of the parent company in the name of each child series.
Learn how to change an LLC name in Illinois if you need to.
- Choose an Illinois Registered Agent
As with any other business, you will need to choose a registered agent in the state of Illinois who can accept the service of process on your behalf.
To transact business in the State of Illinois, you must use a registered agent that is a resident of Illinois or a corporation authorized to do business there. You may choose yourself as the registered agent for the company.
- File the Articles of Organization
You will need to file a series of LLC articles of organization with the Illinois Secretary of State. This document will include information about the parent company and each child series.
You must file separate articles of organization for each child series in Illinois. The initial filing fee is $500 plus an additional $50 per business day if not filed by the date due.
The articles of organization will provide certain basic information about your company (its name, principal office location, and the name and address of its registered agent, for example) as well as information about each series, also known as Certificate of Designation and Articles of Amendment .
You must prepare an initial statement of information in which you provide basic information about your business, including its name, purpose, registered agent, and address.
You will need to file this statement with the Illinois Secretary of State and pay a filing fee. The next important step is to create an operating agreement within the master LLC.
- Create a Series LLC Operating Agreement
Like any other LLC, you will need to create an LLC operating agreement governing the operations of your series LLC between the series LLC owners.
The operating agreement will spell out the rights and responsibilities of the members of each series, as well as the requirements for adding or removing members, initiating new series and dissolving the company.
The operating agreement will also spell out the authority and procedures for operating each series and how profits and losses in each series will be managed.
We recommend seeking legal advice or assistance from a law firm when you are preparing your Illinois series LLC operating agreement.
- Obtain an Employer Identification Number for Each Series
If you have employees, each series of your Illinois series LLC will need to obtain its own Federal Employer Identification Number from the Internal Revenue Service.
Employees should not use either the parent company's or child companies' EIN when completing a Form W-4 or a Form I-9.
An individual who has been using an EIN must apply for a new number if he or she becomes an employee of a series LLC.
Other Things To Consider
There are a few other things you should keep in mind when forming an Illinois series LLC: Separate Bank Accounts and Records:
Each series within your Illinois series LLC must keep its own records and file its own taxes separate from the parent LLC.
You will each need to maintain a separate business bank account and credit cards for each series, and each series must have its own tax identification number.
- Separate Liability Protection
Each series within your Illinois series LLC is a separate legal business entity with its own business debts and liabilities, as well as its own assets and separate bank accounts.
This means that you or any other members of the parent LLC are not personally liable for another series' mistakes or debts, even for the annual report.
- Series Do Not Have to Be Independent
Although each series in your Illinois series LLC is a separate entity from the parent LLC, they do not have to be independent of one another.
You may have overlapping ownership interests or membership between series, or even cross-series transactions alongside the parent LLC.
This flexibility can be helpful in managing your business operations. This means that each entity must have its own operating agreement.
- Mergers and Acquisitions
As with any other type of LLC, you may merge or acquire another business as a series of your Illinois series LLC.
This can be a helpful way to grow your company without having to create a new entity.
- Winding Down a Series LLC
If you decide to dissolve one of your series, you will need to file articles of dissolution with the Illinois Secretary of State just as you would any other LLC.
This document will include information about the series that is being dissolved and how its assets will be distributed according to what was mentioned in the operating agreement.
- Obtaining Licenses and Permits
Each series of your Illinois series LLC will need to obtain the appropriate LLC business license and permits required for conducting business in Illinois separate from the parent LLC.
The specific documents you need may vary based on your line of business, but they will likely include state and local tax registrations, business licenses, and zoning permits.
Be sure to research the specific requirements for your industry and location so that you can stay compliant.
Additionally, you can request help from professional companies that offer LLC services.
Similar Article: How to Dissolve an LLC in Illinois
How Does a Series LLC Work in Illinois?
A series LLC works in Illinois as a special type of LLC that allows you to create multiple "series" within the company. This can help organize your business operations, as each series can have its own separate name, purpose, members, and assets. Each series operates as a separate entity and is treated separately for tax purposes since they have separate bank accounts and annual report.
Can an Illinois Series LLC Help Protect My Personal Assets?
An Illinois series LLC can help protect your personal assets. Each series within your company is a separate legal entity with its own debts and liabilities, as well as its own assets, annual report, and operating agreement.
What Is the Difference Between an LLC and a Series LLC?
The main difference between an LLC and a series LLC is that a series LLC allows you to create multiple "series" within the company. This can be helpful in organizing your business operations, as each series can have its own separate name, purpose, members, annual report, and assets.
Each series operates as a separate entity and is treated separately for tax purposes.
Can You Change an LLC to a Series LLC in Illinois?
Yes, you can change your LLC to a Series LLC in Illinois by filing articles of organization with the Illinois Secretary of State. This will include information about the number and designation of each series you wish to create, as well as your name and address. You will also need to pay a filing fee.
Can I Form an LLC Online in Illinois?
Yes, you can form an LLC by filing articles of organization with the Illinois Secretary of State in person, by fax, or by mail. However, you cannot create a series LLC online in Illinois.
Can a Series LLC Be an S Corp?
No, nlike an LLC, a series LLC is not considered to be a separate taxpaying entity.
Can I Transfer Assets Between Different Series of My Series LLC?
Yes, you can transfer assets between different series of your Illinois series LLC as long as certain procedures are followed, such as the annual report.
Should I Start a Series LLC?
In conclusion, starting a series LLC in Illinois is a good way to organize your business operations.
This company type allows you to separate your assets and liabilities into different series, as well as protect your personal assets from those of the LLC.