Series LLC in Missouri (What Is It & How to Get One?)
A Missouri Series LLC is a unique business structure in the state, blending corporation protection with partnership benefits. To successfully manage this business, expertise in state laws, regulations, and procedures is crucial.
Our guide, shaped by experience and collaboration from legal experts offers insights and practical advice for a well-run series LLC. We will delve into the unique features of a series LLC and the essential steps to acquire one in the state of Missouri.
Whether you're a seasoned entrepreneur or a budding business owner, understanding the intricacies of the Missouri Series LLC is key to optimizing your business structure for enhanced flexibility and efficiency.
Quick Summary
- A Series LLC in Missouri is a unique structure of an LLC that enables separate series within the LLC.
- To establish a Series LLC in Missouri, you need to complete several official steps, including filing articles of organization and LLC operating agreement and designating separate series within the LLC.
- With 548,647 small businesses comprising 99.4% of all businesses in Missouri, the Series LLC structure offers a unique opportunity for these entrepreneurs to manage multiple business activities under one legal umbrella, enhancing their operational efficiency.
- In my experience, delving into the realm of Missouri Series LLCs revealed a pragmatic solution for entrepreneurs overseeing diverse business endeavors, providing a blend of flexibility and protective advantages.
What is Missouri Series LLC?
A Missouri Series LLC is a type of limited liability company that allows for the creation of multiple, separate series or units within the same LLC structure, each of which can have its own assets, liabilities, and members, and is treated as a separate entity for legal and tax purposes.
A series LLC is a flexible form of business entity creating part of the same legal structure as its parent company or organization, which allows it to separate itself from liability for claims against one unit with assets in another.
Traditional asset protection strategies do not work against creditors with claims for unpaid debts.
On the other hand, series LLCs are designed to protect one unit of an organization by segregating its assets through a firewall shield.
Series LLC's ownership and operating procedures in Missouri are governed by Chapter 347 of the Missouri Revised Statutes.
The series LLC consists of one or more individual series and a master LLC (also called a parent LLC), each with its name, separate business bank account, LLC operating agreement, and business assets.
Series LLC rules in Missouri are modeled after the Delaware series LLC statute, which has been in effect since 2006.
As reviewed by the Michigan Business & Entrepreneurial Law Review, the Delaware statute was enacted to provide a business entity that would offer the limited liability features of a corporation and the tax advantages of a partnership [1].
The Formation of Series LLC in Missouri
The process of forming a series LLC in Missouri becomes particularly relevant when considering the recent surge in new businesses, with 29,925 establishments opening between March 2021 and March 2022 as per the US Small Business Administration, highlighting the need for structured and protective business frameworks [2].
Here are the steps:
1. Filing Missouri Articles of Organization
To set up a Missouri LLC series, a business owner must submit the Articles of Organization, specifying the company name, registered agent, and LLC members, with the Secretary of State and pay the applicable fees.
The main document for your future Series LLC is the Missouri Articles of Organization and operating agreement.
2. Draft an Operating Agreement for Missouri Series LLC
Each series LLC has its Operating Agreement, which is mandatory. To add a new child LLC, amend the LLC operating agreement according to the structure and purpose of the new limited liability company.
"If you've got an operating agreement in place and you can show that you've been following the operating agreement, then if you ever were to get sued, it will keep people from going through your business to get to your personal assets."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
3. Find Registered Agent Service and LLC Name
Search online for "Missouri registered agents" to find a registered agent service.
The limited liability company name must be distinguishable and include "series limited liability company" or "SL LLC."
4. Pay Processing Fee for Missouri LLC Formation
The filing fee price is the same throughout the year for each separate LLC. Next to filing fees, you should pay for the email application for multiple properties.
Related Articles:
How is a Series LLC Taxed in Missouri?
A series LLC in Missouri is taxed as separate from its owners.
Every Missouri LLC is treated as separate from its owners, including a Missouri series LLC.
That means that a single-member series LLC in Missouri is disregarded for tax purposes, and the income and losses of the limited liability company flow through to the member, later to be reported on a separate tax return.
The Missouri Department of Revenue will not recognize a Missouri series LLC as a separate entity for tax purposes, so all taxes are paid at the owner's individual level [3].
This can be a disadvantage if you have multiple LLCs in different states because each state will want to tax the income from that business.
A multi-member Missouri series LLC will be taxed as a partnership, with each member being taxed on their share of the profits and losses.
Members can report their share of income and expenses from each series on their individual tax returns.
The Advantages of Series LLC in Missouri
Forming multiple legal entities might seem intimidating, but series LLC offers many advantages.
Specifically, a separate LLC can be created for each line of business under one parent LLC.
One advantage is maintaining separate records and financial statements while maintaining tax transparency between all limited liability company entities.
There are also very few filing requirements when forming multiple series under a parent LLC - you only really need a Missouri Articles of Organization and an LLC Operating Agreement.
A Missouri series LLC shares many features with a traditional limited liability company, which are separate legal entities, but they have a single owner as per the LLC operating agreement.
This can be problematic if the owner is sued or faces other legal problems because the company is at risk.
With a series LLC, each separate line of business is protected from the others in case of any legal issues.
The personal asset protection of a series LLC is more personal than with other types of business structures.
For example, if one line of business has its personal assets frozen by creditors and the person who started that entity cannot pay for any legal fees or damages during court proceedings, the owner's assets will not be jeopardized because they are stored separately in another line of business under Series LLC.
Read More: How to Transfer Personal Assets to an LLC
The Disadvantages of Series LLC in Missouri
Series limited liability companies in Missouri have a few disadvantages that should be considered before choosing to form or transact business with one.
- Each child LLC needs to maintain separate records, such as the series LLC operating agreement and business bank account, which may become a severe administrative issue if your business grows.
- Filing separate LLC Articles of Organization for each of your LLCs can be expensive and time-consuming.
- The liabilities of one LLC do not automatically become the liabilities of any other LLCs in the series, so if one limited liability company is sued, the others are not necessarily liable.
- Finally, Missouri series LLCs are a relatively new concept and have not been tested in court that much, so there is some uncertainty about how the courts will treat them.
For this reason, it's essential to have legal advice and guidance before forming a series LLC in Missouri.
FAQs
How Do I Change My LLC to a Missouri Series LLC?
To change your LLC to a Missouri Series LLC, submit a Certificate of Amendment to the Missouri Secretary of State. It's a straightforward online process with the same \$50 filing fee.
Does Each Missouri Series LLC Need Its Own EIN?
Yes, each Missouri Series LLC requires its own Employer Identification Number (EIN). The IRS issues the EIN to each legal entity. It is essential for hiring employees, applying for loans, and conducting various operations across all LLCs.
Can Multiple LLCs Use the Same Bank Account?
No, multiple LLCs should not use the same bank account. It is advisable to maintain separate bank accounts for each Missouri LLC to keep assets and finances distinct, preventing confusion and ensuring proper bookkeeping and tax purposes.
Does Each Missouri Series LLC Need Its Own Operating Agreement?
Yes, each Missouri Series LLC needs its own operating agreement for the parent LLC and individual agreements for each child LLC. This ensures clarity and alignment of rights and responsibilities for all parties involved.
References:
- https://repository.law.umich.edu/cgi/viewcontent.cgi?article=1008&context=mbelr
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-MO.pdf
- https://dor.mo.gov/
