A Missouri Series LLC consists of a limited liability company formed under the laws of Missouri.
It represents a Missouri hybrid business entity that combines the limited liability protection of a corporation with the tax benefits and operational flexibility of a partnership.
A Series limited liability company also offers protection for "series" or "cells" within the primary LLC, which would otherwise be subject to unlimited personal liability.
This article will cover this type of business entity and how it can help you protect your assets from liabilities associated with each series or cell within your business.
What is Missouri Series LLC?
A series of limited liability companies formed in Missouri represents an innovative approach to asset protection.
A series limited liability company 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, and business assets.
Series LLC rules in Missouri are modeled after the Delaware series LLC statute, which has been in effect since 2006.
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.
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 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 Operating Agreement.
A Series LLC shares many features with a traditional LLC, which are separate legal entities, but they have a single owner as per the 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 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 LLC is sued, the others are not necessarily liable.
And 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.
How is a Series LLC Taxed in Missouri?
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 LLC 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.
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.
The Missouri Department of Revenue will recognize the Missouri series LLC as a separate entity for tax purposes.
Members can report their share of income and expenses from each series on their individual tax returns.
The Formation of Series LLC in Missouri
To set up a Missouri LLC series, a business owner must file the legal documents (such as the operating agreement) 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.
The document will include the name of the company, the registered agent, and the list of series LLC members.
There is no limit to the number of series that can be formed under a Missouri series LLC.
Each series has its own Operating Agreement, a legal document outlining the specific rights and responsibilities of that series' members.
Unlike some other states, a series LLC operating agreement is mandatory.
If you wish to add a new child LLC sometime in the future, you will have to amend your Series LLC operating agreement.
Finding a registered agent or a registered agent service is easy in Missouri for your series LLC operating agreement.
All you need to do is search the internet for "Missouri registered agents." Many companies offer this service.
This individual will receive legal papers on behalf of your company and notify you of any legal actions that need to be taken, such as the operating agreement.
When forming a series LLC operating agreement, it's important to choose a business name that is distinguishable from other business entities registered with the state of Missouri.
The name must also include the phrase "series limited liability company" or the abbreviation "SL LLC."
The filing for setting up a series LLC in Missouri is $50 for each set of your Articles of Organization.
If you have multiple properties, the limited liability company gets more expensive. The e-mail application is $105.
The formation of a series LLC in Missouri is relatively simple. The main document you need to file is the Articles of Organization, which can be found online.
How Do I Change My LLC to a Missouri Series LLC?
To change your business structure from a traditional LLC to a Missouri Series LLC, you need to file a Certificate of Amendment with the Missouri Secretary of State.
The process is simple and can be completed online. The same filing fee of $50 applies to this action as it would if you'd normally applied for a series LLC.
Does Each Missouri Series LLC Need Its Own EIN?
Yes, each Missouri Series LLC needs its own employer identification number (EIN). The Internal Revenue Service is in charge of allocating the employer identification number to each legal entity.
An EIN (also called a federal tax identification number) is mandatory if you plan to hire employees, apply for business loans, and generally perform multiple operations across all LLCs.
Can Multiple LLCs Use the Same Bank Account?
In order for your assets to remain separate from the LLC and other child-LLCs, it is advisable to keep multiple assets separated by opening a different bank account for each LLC.
If you have multiple LLCs, it is vital to keep them separate for bookkeeping and taxation purposes too.
This will help avoid any confusion or commingling of funds down the line.
Does Each Missouri Series LLC Need Its Own Operating Agreement?
There should be one Missouri Series LLC operating agreement covering the parent LLC and a separate one for each of the child LLCs under this umbrella.
This is typically the way it's done and will ensure that everyone is on the same page regarding their rights and responsibilities.
Missouri Series LLC Formation: What You Need to Know
To conduct business as a Missouri series LLC, owners need to consider many things.
First of all, individual LLC owners in Missouri need to establish a series LLC to understand the requirements and obligations of this type of entity versus other types of business structures.
While legal advice may be necessary when making decisions on what kind of structure your Missouri series LLC should have, seeking counsel from a professional will help ensure that you take care with every step towards establishing your new business while also protecting yourself legally if anything were ever to go wrong.