A series LLC is a cost-effective alternative for business owners and entrepreneurs with multiple enterprises. If you have multiple businesses that you would like to keep separate for the purposes of liability, you have two options:
A series LLC is typically the more cost-effective solution. Here's a break down:
As you can see, if you have 2 businesses the Series LLC is already more cost-effective from a Secretary of State perspective than filing 2 LLCs. It will take a few more businesses to make the Series LLC more cost-effective on Secretary of State filing fees alone.
However, the Series LLC usually turns out to be the more cost-effective option when you consider attorney fees in addition to Secretary of State costs. This is because each cell of a series LLC does NOT need a separate operating agreement. Instead, only the "Mother" LLC needs an operating agreement. It takes less time for an attorney to set up and file annual reports for a series LLC with multiple cells than for two separate corporations LLC. Therefore, when attorney fees are taken into account, the Series LLC should save you money when setting up and maintaining two businesses even as against the alternative of setting up two corporations.
The bottom-line: If a client is looking to set up multiple businesses, and have each protected from each other's liability, I often recommend a Series LLC. This is especially the case when the businesses are related and can share an operating agreement. This is why Series LLCs are an especially excellent tool for multiple real estate investments or multiple franchise locations.
Justin Masterman Creditors seem to have major issues understanding lien priority with series. If one creditor has a blanket lien on the "parent" LLC, can you perfect a blanket lien on one of the series LLC's under that parent (if a UCC isn't filed against that particular sub) or is the UCC against the parent good to cover all subs as well?
Justin, after doing a little bit of looking into this, it looks like your question deals with a legitimate gray area in the law. The statutory law is ambiguous and has not yet been tested by the courts. The generally recommended best practice is to file the financing statement in the name of the parent LLC. However, Illinois LLCs may be an exception to this approach, because, unlike other states, Illinois LLCs are likely to fit the UCC definition of a "registered organization," in which case the series itself should be named in the financing statement. Further research (outside of the scope of blogging) would be required to give you a more definitive answer. Hope this helps.
O'Flaherty Law is happy to meet with you by phone or at our office locations in: