Delaware Series LLC Guide

A Delaware Series LLC is a type of Limited Liability Company (LLC) that has the ability to create multiple independent “cells” or “protected series”. A Series LLC is designed to provide the liability protection of forming multiple LLCs while minimizing costs.

In a Series LLC, a single “umbrella” LLC sits above the individual protected series. Each protected series can have its own assets, members, managers and legal shield. The debts and liabilities of one series cannot be enforced against the assets of another series, or the master LLC. This keeps creditors of one protected series from attaching assets of other protected series. 

Delaware created the Series LLC by passing the world’s first Series LLC law in 1997. Delaware continues to develop and refine their Series LLC laws, maintaining their status as the premier state for asset protection.

Series LLCs are most often found in business contexts where multiple, cash producing assets need to be legally separated. Real estate investment is a common example. 

A real estate firm formed as a Series LLC will form a separate protected series to shield and own each individual property in the portfolio. Additionally, the company may have a management series which handles cash flow from the properties.

Different types of investment companies, such as mutual funds, have used the Series LLC for decades to segregate different classes of funds.

Delaware Series LLCs offer a range of benefits across several categories, from enhancing legal protections to minimizing costs. The key benefits of a Delaware Series LLC are administrative flexibility, improved limited liability protection, and lower startup and maintenance costs.

The Series LLC uses an asset protection strategy called “ring-fencing”. The assets of each protected series are shielded from the debts, obligations, or liabilities of any other protected series or the parent LLC. This means that a hostile creditor cannot get access to the assets of a single protected series in order to settle the debts of another.

For serial entrepreneurs operating multiple lines of business, the Series LLC can prevent one struggling project from sinking the entire enterprise.

Before the Series LLC, achieving separate cells for liability protection required forming multiple LLCs. This means multiplying initial filing fees and annual maintenance costs by every LLC. 

A Delaware Series LLC requires just one state filing and can create an unlimited number of separate protected series. In Delaware, a Series LLC only makes one annual franchise tax payment no matter how many protected series it establishes.

 

Lastly, a Series LLC only needs to appoint one Registered Agent in Delaware to represent all protected series. This means paying just one annual Registered Agent fee for the entire entity.

Delaware Series LLCs are governed by a private Operating Agreement. This is the internal document detailing the ownership and responsibilities of all members and managers of the company. Changes can be made to the Operating Agreement at any time without requiring any additional filings.  

 

Since the Series LLC Operating Agreement is a private contract, members are able to create unique ownership structures tailored to their business. This can include creating separate classes of owners with different voting rights or specific arrangements for distributions. Changes to a Series LLC’s membership are agreed upon by the LLC’s voting members. They are then implemented through amendments to the Series LLC Operating Agreement.

Here are the key steps you need to follow to form a Delaware Series LLC.

You can name your Delaware Series LLC anything that you want. However, your business name has to be unique. Your business name cannot be similar to any company already registered in Delaware.

By law, your Series LLC name also needs to include a corporate ending. Options include Series LLC, Series L.L.C, or Series Limited Liability Company. 

If you don’t want to do business with Series LLC in your name, you’ll need to register a Doing Business As or DBA name. 

Delaware law requires you to appoint a Delaware Registered Agent for your Series LLC. If you are not located in Delaware, you need to appoint a company, like IncNow, to be your Registered Agent.

A Delaware Registered Agent needs to meet the following requirements:

• Maintain a physical street address (not a P.O. Box) within the State of Delaware.
• Be available during standard business hours (9:00 A.M. to 5:00 P.M., Monday through Friday).

The main purpose of a Delaware Registered Agent is to receive “Service of Process” on behalf of the Series LLC and its protected series. This includes official court filings, such as lawsuits and subpoenas, as well as state tax notifications.

Forming a Delaware Series LLC requires filing a Certificate of Formation with the Delaware Secretary of State’s office. The Certificate of Formation is the document that creates a public record of a Series LLC’s existence in Delaware. 

The Certificate of Formation must include the name of the Series LLC, the name and address of the Registered Agent, the signature of an authorized individual, and a statement declaring that the LLC is able to create separate series.

Delaware does not require the names of the Series LLC owners (Members) or Managers to appear on the Certificate of Formation, offering a layer of privacy not found in many other states.

Every Delaware Series LLC should have a written Operating Agreement signed by all Members.

The Series LLC Operating Agreement is an internal company document that explains how a Series LLC is structured. It records the names of the Series LLC Members and their respective ownership interests, while also designating Managers and outlining their specific duties. 

In addition to the master Operating Agreement, each protected series should have a Separate Series Agreement.

Once your Delaware Series LLC is officially formed, it must obtain an Employer Identification Number (EIN). This unique identifier is mandatory for paying federal taxes, hiring employees, and opening business bank accounts.

Business owners can apply for an EIN directly through the IRS website or by mail. The application process involves completing and submitting IRS Form SS-4.

The cost to form a Delaware Series LLC depends on the level of service you require. The mandatory base filing fee paid to the Delaware Division of Corporations is $110.

IncNow offers three distinct formation packages tailored to your needs:

• Basic Series LLC Package – $199: The Basic Series LLC  Package covers the filing of your Delaware LLC and includes one full calendar year of Delaware Registered Agent Service.
• Complete LLC Package ($299): The Complete Series LLC Package provides all necessary internal company documents, including an attorney-drafted Series LLC Operating Agreement.

Exclusive Offer: Use the discount code Save50 at checkout to receive $50 off the Complete Series LLC package.

Delaware’s Series LLC law allows for the creation of two types of separate series: protected series and registered series. Both types of series come with their unique benefits and drawbacks.

A protected series is the traditional type of series that a Delaware Series LLC can create. Protected series function like separate, mini LLCs and are shielded from the debts or liabilities of the other protected series and the main LLC.

Creating a protected series within a Series LLC does not require filing any documents to the state. A Delaware Series LLC can add protected series by amending its Series LLC Operating Agreement. There are no additional costs to create or maintain protected series.

Creating a registered series for a Delaware Series LLC requires completing and additional state filing. The filing is called a Certificate of Registered Series.

Registered series have certain rights and privileges that protected series don’t have. A Delaware registered series can obtain its own Certificate of Good Standing, access secured financing and merge with other registered series.

Registered series incur additional costs. The filing fee to submit the required Certificate of Registered Series is $90. Additionally, a Delaware Series LLC will need to pay a $75 fee each year for every registered series. 

In Delaware, traditional LLCs are governed by an Operating Agreement. The Operating Agreement is a private contract between the LLC Members that outlines the structure of the company. The Agreement names the Members and their individual ownership interests, names Managers and responsibilities, and how decisions are made in the company.

Delaware Series LLCs also use Operating Agreements. An Operating Agreement for a Series LLC includes much more information than an Agreement for a traditional LLC. The Operating Agreement for a Series LLC needs to contain specific language detailing the LLCs ability to create, maintain and destroy separate protected series.

A Separate Series Agreement is a mini Operating Agreement for an individual protected series. Just like an LLC Operating Agreement, a Separate Series Agreement establishes the ownership, management and general purpose of a protected series or registered series. 

The Separate Series Agreement is an important part of maintaining a protected series’ limited liability shield. Well prepared Separate Series Agreements can plug certain holes that could potentially turn into costly disputes.

Most attacks on a business come from the inside, in the form of business partner disputes. A Separate Series Agreement should clearly define the ownership and management responsibilities of each Member as they pertain to that individual series.

Properly documenting the distinct rights  responsibilities of each Member becomes increasingly important as the Series LLC organization grows and adds more protected series.