Every business owner knows that at some point in the lifetime of their business, they must make a decision as to the proper type of formation. However, what many business owners fail to recognize is that this is an ongoing consideration that must be revisited time and time again during the lifespan of a business. Aside from S Corporations, as your business grows and expands over time, one such option you may need to examine is whether or not a Series LLC is appropriate for your business.
A Series LLC is a relatively new form of a limited liability company that may be an appropriate business formation for certain small business owners: specifically, those who may need segregated membership/ownership interests with separate rights, duties, obligations and liabilities into independent series. Each of these “series” operates as if it is a separate entity- even going so far as being able to have a unique name, bank account, and separate books and records.
In an attempt to “illustrate” a Series LLC vs. a regular LLC: Think of a“regular LLC” as a book; a novel, etc- something bound into one piece of literature. On the other hand, think of a “Series LLC” as a group of smaller pieces of literature, such as magazines. The magazines may be collectively owned by the same person, but each magazine (visually speaking) is separate from one another.
At the time of writing this article, Oklahoma is one of approximately 18 states that allows the formations of series LLCs.
Business owners who own multiple properties or similar businesses, such as real estate owners who own multiple properties, or oil and gas operators who own multiple companies. In other words, companies with different profit centers who want to shield each business entity or operation from the other.
While series LLCs are relatively simple to use, it’s absolutely essential that the business owner treat each “series” as a separate company; meaning, signing contracts using the name of that specific series, maintaining separate bank accounts, books and records, etc. Business owners must always respect the corporate formalities of their business formation to maintain liability protection; for more on this topic, you may find this post helpful.
In conclusion, at the end of the day, you as a business owner must never lose sight of the fact that your ultimate focus must be on actively mitigating the liability that your business encounters. This is what separates the professionals from the amateurs. Forming a series LLC may be a secure way to protect your business by separating out your liability. Email us at firstname.lastname@example.org, or drop us a note below if this sounds like a way you could increase protection for your own business.