The Indiana Legislature recently enacted a new option for business owners selecting a corporate form – an option particularly suited for owners who require a holding company, umbrella company, or multiple divisions. House Enrolled Act (“HEA”) 1336, passed March 23, 2016 and codified as Indiana Code Sec. 23-18.1 et seq., changed a number of aspects of business and other association law, including the ability to create Series Limited Liability Companies (“Series LLCs”). Effective January 1, 2017, Indiana will become the 14th state (plus Puerto Rico) to have statutes allowing for Series LLCs.
A Series LLC consists of a Master and one or more separate divisions referred to as Series. An important feature of Series LLCs is the ability to provide limited liability protections between Series and also between a Series and the Master. Although this is possible today through the use of separate LLCs, the process is convoluted and requires separate filing fees for each company, as well as separate applications to do business in other states.
So what does that mean for you? A Series LLC is not for everyone, but does have a number of advantages. First, a Series LLC can reduce the number of filings and the costs. While each individual LLC requires that a biannual report be filed, the Series LLC only requires the filing of a single biannual report for all entities within the Series LLC. After the Master LLC is formed, it is also cheaper to form new Series. However, with only a few series, the filing costs may actually be higher since the original Master filing costs more than a regular LLC; the Series filings, however, cost less than a regular LLC. Second, management can be consolidated and thus streamlined. Third, liability may be limited between Series and between the Master and the Series.
This is ideal for real estate investors with multiple investment properties, or for businesses where one division may be in an industry that creates more potential for liability than the other divisions. Of course, protection is dependent on proper formation and maintaining and protecting the corporate form throughout the life of the entities.
Series LLCs are one of the many corporate forms that you should consider when deciding what’s best for your company. This article is not intended to be a definitive discussion regarding the complexities of the issues discussed above. If you’re interested in discussing the advantages and disadvantages of a Series LLC for your particular business, or whether another corporate entity may be better for your situation, please contact Christopher Park (firstname.lastname@example.org), Justin Leverton (email@example.com), or any of our other attorneys here. We would be happy to discuss the available options with you.