Any new business owner will attest to the relative complexity of setting up a Series LLC entity in the District of Columbia, especially if you are unfamiliar with certain legal steps required by the jurisdiction. So if a Series LLC is something you are potentially interested in but are undecided whether it’s worth the trouble, this set of guidelines may help you get an idea of how to get started on the whole process.
Originally established in the state of Wyoming in the late 70s, the limited liability company—or the LLC for short—is a fairly new business model that has been on the steady rise in popularity throughout the country.
The Series LLC is a step further from the basic model. It was first introduced in Delaware and is currently available only in a number of states but this business model is quickly expanding to other parts of the country.
As the name suggests, a Series LLC is an LLC consisting of more than one division or, as it reflected in the name, more than one series. Every division in this Series may have different goals from those of their parent company (and more often there is also an asset and liability diversity between the divisions), allowing a certain degree of security and legal independence provided the series is formed correctly.
There are a few major factors at play when it comes to the process of forming a Series LLC, and if you’re interested in taking your company a step further, we recommend you get more closely acquainted with the legal technicalities of this process.
IMPORTANT NOTE: When it comes to the murky waters of business law, it’s vital to understand that even with the best resources about the formation of this type of entity, it is not a guarantee of a smooth process if you are not someone overly familiar with this aspect of the law. It’s recommended you seek legal advice to assist you in forming a Series LLC in DC.
Still, those who seek the stable growth of their business in a way that protects their assets, forming a Series of LLCs is an ideal course of action. A good LLC service can do this for you in a swift and secure fashion, or you can form it yourself using your own resources.
What does Series LLC Mean?
- What does Series LLC Mean?
- How do you Create a Series LLC in DC?
- Is it Possible to Outsource a Series LLC Formation?
- Final Thoughts
As established earlier, a Series LLC is a group of divisions formed by a single parent company. Despite each division operating under the same parent LLC, the nature of this model is to give each division owner more independence, financial autonomy and legal security. This primarily ensures the parent company and other LLC divisions are less likely to face a lawsuit specifically targeted at a single division in the series.
If you’re closely familiar with the regular LLC business model, you’ll probably find it more than convenient that Series LLC comes with the same limited liability insurances aimed to shield a regular company’s assets when met with legal action. This means that an owner’s individual assets, as well as interests of other sub-divisions, won’t come under fire when a lawsuit is brought against an unconnected LLC division in the Series.
This structure is what makes Series LLC so appealing to certain business owners since it eliminates legal dependency between all LLCs working under the same parent company while at the same time creates a network of operations under a single parent company without the hassle of setting up multiple independent LLCs.
How do you Create a Series LLC in DC?
Finding a Good Name for a Series LLC
Most new ventures start with a name, and in that Series LLC is no exception. It’s generally a good idea to come up with a name that is reflective of the type of business your company works with, or at least a name that is hard to miss. Additionally, a Series LLC should incorporate the business model in the actual name, whether it’s LLC, L.L.C. or Limited Liability Company.
Another important factor in naming your serial business is checking name availability. There are many ways to optimize the process, such as the business name search tool designed to cross-check names that have already been taken by other entities in the District of Columbia.
More importantly, DC naming guidelines require you to tie each LLC division to the parent LLC by appending the names of subsidiaries with that of the main company. Additionally, all divisions should be designated uniquely so there is a clear distinction between them.
For instance, a parent company entitled “Walter’s Coffee” that wants to set apart its cafe LLC and roastery LLC divisions might name them “Walter’s Coffee Cafe LLC” and “Walter’s Coffee Roastery LLC” respectively.
If there is something more you’d like to know about the subject, be sure to look through a more detailed guide on naming an LLC that details the process of naming standard LLCs and Series LLCs.
Choosing a Registered Agent
The next logical step here is finding a reliable registered agent. This may require a bit of careful consideration on your part.
Of course, you are free to pick any registered agent that seems most appealing to you, but above all, it must be eligible to provide services in the District of Columbia from a local office that guarantees quick communication with regional officials.
This is done to arrange a timely exchange of documents between the office and the authorities, meaning the registered agent of your choice can securely process vital paperwork in the required time-frame which is essential for handling lawsuits and regular payments.
What’s convenient about Series LLC is the fact that there is no legal obligation to assign unique registered agents to every LLC division—it’s completely acceptable to work only with one agent regardless of the side of the Series.
Compiling the Articles of Organization
Most jurisdictions require you to fill and submit a special document to establish a regular and Series LLC, though some states draw a clear distinction between such documents. In the case with the District of Columbia, a single form is used for forming Called the Certificate of Formation of a Limited Liability Company. It follows an identical fill-out process with the exception of Section 6, or Miscellaneous provisions, that requires you to state that the nature of your LLC is a serial one.
The document essentially states pertinent information regarding your business, from the company name and address to the legal info on your registered agent and the address of their DC office. This includes the info on the company members, the potential managerial body, and other personnel with executive power.
Other information should cover the LLC organizer, such as the organizer’s name and signature, plus the dates on which each division should be legally established as well as plans for their dissolution.
When the document is filled according to legal requirements, it should be submitted to the D.C. Corporations Division together with the mandatory $220 fee.
Submitting the Certificate of Series Designation
Drafting the articles of organization may be enough to finalize the serial formation in some states, but in DC there is another crucial step to this process and it’s creating the Certificate of Series Designation for Domestic Limited Liability Company.
This is done to expand upon the existing structure of the parent company (legally established by the articles of organization) by officially forming LLC divisions that will operate under the main entity. Though drafting one document to detail the purpose of every division will be enough as there is no need to create multiple forms.
Unlike similar paperwork in other jurisdictions, the DC certificate is rather succinct. The necessary information that should be detailed in the form includes the legal name, address, and formation date of the parent company, the name of individual LLC divisions, the date the form is submitted, and the name of the LLC organizer along with their signature.
When the paperwork is correctly filled out, it should be ready for submittal with the DC Corporations together with the required $220 fee.
Applying for an EIN
LLC divisions should be prescribed its own EIN, or Employer Identification Number, which is an ID number issued by the Internal Revenue Service for taxation purposes.
Much like your personal SSN, the EIN functions as a nine-digit identification number tied to all financial operations of a specific company. It appears on the tax forms, financial documents, issuing payments, whether one-time or in payroll form.
To obtain an EIN, you must download a free form from the official IRS portal, fill it out, and submit, after which the company in question will be given its own EIN identification code.
Submitting an Operating Agreement
Even though the District of Columbia doesn’t place any legal obligation to support the establishment of traditional LLCs with operating agreements, it is still recommended you obtain one when creating a Series LLC. The rather equivocal wording in DC business law stipulates the necessary information an organizer is expected to detail in the operating agreement for a Series.
The legal guidelines may be a little murky, but it’s still strongly advised you draft the agreement. The document is best utilized when it is compiled with great elaboration where the functions of LLC divisions are disclosed in clear detail. If the document is thoroughly exhaustive on the topic of individual directions of the LLCs, it would save you the pain of drafting numerous agreements to go with every entity.
On top of this, the agreement will also describe the hierarchy of each company, including the possible assignment of a manager. Other information should ideally stipulate the course of action in the event of replacing ownership and/or management and dissolution process for each division. It won’t hurt to add the information on asset distribution, owner voting privileges, investments, and so forth.
Establishing a Financial Support Network
Any business entity should be tied to its own bank account instead of a personal one that the owner might be in possession of which is the case for all LLC types and any other forms of business.
The entire process is a little bit lengthier with Series LLCs given that LLCs divisions require exclusive bank accounts, all different from that of the establishing company.
Such an approach is imperative for sustaining the insulated structure of the serial ownership, allowing every division to enjoy financial independence and operate at its full potential as a division in the Series which would be impossible if an LLC division depended financially on the bank account of the parent LLC.
A qualified accountant is likely to perform all financial operations to a much better degree, so it would make sense to arrange a finance professional for all divisions. It would also help to acquire accounting software to manage the invoicing and other transactions.
Obtain Licenses and Permits
In contrast to many states supporting the serial LLC model that don’t obligate most entities with a basic business license, the District of Columbia expects nearly every business type to apply for one. To see if your business falls into this category, see the relevant information provided by the D.C. Business Center website.
Some industries also require specific licensing for legal operation in the District, so be sure to check the list of professional permits/licenses on the Registration and Licensing Services page. Additionally, further licensing may be necessary on the municipal and county level.
Following Maintenance Protocols
The smooth sailing of any business, particularly a multi-division one, requires careful maintenance, in the case of DC—submitting a biennial report. The submission deadline for the yearly report is a fixed one—every filing has to be done by April 1st.
At their core, biennial reports exist to inform the relevant authorities of the current status and past proceedings of the company. This detailed report should cover any changes—if any occurred—in the time elapsed from the preceding report. The report should be directed to the Corporations Division along with the $300 filing fee.
Is it Possible to Outsource a Series LLC Formation?
The District of Columbia permits three courses of action in this regard: you can rely on your own abilities to save significant sums of money (and potentially miss errors in paperwork or legal processes), find a reliable formation service, or go for the other option where you hire an attorney to aid you.
While the first option may be outside of your realm of capabilities, hiring a lawyer can be pretty costly. A formation service is cheaper and offers to take care of most legal proceedings for you.
One downside of this is the relative rarity of business formation services compared to other more established services used in such cases. DC is more generous in that regard, offering multiple services for Series LLC creation, including the acclaimed Northwest Registered Agent.
As one of the leading registered agents in the industry, they offer a complete service package for entity creation together with customer support and overviewing all documentation received by the enterprise.
The formation of Series LLC in DC is fairly similar to the process of establishing a standard LLC. The key is to learn the correct ways of filling the Articles of Organization, namely Section 6 of the form, as well as draft the Certificate of Series Designation to establish insulated divisions.
So if you’d rather save yourself the turmoil of navigating the complex organizational conventions and avoid mountains of paperwork, it would serve your interests well to seek services from an attorney who can supervise each step of forming a Series LLC in DC for you.