Any new business owner will attest to the relative complexity of setting up a Series LLC entity in Kansas, especially if you are unfamiliar with certain legal steps required by the state. 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, Kansas included, 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 state law. It’s recommended you seek legal advice to assist you in forming a Series LLC in Kansas.
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?
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 Kansas?
Finding a Good Name for a Series LLC
It’s generally a good idea to come up with a name that is reflective of the type of business your company works with and evokes favorable associations.
Additionally, a Series LLC should incorporate the business model in the actual name, whether it’s LLC, L.L.C. or Limited Liability Company encompassed by the designation “Series.”
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 Kansas entities.
There are also small naming restrictions in Kansas that should be considered early on. One of those is other corporate designations—those are entirely off-limits, meaning that definitive business descriptors should be kept out of an LLC name if they don’t reflect the type of business the company specializes in, i.e. including “hospital” in the name of a series LLC that has nothing to do with healthcare.
More importantly, Kansas 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 Kansas 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 state, 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 states require you to fill and submit a single document called the articles of organization before you could officially establish a regular LLC or a Series. Kansas is an outlier as it obligates you to submit two different certificates.
The form used in establishing a Kansas Series LLC is called the Series Limited Liability Company Articles of Organization to distinguish it from the Limited Liability Company Articles of Organization meant for regular LLCs.
The Certificate of Organization essentially states pertinent information regarding your business, from the company to the legal info on your registered agent and the address of their Kansas office.
Other information should cover the main LLC organizer, such as the organizer’s name and signature, plus some vital info regarding other LLC members, most importantly their designated names and the dates on which each division should be legally established.
Both documents should then be submitted with a $250 formation fee to the Kansas Secretary of State.
Submitting the Certificate of Designation
The next step could be rather costly depending on the expansiveness of your business. In Kansas, this form of company can only be finalized after you send out the Series Limited Liability Company Certificate of Designation.
Unlike some licenses, this document applies to every division in the Series. Considering its $100 application fee, there is a chance it will amount to quite a sum.
The document is to cover certain information in relation to a subsidiary:
- Parent company information (name, address)
- Relevant information of the division that’s being formed
- Owner information (names, addresses, titles)
- Manager information if applicable
- LLC organizer information + signature
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
Although Kansas doesn’t obligate you with an operating agreement, it’s a completely different story when you deal with Series. In this case, an operating agreement is vital as it “provides for the establishment of one or more series,” according to the Kansas Secretary of State’s office.
The agreement 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.
In Kansas, you might be expected to secure certain licenses and permits given that specific industries are more closely monitored, though all businesses must register for state tax without exception. This is done by applying for an account with the Kansas Department of Revenue Customer Service Center.
To see if your business needs a license or permit for legal operation in Kansas, the Kansas Business One Stop website provides all relevant information on its Common Business Licenses and Permits page to help local entrepreneurs with sorting any licensing issues.
Understand Maintenance Requirements
Your work doesn’t end after all formation documentation has been approved. The smooth sailing of any business, particularly a multi-division one, requires careful maintenance, in this case—submitting annual reports.
The report informs 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.
This covers any revision in company and division names, addresses, changes in ownership or registered agents including their new names and addresses.
Is it Possible to Outsource a Series LLC Formation?
Kansas permits two 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) or go for the other option where you hire an attorney to aid you.
While certain states concede the outsourcing of these proceedings to service providers like Northwest Registered Agent, the option is, unfortunately, not available in Kansas.
It’s recommended to employ a lawyer specializing in commercial and corporate law to help you navigate the rather complicated legal matters.
Establishing a Series LLC in Kansas is not exactly unlike creating a regular company with limited liability with the exception of specific paperwork.
What you need to master is the ability to distinguish between specific Articles of Organization requested by the state to aid in the establishment of specific entities. Same goes for the and Certificates of Designation.
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 of an attorney who can supervise each step of forming a Series LLC in Kansas for you.