When establishing a Series LLC in Puerto Rico, one may face some difficulties, especially those of aspiring entrepreneurs. The first step to setting up this business entity involves learning the rules and peculiarities required by the jurisdiction on how to start a Series LLC in Puerto Rico. Therefore, if the Series LLC is really relevant to you, but you don’t know exactly if you’re ready to dive into it yet, we can help you with that. In our set of guidelines, you’ll find everything you need to figure out what it is and how to properly launch a Series LLC in Puerto Rico.
If we look from a historical point of view, limited liability companies first appeared in Wyoming in the late 1970s. For convenience purposes, all business people use the abbreviation – “LLC”. As you can see today, this type of business has caught the interest of American entrepreneurs, because it is popular all over the country.
When it comes to a Series LLC, this business model is a step further from the basic one. It was first provided in Delaware. Today, a Series LLC is currently available only in a number of the US states, but it is quickly expanding to other parts of the country.
As its name implies, a Series LLC is an LLC consisting of several divisions or, as it’s reflected in the name, series. Every division in this Series can have different goals from those of their parent company (and usually there is also a liability and asset diversity between the divisions), allowing some degree of security as well as legal independence, as long as the series has been properly formed.
There are several basic factors involved in the Series LLC creation process, and if you want to take your company a step further, we encourage you to take a closer look at the legal details of this process.
IMPORTANT NOTE: Even with the best resources about the Series LLC registration, it will not guarantee you a smooth process without any knowledge of the aspects of the law. We advise that you have legal consultation to assist you in starting a Series LLC in Puerto Rico.
Still, for those who seek the stable growth of their businesses in a way that protects their property, opening a Series of LLCs will be an ideal choice. A good LLC service available online can do this for you in a swift and secure fashion, or you can also form it on your own with the help of your own resources.
What Is the Definition of the Series LLC?
- What Is the Definition of the Series LLC?
- How Is It Possible To Start a Series LLC in Puerto Rico?
- Can I Entrust the Creation of the Series LLC to Someone?
- Summing Up
As established earlier, a Series LLC is a group of divisions formed by one parent company. Despite the fact that each division operates under the same parent LLC, the nature of this model is to offer every division owner legal security, more independence, and financial autonomy. This first of all ensures that the parent company and other LLC divisions are less likely to face a lawsuit against one division of a Series LLC.
If you’re closely familiar with the regular LLC business model, you will probably find it more than convenient that Series LLC has the same limited liability insurances which can shield a regular company’s assets in the event of any legal action. It means that an owner’s personal assets and interests of other sub-divisions won’t come under fire in the event of a lawsuit.
This structure is what makes Series LLC so appealing to certain businessmen since it eliminates legal dependency between all LLCs working under the same parent company and, at the same time, creates a so-called network of operations under a single parent company without the hassle of forming multiple independent LLCs.
How Is It Possible To Start a Series LLC in Puerto Rico?
Selecting a Perfect Name for a Series LLC
Most new companies start with a name, and a Series LLC is no exception. It’s actually a good idea to find a name that is reflective of the type of business your organization works with or, at least, a name that is hard to miss. Moreover, a Series LLC should include the business model in its actual name, whether it’s LLC, Limited Liability Company, or L.L.C.
Another important issue in naming your serial business is checking business name availability. There are many ways to optimize the process, such as the business name search tool that is designed to cross-check names that have already been taken by other Puerto Rico ventures.
More importantly, Puerto Rico naming guidelines require entrepreneurs to tie each LLC division to the parent LLC by connecting the names of subsidiaries with that of the main company. In addition, all units should have their unique names so that there is a clear distinction between them.
For instance, a parent company is “Peter’s Toy” that wants to set apart its toy store LLC and children’s cafe LLC divisions might name them “Peter’s Toy Store LLC ” and “Peter’s Toy Cafe LLC ” respectively.
If you want to learn more, you may check out a more detailed guide on naming an LLC that outlines the process of naming standard LLCs and Series LLCs.
Obtaining an EIN
LLC divisions have to obtain their own EIN, that is the Employer Identification Number. It is an ID number issued by the IRS (Internal Revenue Service) for taxation purposes for your business venture.
Much like your personal SSN, the EIN stands for a nine-digit identification number tied to all financial operations of a specific organization. It is usually used for the tax forms, financial documents, issuing payments, whether one-time or in payroll form.
To get one, you should download a free form from the official Internal Revenue Service portal, fill it out, and submit it. After that, the company in question will be given its own EIN identification code.
Appointing a Registered Agent
The next logical step in commencing a Series LLC refers to choosing a reliable registered agent. So, this also requires a bit of careful consideration on your part.
Of course, you might appoint any registered agent who seems most appealing to you, but, above all, this person has to be eligible to provide services in Puerto Rico from a local office that guarantees your company quick communication with the state.
This is done to arrange a proper exchange of official papers between the office and the authorities, meaning the registered agent of your choice will be responsible for securely processing vital paperwork in the required time frame. It is essential for handling lawsuits and regular payments.
What’s attractive about a Series LLC is the fact that there is no legal requirement to designate unique registered agents to every LLC division. You can deal only with one agent regardless of the side of the Series.
Preparing the Certificate of Organization
Many jurisdictions require business people to draft and file a special document to establish either regular or a Series LLC, sometimes two different forms and in other cases, one single form for all business types. The relevant form in Puerto Rico is known as the Certificate of Formation of a Limited Liability Company.
This document essentially has pertinent information regarding your business venture, from the company name and address to the legal data on your registered agent and the address of their Puerto Rico registered office. This includes the info on the potential managerial body and other personnel with executive power.
Other information should cover the main LLC organizer, such as the organizer’s name and signature, and also the dates on which each division should be legally established, as well as dissolution plans.
Once the document is filled according to legal requirements, you have to submit it to the Puerto Rico Department of State together with the mandatory $250 fee.
Drafting an Operating Agreement
Puerto Rico has no legal obligation to support the establishment of the traditional or Series LLC with the document that is called an Operating Agreement. However, every entrepreneur will recommend you obtain one.
This agreement is best utilized when it is compiled with great elaboration, where the functions of LLC divisions are disclosed in clear detail. If the Operating Agreement is thoroughly exhaustive on the topic of individual directions of the LLCs, it can save you the pain of drafting numerous agreements to go with every company.
On top of this, this paper will also describe the hierarchy of every enterprise, 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, as well as the dissolution process for each division. It also won’t hurt to add the information on asset distribution, owner voting privileges, investments, etc.
Securing Permits and Licenses
Even though Puerto Rico does not require you to apply for any general business license to conduct a Series LLC, the jurisdiction obligates businesses to get licensed locally, namely apply for the municipal tax.
If you want to find out more about the process, check out the Department of State website, where comprehensive information on the types of licensing required in Puerto Rico is provided.
Creating a Financial Support Network
Remember, any business entity has to be tied to its own bank account instead of a personal one. Opening a bank account for a Series LLC can take much time because LLC divisions require exclusive bank accounts, all different from that of the establishing company.
It is important to sustain the insulated structure of the serial ownership providing every division with financial independence and an opportunity to 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 can make sense to arrange a finance professional for all divisions. Moreover, it will also help to acquire accounting software to manage invoicing and other transactions.
Keep Your Business Compliant
The smooth operating of any enterprise, particularly a multi-division one, requires careful maintenance, in the case of Puerto Rico — submitting annual reports. The filing deadline for the yearly report is a fixed one, that is every filing has to be done by April 15th.
At their core, annual reports in Puerto Rico exist to inform the relevant state authorities of the current status and past proceedings of the business. This detailed report should include any changes in the time elapsed from the preceding report.
The report should be directed to the Puerto Rico Department of State along with the $150 filing fee.
Can I Entrust the Creation of the Series LLC to Someone?
Puerto Rico permits two courses of action in this regard: you can rely on your own abilities, so you will save significant sums of money (but potentially miss errors in the company’s paperwork or legal processes) or go for the other option where you hire an attorney to help you.
While certain states concede the entrusting of the creation process with the help of service providers, for example, Northwest Registered Agent, this option is, unfortunately, not available in Puerto Rico.
If you don’t think your legal knowledge is enough to manage the establishment of a Series LLC solo, it’s strongly encouraged to seek the services of a licensed lawyer in Puerto Rico.
Although it is rarely low-cost, this method is the more reliable of the two. For instance, preparing a supplement document for the Certificate of Organization may come off as unfairly difficult, especially without legal expertise.
The formation of Series LLC in Puerto Rico is fairly similar to the process of establishing a standard LLC. The key is to learn the correct ways of filling the Certificate of Formation and the main Operating Agreement.
Thus, if you want to save yourself from facing complex organizational procedures and avoid mountains of paperwork, you should consider hiring the services of an attorney who will manage every stage of the creation of a Series LLC in Puerto Rico for you.