It is known that setting up a Series LLC in Tennessee can be quite difficult, especially if you face it for the first time and don’t know all the nuances and laws of the state. Nevertheless, if you are determined to open a Series LLC, you can follow the guidelines we have prepared for you and make it happen quickly and efficiently.
What is a Series LLC in Tennessee? It all started with the state of Wyoming in the late 1970s when the first limited liability company was formed, better known as an LLC. Nowadays, this business structure is the most popular in America.
As for a Series LLC, it was first introduced in Delaware. Not all states in America allow you to establish a Series LLC, only some of them, and Tennessee is one of them.
As we can see from the name, a Series LLC is the same as an LLC, only made up of several divisions or series. In addition, each division in the series may have different purposes from those of its parent company, providing a certain degree of security and legal independence, if the series is properly formed.
There are several major factors, which affect the process of forming a Series LLC. Therefore, we encourage you to take a closer look at the legal nuances of this process.
Please Note: It is important to understand that even having the best resources on how to start this type of legal entity will not guarantee a smooth process if you do not know the state law. You should consider asking for legal advice to get help establishing a Series LLC in Tennessee.
However, for those interested in a stable growth of their businesses and their assets protection, the formation of a Series LLC will be a perfect choice. What’s more, you can either hire an online LLC service provider, which can do it for you quickly, or you can form one on your own.
What Is a Series LLC?
- What Is a Series LLC?
- How Do You Set Up a Series LLC in Tennessee?
- Who Can Handle a Series LLC Formation?
- Wrapping Up
As we have already mentioned above, a Series LLC consists of a group of divisions created by one parent company. Although each unit operates under the same parent LLC, one thing is the point of this business model: to give each owner of the division more independence, financial autonomy, as well as legal security. This ensures, first and foremost, that the parent company and the other LLC divisions are less likely to face a lawsuit against a particular division in the series.
If you know what a regular LLC is, you might think that a Series LLC is a more convenient business model, because it has the same limited liability insurance that protects the assets of a regular company in the event of a lawsuit. This means that the owner’s individual assets, as well as the interests of other divisions, will not be affected in the event of a lawsuit against a non-related division of the LLC in the series.
That is why a Series LLC is so attractive to some entrepreneurs since it eliminates the legal dependence between all LLCs operating under the same parent company. But, at the same time, it creates a network of operations under a single parent company avoiding the hassle of forming a number of independent LLCs.
How Do You Set Up a Series LLC in Tennessee?
Come Up With a Name for a Series LLC
Choose a name that reflects the type of business your company handles, or at least a name that will be catchy. The main thing to remember is that a Series LLC should include its business model in the actual name, for example, LLC, L.L.C., or Limited Liability Company.
Another important factor is making sure the name is free in the state. You can check that using the Tennessee business name search tool.
Tennessee also has some restrictions regarding company names that should be considered first. One of them includes other corporate designations, and they are completely prohibited. An LLC name should avoid using words, which do not reflect the type of business the company specializes in, i.e., including the word “Insurance” in the name of a Series of LLCs that have nothing to do with it.
What is more important, the Tennessee naming guidelines require that you tie every division to the parent LLC by adding the names of the subsidiaries with the name of the main company. However, all divisions should have unique names to make them clearly distinguishable from each other.
For example, a parent company entitled “Peter’s Cake” wants to set apart its bakery LLC and cafe LLC divisions. They might name them “Peter’s Cake Bakery LLC” and “Peter’s Cake Cafe LLC” respectively.
Do you want to find out more about this issue? Then look through a more detailed guide on naming an LLC in Tennessee, that details the process of naming standard LLCs and Series LLCs in this state.
Hire a Registered Agent
The next step to take is to find a registered agent for your business. Anybody can be your registered agent, but the main condition is to be present at the Tennessee office and to keep in touch with the state.
This is necessary to organize the timely exchange of documentation between the office and the state. The registered agent has a duty to process vital paperwork within the required time frame, as it is very important to deal with lawsuits and regular payments.
Generally, there is no legal obligation for Series LLCs to appoint separate registered agents for each division of the LLC, so you can hire only one agent.
Draft an Operating Agreement
Although there is no legal requirement in Tennessee to create an Operating Agreement for an LLC, having this document will be very beneficial to your firm.
It will be better if this agreement is drafted with great detail and thoroughness. Moreover, if the document is thoroughly exhaustive on the topic of individual directions of the LLCs, it will save you from the need to create numerous agreements for each LLC.
In addition, this internal document will also describe the hierarchy of every company, including the possible assignment of a manager. All other information should provide, as a rule, the course of action in the event of a change of ownership or/and management, as well as the dissolution process for each division. It won’t hurt to add the information on asset distribution, owner voting privileges, investments, and so forth.
Submit the Articles of Organization
Most states of the USA require you to fill and submit a special document to launch an LLC, and Tennessee is no exception. The state accepts the same form of the Articles of Organization to open either traditional or serial LLC, with the main distinction found in the fill-out process of Section 3 of the document, where you should note that the entity is meant to be a Series.
The form’s Section 14 automatically requires you to check the box certifying the formation of a Series in accordance with Tennessee Code T.C.A. §48-249-309(a) and (b).
While the document itself is not very complicated, the process of preparing it may take a little longer than creating similar documents in other states, because of the large number of sections included in the Tennessee Articles.
The form usually lists all the necessary information about your company, such as the address and name of the entity, the preferred business hierarchy (manager-managed or member-managed), and the address of the registered agent, especially its office in Tennessee.
Other information should cover the dates designated to mark the end of the fiscal year of your venture, details of the ownership group, the course of action for future restructuring or dissolution, and information of the LLC organizer including the name and signature.
When all paperwork is filled out according to legal requirements, the form should be sent to the Tennessee Secretary of State with the mandatory $50 fee per owner/member of the series. In total, the minimum allowed sum is $300 for all owners, while the upper margin reaches $3,000.
Establish a Financial Support Network
Any business entity should open its own bank account instead of having a personal one of the owner. The entire process of doing this is a little bit lengthier with Series LLCs since LLC divisions require exclusive bank accounts, all different from that of the establishing company.
This allows each division to enjoy financial independence and operate at full capacity as a division in a Series. You will need a qualified accountant to make all the financial transactions much better. It is also advisable to invest in accounting software to optimize the processing of financial transactions.
Obtain an EIN
LLC divisions should get their own EIN, or Employer Identification Number, which is an ID number issued by the Internal Revenue Service for taxation purposes.
Like your personal SSN, the EIN, which is a nine-digit identification number, is tied to all financial operations of a specific organization. It appears on the financial documents, payroll forms, tax forms, and issuing payments.
To obtain an Employer Identification Number, you have to download a free form from the official IRS website, complete and submit it.
Get Licenses and Permits
Compared to other states that support the creation of a Series, Tennessee is stricter in its licensing for limited liability companies, obligating every entity to register as a franchise, meaning that every division as well as the parent company require individual registration IDs and accounts for excise tax as issued by the Department of Revenue.
This application doesn’t exceed $15 for an individual account. All payments should be submitted to the clerk of the relevant local authority (county or municipality). This empowers them to seek relevant licensing on behalf of your company.
The good news is, Tennessee does not obligate owners or managers to obtain a general business license, though certain industries expect you to be licensed.
To find out if your company needs any permissions for legal operation in Tennessee, you can look through the Licensing and Regulations list as compiled by the Tennessee Department of Commerce and Insurance to help local entrepreneurs with sorting any issues.
Furthermore, you may also be requested to oversee licensing on a local county level, depending on the nature of the enterprise. Hence, check with local authorities on the subject of permits.
Comply With Business Maintenance Protocols
For your company to operate without any extra problems, careful maintenance is a must. In the case of Tennessee, we’re talking about filing an annual report for every active LLC.
Thankfully, it’s perfectly possible to do this from the comfort of your home or office directly through the Secretary of State’s website.
The major difference in maintenance that we can see in Tennessee compared to other states is the theoretical number of annual reports a Series must submit—it is not enough to cover all divisions in the parent company report. Instead, every division should be reported on individually.
This report informs the relevant authorities of any changes, if any, since the previous report. As a rule, this applies to any changes, for example in company and business division names, addresses, including new names of the owners or a registered agent.
As for legal fees, annual reports come with rather modest rates, requiring every division owner to submit only $50 for their entity. Again, the minimal allowed sum is $300 for all owners while the upper margin reaches $3,000 for all owners.
Who Can Handle a Series LLC Formation?
There are two ways to set up a business in Tennessee: you can do it yourself and save a lot of money (but you are likely to make more than one mistake), or you can hire a lawyer.
While certain states concede the outsourcing of these proceedings to service providers like Northwest Registered Agent, the option is, unfortunately, not available in Tennessee.
It’s recommended to employ a lawyer specializing in commercial and corporate law to help you navigate the rather complicated legal matters.
Starting a Series LLC in Tennessee doesn’t look exactly like forming a regular limited liability company, except for the specific paperwork.
What you need to remember is the proper way to fill the Articles of Organization, namely the correct handling of certain sections that stipulate the entity model you want to create. Besides, there is the rather intricate process of applying each division for excise tax, which is a compulsory step for the registration process in the state.
Therefore, if you’d rather save yourself the turmoil of navigating the complex organizational conventions and avoid mountains of official paperwork, it would serve your interests to seek the services of an attorney, who can oversee every step of setting up a Series LLC in Tennessee for you.