Every aspiring entrepreneur can confirm that starting a Series LLC in Utah is relatively difficult, particularly if you don’t know some of the legal steps the state requires. Thus, as long as a Series LLC seems interesting to you, but you haven’t made up your mind yet whether it’s worth the hassle, then this guide can help you understand how to start this process.
Created in Wyoming in the late 1970s, the Limited Liability Company – the LLC for short – refers to a rather new business type with a popularity that is growing steadily across the country.
Series LLC is an improvement over the basic model. Delaware first introduced it, and now it is offered only in some states, including Utah. Indeed, this business model is rapidly expanding to other parts of the United States today.
As the name implies, a Series LLC means an LLC made up of more than one business entity or, as it reflects in the name, more than one series. Each division in the series may have different purposes from those of its parent company (and there is usually a diversity of assets and liabilities between the divisions as well), which provides certain security as well as legal independence when the series is formed properly.
In addition, there are several key factors, which affect the process of creating a Series LLC. So if you want to take your company a step further, we advise you to take a closer look at the legal nuances involved in the process of forming a Series LLC.
One thing to keep in mind regarding the pitfalls of business law is that even having the top resources on how to set up this legal entity does not guarantee a seamless process without understanding this aspect of state law. Therefore, consulting with a lawyer can help you establish a Series LLC in the state of Utah.
Nevertheless, if you are looking for stable business growth, then creating a series of LLCs will be the perfect option for you. With a good LLC service, it can be handled for you in a quick and reliable manner, otherwise, you can also form it yourself with your own resources.
What Is Series LLC?
- What Is Series LLC?
- How Do You Open a Series LLC in Utah?
- Is It Possible to Outsource a Series LLC Formation?
- Final Thoughts
As mentioned earlier, a Series LLC refers to a group of divisions registered by a single parent company. Although each division operates under the same parent LLC, the nature of this model involves providing every owner of a division with legal security, more independence, as well as financial autonomy. First of all, it guarantees that the parent company and the other divisions of the LLC will less likely face a lawsuit against one division of the series.
When you know what the regular LLC business model is, then you’ll probably find the Series LLC more than comfortable since it comes with the same limited liability insurance designed to protect the assets of the regular company in the event of a lawsuit. It means that the owner’s personal property and the other business divisions’ interests won’t face a lawsuit against an unrelated division of the LLC in the Series.
It is this structure that makes Series LLCs so attractive to some entrepreneurs, since it removes the legal dependence between all LLCs operating under one parent company, and, at the same time, provides a network of operations under a single parent company with no hassle of starting several independent LLCs.
How Do You Open a Series LLC in Utah?
Choosing a Good Name for Your Series LLC
Generally, it’s a good idea to come up with a business name that reflects the type of activity your company performs, or, at least, such a name that’s hard to miss. Moreover, a Series LLC should also incorporate the business model in the actual name, whether it’s Limited Liability Company, LLC, or L.L.C., with the addition of “Series” to clarify.
One more important element in naming your serial business is name availability check. There are many options to optimize the process, like the business name search tool designed to cross-check names, which have already been taken by other Utah business entities.
Corporate designations, which are different from the one the company is set to operate under, are also not allowed. In addition, specific business descriptors should not be included in the name of the LLC, unless they reflect the type of business the company specializes in, i.e. including “bank” in the name of a series LLC that has nothing to do with banking.
What’s more important, Utah naming guidelines also require you to connect each LLC division to the parent LLC by appending the names of subsidiaries with that of the main company. Furthermore, all divisions should be designated uniquely, so there is a clear distinction between them.
For example, a parent company entitled “Karl’s Coffee” that wants to set apart its cafe LLC and LLC divisions might name them “Karl’s Coffee Cafe Series LLC” and “Karl’s Coffee Roastery Series LLC” respectively.
To learn more about this subject, check out the detailed guide on naming LLCs, which describes the process of naming standard LLCs as well as Series LLCs.
Designating a Registered Agent
The next step you should take is finding a reliable registered agent. This process 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 should be eligible to provide services in Utah from the office that guarantees quick communication with the state.
This is for you to arrange a timely exchange of business documents between the office and the state, meaning the registered agent of your choice can securely process important paperwork in the required time frame, which is essential for regular payments and handling lawsuits.
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.
Preparing the Certificate of Organization
Most states require entrepreneurs to draft and submit a special document to register an LLC, known as the Articles of Organization. However, in Utah, the recognized name for it is the Certificate of Organization. The state also has two different versions of the certificate used to launch regular LLCs and serial ones, with the latter requiring the series LLC version of the document.
Even though they both are pretty comparable, the form intended for multi-LLC entities should also contain a notice that further details the relationships between all divisions running under the same parent company.
This notice is meant to allow for the registration of LLC divisions while also strengthening the insulated limited liability nature of all divisions and how it relates to the master LLC. Legally, the addition of this directive will be enough to protect the LLC divisions’ assets in the event of a lawsuit brought against another entity in the series but for the notice to work accordingly, it should be incorporated in the certificate “immediately following the provision stating the name of the company,” according to state legislation.
You can also submit a single certificate instead of drafting multiple ones to match every division and the same applies to the special notice.
The form itself includes the necessary information about your business, from the company address and name to the legal info on your LLC registered agent and the address of their Utah office.
Other information should cover the company’s operating purposes, the management structure (manager- or member-run), relevant information on company owners or managers, such as whether the company classifies as a minority- or female-owned, plus the course of action for future dissolution or restructuring.
When all paperwork is complete, you have to send the form to the Utah Department of Commerce Division of Corporations and Commercial Code and pay the mandatory $70 fee.
Getting an EIN
LLC divisions should be assigned 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 functions as a nine-digit identification number tied to all financial operations of a particular company. It appears on financial documents, the tax forms, issuing payments, whether one-time or in payroll form.
To obtain an EIN for your business, you have to download a free form from the official IRS portal, fill it out, and submit, after which the company will be given its own EIN identification code.
Writing an Operating Agreement
Although Utah imposes no legal obligation to support the formation of LLCs with an Operating Agreement, it is still recommended for you to obtain one.
The agreement is best utilized when it is drafted in great detail, 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 will save you from drafting numerous agreements to go with every entity.
Besides, the agreement will also cover the hierarchy of each company, including the possible appointment of a manager. Other information should ideally stipulate the course of action when replacing ownership and/or management and dissolution process for each division. Information on assets’ allocation, owners’ voting rights, investments, shares, and so on would also be helpful.
Establishing a Financial Support Network
Any business entity should have 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 longer with Series LLCs because LLCs divisions require exclusive bank accounts, all different from that of the establishing company.
Such an approach is necessary to maintain 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 can also help to invest in accounting software to optimize the processing of financial transactions.
While Utah does not obligate managers or owners to get a general business license, certain industries expect you to be licensed when there is a Series LLC involved.
To find out if your company needs any permissions for legal operation in Utah, check out the Utah One-Stop Online Business Registration, which can help local entrepreneurs with sorting any licensing issues.
Moreover, remember that you may be requested to oversee licensing on a more local level depending on the nature of the venture, so always check with local authorities on the subject of permits.
Understanding Maintenance Requirements
The smooth running of any business, particularly a multi-division one, requires careful maintenance, in the case of Utah—submitting the annual report along with a $20 fee.
This report informs the relevant authorities of the current status and past proceedings of the organization. It should cover any changes—if any occurred—in the time elapsed from the preceding report.
The annual report includes any revision in company and division names, addresses, changes in ownership or registered agents, including their new names and addresses. There is also no need to submit multiple reports to cover all divisions, a single report for the parent company would be enough.
Is It Possible to Outsource a Series LLC Formation?
Utah permits two courses of action in this regard: you can rely on your own abilities to save your money (and potentially miss errors in paperwork or legal processes) or go for the other option, like hiring an attorney to aid you.
While certain states concede the outsourcing of these proceedings to online service providers, for example, Northwest Registered Agent, the option is, unfortunately, not available in Utah.
It’s recommended to employ an attorney specializing in commercial and corporate law to help you navigate the rather complicated legal matters.
The creation of Series LLC in Utah is not too dissimilar to the process of opening a standard LLC. The most crucial step of this process is to fill out the appropriate version of the Certificate of Organization and add a special notice to legitimize the Series LLC entity as a whole.
Hence, if you’d rather save yourself the turmoil of navigating the complex formation conventions and avoid a lot 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 Utah for you.