Illinois Series LLC

A Series LLC Illinois is an option for new business entities in the state as of 2005, creating a limited liability company that serves as an umbrella for separate companies formed within the Series LLC. An LLC, which is recognized as a business entity in every state, provides its owners personal liability protection from business debts and judgments. LLCs are considered pass-through entities for taxation, which means that the owner or owners report business profits and losses on their individual tax returns.

Although an LLC provides the limited liability of a corporation, this entity is easier to form. A Series LLC provides each separate business with protection from liability accrued by other entities within the series. In states without a Series LLC, you have to pay a separate filing fee to create each separate legal entity. Illinois and seven other states currently offer the Series LLC structure. Entrepreneurs who own multiple businesses and want to keep them legally separate can either establish multiple LLCs or one Series LLC with a separate cell within for each distinct business.

Each series in a Series LLC can operate a separate business and have separate assets; each is also granted protection from judgments and claims against another cell in the series. Each cell can have its own members, managers, and operating agreement. In Illinois, a Series LLC is only required to pay one filing fee and file a single annual report. As long as legal LLC requirements are met, debts and obligations of one sub-LLC cannot be enforced against any other sub-LLCs or against the series as a whole. Only the main Series LLC is required to file an operating agreement, though having a separate agreement for each cell is recommended.

Real estate management and investment companies that own several different properties often use the Series LLC as a holding company. This allows each separate property to receive limited liability. Other ventures that may benefit from a Series LLC are a woodworking or crafts business that serves different types of customers or a business that offers several separate service lines or products.

Although the Series LLC was established in Illinois several years ago, this entity has not yet been thoroughly tested in court. This means that another state might not treat each sub-company within the Series LLC as a legally separate entity. The IRS has not yet established Series LLC case guidelines, and little case law exists to establish how bankruptcy will affect a Series LLC.

Series LLC Requirements

In Illinois, a Series LLC must:

  • Establish one or more series in its operating agreement.
  • Maintain separate LLC agreements and business records for each series.
  • Hold assets of each series in accounts that are separate from each other and from those of the umbrella LLC.
  • Provide for these separate accounts and records in the operating agreement.
  • Provide notice of limited liability in the Articles of Organization, indicating that liability is only upheld when:
    • Record-keeping requirements are met.
    • Separate accounting requirements are met.
    • Assets and liabilities are held separately.
    • These conditions are detailed in the Articles of Organization.
  • File Form LLC-37.40, the certificate of designation, for each separate series.

If these conditions are not fulfilled, the court will consider the Series LLC void and all assets may be seized to satisfy the creditors of any sub-LLC.

Benefits of Series LLC

A Series LLC has a lower start-up cost than does establishing multiple LLCs. Instead of an annual report for each LLC, you only need to file one for the series. This will also save you money on attorney fees. A Series LLC is also less complex to administer and has fewer requirements than does a corporation with subsidiaries. In some states, rent paid from one cell to another within the same LLC is free of sales tax. A Series LLC is subject to only one registration fee and one annual fee. In many cases, the entire Series LLC is treated as a single entity for taxation.

Drawbacks of Series LLC

Each series within the LLC must have its own registered agent, which means you'll pay additional fees. Administering separate bank accounts for each series can become an administrative issue.

If you need help with establishing a Series LLC in Illinois, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.