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March 18, 2022

by Oney Snyder, Esq., Carlile Patchen & Murphy LLP

Originally set to become effective starting January 2022, Ohio’s new LLC Act went into effect on Feb. 11. In general, a series LLC offers a considerable amount of flexibility on how the owners of an LLC may conduct business. It permits owners to maintain separate assets within a single business entity while reducing the need to create additional entities with the Secretary of State.

Traditionally, a non-series LLC limits the owner’s liability to the specific assets owned by that LLC. In other words, if the owner of the LLC wanted to isolate certain assets within the LLC from other assets, the owner would need to form multiple LLCs. In this situation, each LLC owns assets separately and operates different lines of business. Each separate LLC must be formed with the Ohio Secretary of State. In contrast, a series LLC can take the structure mentioned above and essentially consolidate it within one single series LLC, meaning just a single filing with the Secretary of State.

The series LLC can have separate “cells” within it. Each cell within a series LLC can segregate the liability of the assets owned by that particular cell from the assets in every other cell within that same series LLC.

If properly implemented, the creditors of one cell within the series LLC cannot reach the assets of another cell within that series LLC. The series LLC is like the parent LLC in a holding company structure, while each cell within the series LLC essentially operates like a subsidiary of the parent entity.

The series LLC offers another option for structuring your LLC in the future. A business owner who wants to change its existing parent/subsidiary structure into a Series LLC can do so by merging the subsidiaries with the parent entity and amending the surviving entity’s articles of organization and operating agreement to comply with the new requirements for a series LLC.

A series LLC has certain requirements, per the new LLC statute:

  1. The paperwork filed with the Secretary of State must state that the LLC may have one or more series of assets.
  2. The operating agreement for the series LLC must have certain elements, including either or both of the following: (1) separate rights, powers or duties with respect to specified property or obligations of the LLC, or profits and losses associated with specified property or obligations; (2) a separate purpose or investment objective.
  3. At least one member must be associated with each cell within the series LLC.

Also, it should be noted that the records for the series LLC must be kept separate for each cell within the series LLC. However, it is crucial to diligently keep records of which cell in a series LLC contains which assets, so as not to lose the liability protection within the series LLC, one of the primary purposes of this structure.