What is a Delaware Series LLC: Benefits, Process, and Other Requirements?

When you hear about a Delaware series LLC, you might wonder if it's the same as a standard LLC. They're not. A standard LLC is a single entity with combined assets and liability protection covering the whole company. Thus, if it is sued, all of its assets are at risk.

A Series LLC acts like an umbrella, creating separate "series" or "cells" within it. Each cell has its own assets, members, and liabilities. A lawsuit against one cell doesn't affect the others. However, in this blog post, let's explore Delaware series LLCs and their requirements.

What is a Delaware Series LLC?

Established in 1997, the Delaware Series LLC acts as a legal entity managing assets and liabilities. It prevents one series' debts from impacting other series or the umbrella LLC of which it is a part.

How is an LLC Different from a Series LLC in Delaware?

The table below depicts the distinction between a standard LLC and a Series LLC in Delaware:

Advantages of Availing a Delaware Series Limited Liability Company

Through a Delaware series LLC formation, you can enjoy the following advantages:

1. Ease of Incorporation

The only requirement for starting a series LLC is that one of the series of the Delaware LLC must be incorporated with the Delaware government. You can start the other series LLCs on an operating agreement.

2. Affordable Cost

When you start a Delaware series limited liability company, you can pay less cash for incorporation, and you need to pay only one filing fee, as well.

3. Low Franchise Tax

When you own a series LLC, you must pay an annual franchise tax. You'll have to pay as much as $300 to the state on or before the 1st of June every year.

4. Requirement of Registered Agent Fee

When proceeding with Delaware company registration, the onboarding of a registered agent is mandatory. The same applies to series LLCs. However, the fee for the registered agent may vary depending on the cells you wish to incorporate.

5. Independence from Other Series

Another significant advantage of choosing a series LLC is that it is distinct from other series under the same LLC. It has its procedures, assets, and liabilities. Moreover, one series' debt or liability cannot be passed on to another.

Disadvantages of a Delaware Series Limited Liability Company

Before diving into the series LLCs, understanding their disadvantages is critical as well:

i) Different Banking and Accounting Systems

Since every series of the LLC has its separate financial statements, it will require a different accounting system and a bank account.

ii) Multiple EIN Requirement

Since every series is considered a distinct legal entity, there is a federal employer identification number requirement. It could make running your business difficult.

Simple Steps to Form a Delaware Series Limited Liability Company

Here's a simple breakdown of how to form a Series LLC in Delaware:

1. Hire a Registered Agent

First, you'll need to hire a Delaware-registered agent. Think of this person or company as your official point of contact in Delaware. They'll have a physical address in the jurisdiction that you can use to direct essential documents and legal mail to.

2. Pick a Company Name

You need to come up with a name for your LLC that follows Delaware's rules. The name must include "LLC," "L.L.C.," or "Limited Liability Company" to show that it's an LLC. Moreover, your enterprise’s name must not be the same as that of an existing business in Delaware.

3. Draft an Operating Agreement

The most critical document for a Series LLC is an Operating Agreement. It's the company's rulebook. You'll have to draft one that establishes how the base LLC will operate and, more importantly, how you're going to form and manage each of the individual series within it. The agreement should also govern the issuance and transfer of the LLC Membership Certificate for each series, formally documenting ownership. It's this agreement that legally insulates each series's assets and liabilities from the other series, giving you the liability protection you're looking for.

4. Get an EIN

An Employer Identification Number is essential for your business. You'll need to apply for one with the IRS. You'll need it to get a business bank account and for taxes, among others.

5. Open Separate Bank Accounts

In order to legally protect your Series LLC, you must have distinct bank accounts for each series that you form. For instance, if you have three series, you will need three different bank accounts.

Why Choose Us?

Business Setup Worldwide has been guiding numerous business investors and entrepreneurs in establishing businesses in their desired locations. The approach we adopt sets us apart in competitive markets. However, if you would like to go on with the company formation services, or with Delaware LLC, C Corp, or S Corp, or know about the Delaware Merger Certificate, then contact us through WhatsApp, email, or through the utilization of any of our social media platforms, such as LinkedIn, Twitter, YouTube, Facebook, or Instagram.