On July 1, 2013, Missouri’s Governor Jay Nixon signed into law legislation allowing the creation of “series limited liability companies”. (SLLC). Missouri is now one of very few states that allow business owners to create SLLCs. In order to understand how an SLLC company generally operates, you should first understand the benefits of a standard limited liability company (LLC).
Generally, an LLC member’s personal assets are protected if the LLC is sued. In other words, only those assets held by the LLC can be attached if a judgment is awarded against the LLC. For example, if the assets owned by the LLC consist of rental property, then only those assets can be attached; not those of the individual LLC member. But in this example, the LLC’s assets can be attached, regardless of whether those assets consist of one parcel or twenty separate parcels of rental property. However, if each separate parcel of rental property is owned by a separate LLC, then only the rental property of the individual LLC that has been sued can be attached. Thus, not only are the LLC member’s personal assets protected, but so are the company assets in each of the other nineteen separate LLCs. This technique of providing asset protection for each LLC, however, requires filing individual articles of organization for each one, accompanied by individual filing fees, and incurring the expenses attributable to the multiple and repetitive tasks associated with managing each LLC.
The SLLC, on the other hand, obviates the necessity of multiple filing fees and, to some extent, repetitive management tasks. An SLLC consists of a parent LLC with two or more sub-LLCs, often call cells, under one umbrella. The SLLC will have one name with each cell have the same name but distinguishing itself from the other cells. For example, the cells under a parent-SLLC named Acme, LLC will be named Acme, LLC (Cell A), Acme, LLC (Cell B), and so forth. Whereas a separate operating agreement is needed for each separate LLC, only one global operating agreement is needed for an SLLC provided, pursuant to Missouri’s new law, that each cell is identified therein. Each cell has the power to conduct business as if it were a separate LLC, which includes conducting business with another cell under the same SLLC.
Missouri’s new SLLC law emphasizes that while one or more cells may have separate business purposes or investment objectives from the other cells, those must be specified in the operating agreement. The new law also sets out various other requirements that must be met and included in the operating agreement in order for a company to be part of an SLLC. While the formation of a single LLC does not mandate the need for an operating agreement, the new law thus seemingly requires an operating agreement when forming an SLLC. This means that the operating agreement for an SLLC must contain technical provisions not otherwise contained in a operating agreement designed for a single LLC. Because of this, and the SLLC’s infancy in Missouri, legal advice should be sought when considering the formation of an SLLC. However, this new legislation provides reason for hope that Missouri is becoming more “business-friendly”.
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