A series LLC operating agreement outlines how a series LLC will be regulated and governed. This internal document establishes protected series and orders the internal affairs of the company. The Series LLC Operating Agreement is important for resolving disputes between owners.
Below are common sections in Series LLC Operating Agreements:
- Conduct operations
- Have its own members
- Retain its own assets
The operating agreement must authorize series, specify each has its own structure, and state one series is not liable for others. Typically, the agreement must be amended when a new series is created.
To add a series, amend the operating agreement. A series can have different or the same purpose and members as the parent LLC.
A series LLC consists of a “parent” LLC with sub-LLCs or “series” branching off. Series are isolated from each other. Owners can create unlimited series with separate assets, members, and operations.
A series limited liability company (LLC) provides liability protection across multiple "series", each of which is theoretically protected from liabilities of the others. A series LLC is like a master LLC with separate divisions, similar to an S corporation with Q-subs.
The purpose of a series LLC is to minimize legal and accounting costs. Filing fees to form multiple LLCs can be high. With a series LLC, you only file and pay fees for one LLC.
Each series in a cluster can be treated as a separate entity for tax purposes, though IRS rules are unclear. Series LLCs permit the creation of multiple independent businesses or series under one entity. Each series functions separately, with its own members, assets, and liabilities. This structure provides liability protection and flexibility.
The initial LLC is sometimes called the master, base, umbrella, or parent LLC. Designating a protected series can be done without public filings and fees. A protected series may break off into a traditional LLC or another series LLC. It may also seek bankruptcy protection separately since each series is a separate legal "person."