Feb 01, 2010

New Types of LLCs on the Horizon

There are three new types of LLCs (limited liability companies) that have come along in the past year or so: the series LLC, the LC3, or "low-profit limited liability company," and the nonprofit LLC. Each is unique and limited in scope and purpose. 
The series LLC allows LLC members (the owners) to own interests in different series of assets and to collect ifferent revenue streams from the LLC. So far, only fourteen states currently allow for the formation of a series LLC: Delaware, Florida, Indiana, Illinois, Iowa, Minnesota, Mississippi, Nevada, North Dakota, Oklahoma, Tennessee, Utah, Virginia, and Wisconsin. 
The main characteristic and advantage of the series LLC is that it allows the LLC to set up one or more series of assets within the LLC. Each series is administered separately from the other series, which means that separate businesses and properties can be subsumed into one LLC entity, but the business and assets of each series can be managed and operated separately from the business and assets of the other businesses. For example, each series can have separate owners and managers, a separate LLC operating agreement that specifies a separate division of profits and losses associated with the series, and other separate formation and operation characteristics.
An important aspect of some states' statutes regarding series LLCs is that each business is insulated from the liabilities of the other businesses within the LLC. A series LLC can work well to insulate multiple real property parcels owned by a real property developer. It may also work for an LLC engaged in separate lines of business that have unique legal liabilities attached to each business. Generally, however, for locally owned and operated small businesses, it is unnecessarily costly and complex to form a series LLC.
We'll talk about the nonprofit LLC and the LC3, or "low-profit limited liability company, in our next posts.

To learn more about making informed choices when forming an LLC, see Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo).