The Ohio Revised Limited Liability Company Act took effect in February 2022. They made several significant changes to Ohio limited liability company (LLC) law. Among them, the Act authorized the formation and operation of a new type of business entity called a  “Series LLC.” Here’s what Ohio businesses and those considering incorporating here need to know. 

What Is a Series LLC?

A Series LLC is a limited liability company that can establish one or more subsidiary entities. Each is called a “series” or “series of assets” that are separate and distinct from each other and the LLC itself. Each series can have its members, managers, business purpose, obligations, assets, and liabilities. They can also independently transact business, sue and be sued, and grant liens and security interests. Assets owned by or associated with a properly maintained series are shielded from the liabilities of other series and the parent Series LLC, and vice versa. 

A Series LLC serves essentially the same function as an LLC holding company but is easier to create and (potentially) simpler to operate. An LLC holding company typically owns interests in one or more other LLCs. These must be organized, registered, and maintained as a stand-alone corporate entity. In comparison, it takes just one filing with the Secretary of State to form a Series LLC. After that, that entity can establish and operate multiple series at its discretion. This is provided it follows certain recordkeeping and administrative requirements. 

How Do I Form a Series LLC in Ohio?

Forming a Series LLC in Ohio differs slightly from forming a standard-issue LLC. As with any LLC formation, you must file Articles of Organization with the Secretary of State and pay a fee (currently $99). To make your new entity a Series LLC, you simply include a statement in the Articles of Organization that the LLC may have one or more series of assets subject to the limitations provided in division (A) of section 1706.761 of the Ohio Revised Code

What Are the Features and Benefits of an Ohio Series LLC?

Like any limited liability company organized in Ohio, a Series LLC must have at least one member and maintain a statutory agent. Ohio law also leaves all of the other decisions about how an LLC is structured and managed to the discretion of its members. These are who usually set forth the particulars in an operating agreement. Series LLCs (and LLCs generally) are not required to file annual reports in Ohio.  

It is relatively straightforward for an Ohio Series LLC’s operating agreement to establish or provide for establishing one or more series. The only requirements are that Series LLC must designate at least one of its members to be associated with each series and must give each series either: 

  • Separate rights, powers, or duties concerning specified property or obligations of the Series LLC
  • Or to profits and losses associated with specified property
  • Or obligations
  • A particular purpose or investment objective.

One significant benefit of a Series LLC is that a series can hold an asset indirectly. In other words, the parent LLC can retain title to an asset while associating that asset with a series, thereby shielding it from all liabilities except those the series incurs. This can create significant efficiencies for Ohio businesses historically relying on holding company structures, such as real estate ventures, hospitality groups, construction firms, and investment funds. To also secure these benefits, the Series LLC must merely maintain records that account for the assets associated with each series separately.

What Problems Might Arise with an Ohio Series LLC?

Although Series LLCs have been around for years (more than 20 states allow them), they are new to Ohio law. For now, some potentially complex business formation and operation questions related to Ohio Series LLCs remain open, such as:

  • What constitutes adequate record-keeping to maintain the separateness of a series?
  • Can a series file for bankruptcy separate from its parent LLC?
  • Will states with no Series LLC laws honor the legal separateness of a series created by an Ohio business?
  • Is a series a separate taxable entity?

In time, court decisions, regulations, and statutory updates will likely resolve these and related questions. But for now, the newness of Ohio’s Series LLC structure is something businesses here should keep in mind. 

Wrapping Up

Ohio’s recent authorization of Series LLCs is a potential boon for business owners for business formation. Adopting a Series LLC structure can lead to significant cost savings and administrative efficiency. But it also comes with some legal uncertainty. Businesses considering forming a Series LLC in the Buckeye State should discuss their options with an experienced commercial lawyer. Contact Brenden Kelley Law at 216-644-3359 today to schedule a consultation.

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Explore our other Blog Posts for Business Owners: Navigating the Resources of Small Business Administration in the U.S., 5 Important contracts to know when starting a Small Business and Choosing the Best Corporation in Ohio: S-Corp or C-Corp?

Additional Resource: For a general overview on starting a business in Ohio, you can refer to the “Starting a Business” section on the Ohio Secretary of State’s website: Starting a Business – Ohio Secretary of State.