Converting your existing LLC to a series LLC primarily depends on whether your state's LLC laws allow a series LLC. As of January 2011, only eight states allow the formation of a series LLC: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas and Utah. Although each of these states has its own specific laws regulating the conversion of an existing LLC to a series LLC, in general the conversion will require three things: revising or creating an operating agreement that provides for the establishment of one or more series, amending the LLC formation document filed with the state and maintaining separate records for each series in the LLC.
Revise your existing LLC's operating agreement to specify that one or more series may be established within the LLC. If your LLC's existing operating agreement is not in writing or there is no operating agreement, it is important to create a written operating agreement. Because a series LLC is fundamentally a segregation of different assets, members and managers within an LLC, good record keeping is necessary to ensure that the series will be respected by the courts and other third parties.
Obtain the necessary document to amend your LLC's formation document -- articles of organization or certificate of formation -- on file with the state. For example, in Delaware a Certificate of Amendment for Limited Liability Company is needed. This can be obtained from the Division of Corporations. In Illinois, a Restated Articles of Organization is needed and is available from the Secretary of State.
Prepare the document to amend the LLC's articles of organization or certificate of formation by inserting the necessary identifying information, such as the LLC's name, address and any identification number provided by the state. For the part of the form indicating the amended information, insert language stating the LLC's authorization to create a series LLC, such as: "The operating agreement provides for the establishment of one or more series." Sign and date the form where indicated.
File the document to amend with the same state agency where you filed the original LLC formation document, such as the secretary of state. A filing fee will be required with the document, which can vary greatly. As of January 2011, the filing fee for a Delaware Certificate of Amendment is $200, and an Illinois Restated Articles of Organization filing fee is $500.
Establish a separate record-keeping system for all new series formed within your LLC as specified in your LLC's operating agreement. In general, you should give each series a unique name; a statement of the assets, members and managers affiliated with the series, and separate financial records for each series.
Illinois also requires the filing of a Certificate of Designation form whenever a new series is established within the LLC. As of January 2011, a filling fee of $50 is required with each certificate.
California has yet to permit the formation of a series LLC; however, it expressly states that it allows a series LLC formed in other states to engage in business in California.
A series LLC is a relatively new form of business structure, which means that there is uncertainty regarding the legal ramifications of such a business structure for tax and liability issues. Until there are court cases interpreting series LLC statutes, business owners and professional advisers have little guidance on the viability of the series LLC business structure in a particular industry. In September 2010, the IRS requested public comment on proposed rules regarding the federal tax treatment of a series LLC; however, there will not be any guidance on the issue until final rules are adopted and published by the IRS.
- Stoel Rives, LLP: LLC Monitor -- Texas Joins the Series LLC Crowd
- Delaware Division of Corporations: Certificate of Amendment for Limited Liability Company
- Illinois Secretary of State: Restated Articles of Organization
- Illinois Secretary of State: Certificate of Designation
- California Franchise Tax Board: Series Limited Liability Company (Series LLC)
- Stoel Rives, LLP: LLC Monitor -- IRS Proposes Regulations for Series LLCs