How to Create a Series LLC in Ohio

What Is a Series LLC?

A Series LLC is a unique form of a limited liability company that allows for the creation of multiple, distinct series or cells within a single LLC. Each series operates independently, with its own assets, liabilities, and members. This structure allows for the segregation of assets and liabilities, providing liability protection across different series under the umbrella of a single parent LLC.

Does Ohio Allow Series LLCs?

Yes, Ohio permits the formation of Series LLCs. The authorization for Series LLCs in Ohio is governed by the Ohio Revised Code, specifically under Chapter 1706. It is essential to include specific language in the formation documents to establish a Series LLC, ensuring that each series is recognized as a separate entity.

How a Ohio Series LLC Works

In an Ohio Series LLC, the master LLC acts as the controlling entity, while individual series operate under its umbrella. Each series can hold its own assets and incur its own liabilities, which are legally separate from those of other series. This separation requires meticulous recordkeeping and adherence to structural requirements to maintain the liability shield between series.

Benefits of Forming a Series LLC in Ohio

• Cost Efficiency: Forming a Series LLC can be more cost-effective than creating multiple traditional LLCs, as it reduces the need for separate filings and administrative tasks.
• Asset Segregation: Each series can hold distinct assets and liabilities, protecting them from the risks associated with other series.
• Administrative Flexibility: The structure allows for streamlined management and operations across different business lines or asset holdings.

Limitations and Risks of a Ohio Series LLC

• Legal Uncertainty: The Series LLC structure is not universally recognized, which may lead to legal challenges in jurisdictions outside Ohio.
• Banking and Lending Challenges: Financial institutions may be unfamiliar with Series LLCs, complicating banking and lending processes.
• Tax Complexity: Navigating tax obligations for each series can be complex, requiring careful compliance with state and federal tax laws.

Who Should Consider a Ohio Series LLC?

A Series LLC may be suitable for businesses involved in real estate, asset holding, or intellectual property management, where asset segregation is beneficial. However, for businesses with simpler structures or those operating in multiple states, a traditional LLC might be more appropriate.

Step-by-Step: How to Create a Series LLC in Ohio

Step 1: Choose a Name for the Series LLC

The name of the Series LLC must comply with Ohio's naming requirements, including the use of "Limited Liability Company" or abbreviations like "LLC." Each series should have a distinguishable name that includes the parent LLC's name.

Step 2: Appoint a Ohio Registered Agent

A registered agent must be appointed to receive legal documents on behalf of the LLC. The agent must be a resident of Ohio or a business entity authorized to do business in Ohio.

Step 3: File the Certificate of Formation

The Certificate of Formation must be filed with the Ohio Secretary of State. This document includes the LLC's name, address, registered agent information, and management structure. Filing can be done online or by mail.

Step 4: Include Series LLC Language

The formation documents must explicitly state the LLC's ability to establish series. Failure to include this language may result in the series not being recognized as separate entities.

Step 5: Draft a Series-Compliant Operating Agreement

An operating agreement is crucial for internal governance. It should outline the management, asset, and liability separation provisions for each series.

Step 6: Establish Individual Series

Series are created internally through documentation and recordkeeping. Each series should maintain separate records to ensure liability protection.

Step 7: Obtain EINs (Parent and Series, If Needed)

An Employer Identification Number (EIN) is required for the parent LLC and may be necessary for each series, depending on their activities.

Step 8: Open Separate Bank Accounts

Separate bank accounts for each series are essential to maintain financial separation and prevent commingling of funds.

Step 9: Comply With Ohio Tax Requirements

Each series must comply with Ohio's tax obligations, including sales tax, income tax, and any other applicable taxes. Reporting and payment obligations must be met for each series.

Ohio Series LLC Filing Fees and Costs

The filing fee for forming a Series LLC in Ohio is $99. Additional fees may apply for each series, depending on the specific requirements and filings.

Ohio Franchise Tax and Series LLCs

Ohio does not impose a franchise tax on LLCs. However, each series must comply with state tax obligations, which may include income and sales taxes.

Ongoing Compliance Requirements for Ohio Series LLCs

Series LLCs in Ohio must file biennial reports and maintain accurate records for each series. Compliance with state laws and regulations is essential to maintain liability protection.

Common Mistakes When Forming a Series LLC in Ohio

• Missing Required Series Language: Failing to include series-specific language in formation documents can lead to legal issues.
• Poor Recordkeeping: Inadequate documentation can jeopardize liability protection.
• Mixing Assets Between Series: Commingling assets can undermine the liability shield between series.

Series LLC vs Traditional LLC in Ohio

A Series LLC offers a flexible structure with potential cost savings and asset protection benefits, while a traditional LLC may be simpler and more straightforward for businesses with less complex needs. The choice depends on the specific business requirements and operational scope.

Additional Resources

• Ohio Secretary of State Main Page
• Ohio Business Division/Formation Page
• Ohio Revised Code - Complete Code
• Ohio Online Filing System
• Ohio Department of Taxation
• Contact Information: Phone: (877) SOS-FILE, Email: business@ohio.gov

This article provides general information about Ohio LLC formation requirements under the Ohio Revised Code. It is not intended as legal advice. Persons forming an LLC should consult with a private attorney regarding their specific circumstances.