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A “Delaware Series LLC” is a special kind of limited liability company (“LLC”) authorized by the Delaware Limited Liability Company Act. An LLC which is organized as a Delaware Series LLC can create designated series of specified property or operations with separate business purposes or investment objectives. Each series is a separate “cell” within the limited liability company. Each cell, or series, has separate members, managers, assets and liabilities, and business interests.

The debts, liabilities and obligations relating to a particular series are enforceable only against the assets of that series and not against the assets of the LLC generally or the assets of any other series. The assets of a specific series are protected from enforcement action against the assets of the LLC itself or against the assets of any other series if certain basic rules are met:

The LLC agreement provides for the establishment of one or more series Separate records are maintained for each series and its assets are accounted for separately from the other assets of the LLC or any other series (and the LLC agreement so requires such separation) Notice of such limitation of liability is set forth in the LLC’s certificate of formation
How Can a Delaware Series LLC be Used?

A hallmark of the LLC is its flexibility. A Delaware Series LLC greatly extends that flexibility to allow the creation of separate cells within the LLC to accomplish diverse business objectives. Each of the series in a Delaware Series LLC can operate independently of the LLC itself in general and any other series.

The primary advantage of a Delaware Series LLC is that it saves the cost of forming multiple limited liability companies to achieve the same goals. For example, if a real estate investor owns 20 separate properties and wants to insulate each property from the liabilities of each other property, he could set up 20 different limited liability companies, paying a separate filing fee for each LLC, or he can set up one Delaware Series LLC and establish each property as a separate series. He would file one certificate of formation and pay one filing fee. Each year thereafter, he would file only one annual report and pay one annual fee. On the back end, when he sells one property, he could simply eliminate the series that held that property without the need to file a certificate of dissolution.

In addition to the cost savings, other factors that make a Delaware Series LLC a useful entity are speed and convenience. For example, when the investor who has set up a Delaware Series LLC decides to buy an additional property, he simply sets up a new series in the same LLC. There is no need to draft a certificate of formation or to wait for it to be filed with the Delaware Secretary of State. The change can be made in minutes in his own office.

Because of the unique aspects of a single legal entity with multiple distinct cells, there are many other potential uses. For example, suppose that a business wants to acquire a single license that expressly provides that it cannot be sublicensed to any third party, even a subsidiary of the licensee. Since the series are all simply “cells” of one Delaware Series LLC and not separate legal entities, the company should be able to share the license among its various series without violating the terms of the license. Each individual business would be able to use the license but still keep its liabilities separate.

While real estate ownership has been one of the most frequent applications for a Delaware Series LLC, it is easy to see potential uses for an entity with its special features:

An owner of a fleet of taxicabs could set up each cab and its driver as a separate series An owner of a chain of drycleaners could set up each store as a separate series A touring theater company could set up each engagement as a separate series
As long as the separate accounting and other requirements are met, the potential uses of the series are virtually endless.

The Delaware Series LLC is a relatively new type of entity but it has already shown itself to be a useful tool for a variety of businesses. As more states amend their limited liability company laws to allow formation of series LLCs, it is likely that more and more creative uses of the series LLC will be discovered.

The Limited Liability Company (LLC) is a comparatively new form of business entity, which started in Wyoming in 1977. It is neither a corporation nor a partnership, but combines the benefits of both. The persons who have interest in an LLC are known as ‘members’ rather than ‘shareholders’. The liability of members is limited to their investment in the LLC. This means that they cannot be held personally liable for company debts unless they have stood a personal guaranty. Tax liability is like that of a partnership, but this may differ in the case of a single-member LLC.

The laws relating to LLCs vary from state to state, though there are attempts to bring about a national, uniform code. Software explaining individual state rules and the details of the procedures for registration and operation is available. Registration is simple and the cost is moderate. The process can be completed within a couple of days. You can either do it yourself, with the software, or entrust the job to a professional.

One (in some states) or more persons can form a LLC by filing the required papers with the Secretary of State and paying the stipulated fees. Banks and insurance companies may not qualify to register a LLC. Certain states restrict some professionals, like accountants and architects, from forming an LLC to render their services.

The management of an LLC is very flexible. The members can decide on the type of management they want. Either all the members together, a single member or a small group of members can run the company. Alternatively, an outsider (including a corporation) can be appointed to manage the affairs of the company. The management parameters are usually set out in a document known as the Operating Agreement.

Normally the voting rights would be in proportion to the interest held, but with the consensus of members it could be one member one vote. The members can also decide the guidelines for profit sharing, mode of dissolution and transfer of interest.

A properly structured LLC can be ideal for several types of businesses. That is why LLCs are gaining in popularity.

The question of why incorporate a business has a simple answer: a corporation is a legal fiction that is used to protect the business owner’s personal assets from being taken should the owner be sued. If you are a sole proprietor, you might be considering making the switch over to incorporation. When you are ready to learn how to incorporate, business owners should know that they can use services that allow them to incorporate online.

How to incorporate depends on what corporate structure you wish to use for you business. There are four basic types of incorporation, and they include the LLC, an S-corporation, a C-corporation, and a non-profit. There are several factors that go into the choice of which structure to use. You will need to decide if your business has a great amount of growth potential, or if what you are selling has the potential of causing injury to people who purchase the product or service and if you could be sued for damages. You will also have to decide how much paperwork you are prepared to deal with, or if you have the resources to hire a professional accountant. Another question to consider is if your business will be conducted outside of your home state.

If you answer in the negative to all of the above questions, then an LLC might cover your business’s needs. If you find yourself answering affirmatively to one or more of the questions, then you will want to seriously consider utilizing the S-Corporation structure. Some states offer more protections and privacy with less regulation than others, so you will need to think about the scope of your business.

There are many organizations that are ready to help you get started with the process of online incorporation. When you are considering incorporating, business owners are pleased to discover that filling out the required paperwork does not require a legal professional. Having said that, business law is very complex, and it is easy to make mistakes that can cost you big bucks, so many business owners like to have a professional handle this aspect for them.

You may want to consult with your tax adviser or accountant for help with incorporation, or you could hire an attorney. The last is not the least expensive option, however, and can sometimes be priced out of a small business owner’s budget. A popular way to get help with incorporating is to use an online incorporation service. These economical services help you with all of the appropriate paperwork you will need in order to get set up as a corporation. They are also prepared to do so in each state in which you would like to do business. When you incorporate online, the fees and services offered can vary a great deal, so it pays to comparison shop for these services in order to find the best service at the best price.