Series LLCs find favor in Indiana
April 7, 2016
Series LLCs find favor in Indiana
Indiana is the 17th state to allow commercial real estate investors the option of creating so-called “series LLCs” to hold and shelter their assets.
The concept was created in Delaware a decade or so ago, and has been adopted by other states since. The Indiana General Assembly passed legislation in this year’s session creating them in the Hoosier state effective July 1. The bill was authored by Rep. Casey Cox, R-Fort Wayne.
“I think it’s the future of limited liability companies across the country … and I think that the reason is the efficiency that it provides for being able to segregate assets, liabilities, different classes of owners,” Cox said.
Under a traditional LLC format, a separate entity often is created for the ownership of each individual commercial property. With a series LLC, a single master entity – in essence a holding company – may be formed that contains separate series, or cells, within it to hold various properties.
Each sub-LLC may have different assets, economic structures, members and management. The profits, losses, and liabilities of each series are legally separate from the other series, thereby creating a firewall between each series.
It allows for more protection for entities, which can segregate assets and ownership under a single umbrella, without having to form individual entities, Cox said.
“It’s us in Indiana saying we think this is something that is catching on in the country and we want to make sure that this is an available option for Indiana businesses as well,” he said.
Series LLCs are considered an advanced planning tool of the future, offering planning advantages for such businesses as hedge funds, venture capital funds, oil and gas deals and fractional share arrangements, according to limitedliabilitycompanycenter.com.
There are some unresolved issues regarding series LLCs in some states, however, including tax filings and payments and creditor/debtor issues raised by the federal bankruptcy code, the LLC Center website noted.
Existing LLCs within Indiana may convert to series LLCs by amending their operating agreements and filing new designations with the Indiana secretary of state, Cox said.
