Tag Archive for: registered series llc

What Is A Registered Series And How Is It Different?

In 2019, the Delaware General Assembly adopted amendments to the state’s Series LLC law allowing for the creation of “registered series”. A Delaware Series LLC is able to establish both registered series and protected series concomitantly. One entity umbrella can house an unlimited number of each series type. 

The Delaware Registered Series is a giant improvement. The new amendments make the Series LLC a more capable entity with the potential to better benefit ambitious entrepreneurs.

What is a Delaware Registered Series exactly? We cover the details of registered series and how they can benefit your business.

What Is A Series LLC?

In 1996, Delaware amended its LLC Act to give LLCs the power to create an unlimited number of cells separate from the main LLC. These would later be known as “protected series”. 

Each protected series can have a separate business purpose, separate associated assets and even separate members. These protections are contingent on the company’s Certificate of Formation and Operating Agreement which must containing proper language for establishing the limited liability of a series. 

“Pursuant to the Delaware LLC Act § 18-215 (b), the “debts, liabilities, obligations, and expenses” of each series are enforceable against the assets of that series only. The assets of each protected series are effectively off limits to creditors of any other protected series or the company.”

Forming a Delaware Series LLC requires filing only one Certificate of Formation with the Secretary of State. A Delaware Series LLC can freely create protected series through its private Operating Agreement without making any additional filings or paying additional state fees. 

What Is A Registered Series?

Registered series function similarly to protected series, however, they have unique legal characteristics. A registered series benefits from being recognized as a “registered organization” under Article 9 of the Uniform Commercial Code. This gives a registered series the right to pledge its associated assets separately from the main LLC in secured financing transactions. 

Serial entrepreneurs who operate multiple businesses often anticipate that one product may take off while others lag behind or experience set-backs. The Series LLC enables these entrepreneurs to separate and protect multiple businesses or product lines during an initial incubation period. With a registered series, it is possible to spin-off a successful product into a separate LLC. This provides entrepreneurs with even more freedom and flexibility to test various business types and explore opportunities. A registered series is like a baby bird that can then leave the nest, spreading its wings to fly on its own. 

How To Form A Delaware Registered Series.

A Delaware Registered Series is established by completing three steps:

     1.) Form a Delaware Series LLC.

First, a Delaware Series LLC is formed by filing a Certificate of Formation with the Delaware Secretary of State.

Note: The Certificate of Formation must include specific language providing for the limited liability of a series.

     2.) List Registered Series In The Series LLC Operating Agreement.

Next, registered series are established in the Series LLC’s private Operating Agreement.

     3.) File A Certificate of Registered Series

Finally, a Certificate of Registered Series is filed with the Delaware Secretary of State. The Certificate includes both the name of the Series LLC (company) and the newly created registered series.

Naming Conventions for Registered Series

The Delaware LLC Act requires that specific conventions be followed for naming a registered series. The name of a registered series must begin with the name of the LLC followed by the name of the series.

In general, the name of a registered series must be distinguishable from that of any other series or qualified business entity existing in the state record.

How Is A Registered Series Different?

Registered series differs from the original “protected series” in several ways. 

In addition to being established through the Operating Agreement, creating a registered series requires a separate public filing . This amendment was inspired by the Illinois Series LLC statute which requires each protected series to file a Certificate of Designation.

The addition of registered series language to the DE LLC Act increases the utility of the Delaware Series LLC. A registered series is able to obtain a Certificate of Good Standing from the Delaware Secretary of State.  This Certificate states that an organization has paid its franchise tax within its state of formation. A Certificate of Good Standing has many important uses. For example, a bank may require a Certificate of Good Standing in order to open a business bank account, or obtain certain business loans.  

A registered series qualifies as a “registered organization”. This allows lenders to perfect security interest in assets of that registered series which are pledged as collateral for credit. This is achieved by filing a UCC-1 Financing Statement. 

Converting A Protected Series To A Registered Series.

The Delaware Series LLC statute allows a protected series to be converted to a registered series, and vice versa.

The following steps are required to convert a protected series to a registered series:

     1.) Members Vote On The Conversion

First, the conversion must be approved by any associated members of the series with voting privileges.

     2.) File A Certificate of Conversion

After gaining approval from members, a Certificate of Conversion must be filed with the Delaware Secretary of State.

     3.) File The Certificate of Registered Series

Next, a Certificate of Registered Series must be filed with the state.

     4.) List Registered Series In The Operating Agreement

Finally, the Operating Agreement must be amended to include the new registered series.


Converting a registered series to a protected series is done through a similar process:

     1.) Members Vote On The Conversion

Associated members must vote to approve the conversion.

     2.) File A Certificate of Conversion

Then, a Certificate of Conversion must be filed with the Secretary of State. 

     3.) Amend The Operating Agreement

The Series LLC Operating Agreement should be amended to ensure that the status of the series is accurate in all internal documents.

How Much Does a Delaware Registered Series Cost?

Creating a Delaware Registered Series involves additional costs compared to the protected series. Here is a break down of the initial start-up and maintenance costs for a registered series:

     1.) Filing Fees

There is a $90 filing fee associated with each registered series.

     2.) Annual Fees

Additionally, there is an annual fee of $75 to maintain each registered series and keep it in Good Standing.

The company as a whole is required to pay one Delaware Annual Franchise Tax of $300. This is due on June 1 of each year after formation.  

A Series LLC with multiple registered series must maintain a Registered Agent for each registered series. This could result in additional Registered Agent fees. 

Comparing Costs: Protected Series vs. Registered Series

There are no additional state fees associated with forming or maintaining any number of protected series. A Delaware Series LLC can freely create and dissolve an unlimited number of protected series without making any additional filings. A protected series is also not required to pay any annual fees.

Even with additional filing fees, operating registered series can still be more cost effective than traditional asset protection strategies, like using holding companies. Creating a holding company involves forming several subsidiary LLCs. Each LLC is an individual operating business with separate assets.

Forming a holding company requires paying filing fees to set up each entity. Additionally, each subsidiary LLC would need to pay Delaware Annual Franchise Tax in addition to an annual fee to maintain its own Registered Agent. 

Who Is A Registered Series For?

The registered series may be better suited for companies requiring secured capital financing. One of the primary benefits of a registered series is the ability to perfect security interests in assets through a UCC financing statement. Choosing a registered series over a protected series can be beneficial to bigger companies with larger balance sheets.

Why a Registered Series?

The motivation behind the registered series stems from discrepancies between the original Delaware Series LLC statute and the Uniform Commercial Code (“UCC”). 

When seeking out credit, debtors often want to avoid over collateralizing a loan with unrelated assets. This means they want to limit a secured creditor to perfect their interest in the assets pledged by the borrower’s registered series and not any other company assets. This can be achieved by filing a Delaware UCC-1 Financing Statement listing one registered series as debtor. Properly filing the UCC-1 allows the lender to provide public notice of their interest in the asset and gives them security over these assets in the event of a dispute. 

Language in the Article 9 secured transactions does not allow a protected series to separately qualify as a “debtor” on any credit extended to it. Instead, the debtor is the entire LLC. 

Further questions concern the location of the organization as a debtor. According to the UCC, a financing statement filed on behalf of a debtor which is a registered organization is filed in the state where the entity is organized. Therefore, a registered series filed in Delaware means the UCC-1 would be filed in Delaware

The Registered Series Amendment is A Step Forward.

Clarification about how the Delaware Series LLC interacts with the UCC will encourage further adoption of the Series LLC by other states. This in-turn will further grow the entity’s popularity with entrepreneurs and business owners. 

Other states have already begun adopting the registered series since its introduction by Delaware in 2019. On June 1, 2022, Texas amended its own Series LLC allowing for a Series LLC to have both protected and registered series. These entities are often used in oil exploration financing. 

Work has been done outside of Delaware law to progress the adoption of Series LLC legislation in other states. In 2017, the Uniform Law Commission (“ULC”) published the Uniform Protected Series Act (“UPSA”). The UPSA creates prescriptive rules aimed at ensuring that Series LLCs are used responsibly.  

The fact that the Delaware General Assembly continues to revise their Series LLC law demonstrates the legislature’s commitment to the continued success of Series LLCs. Delaware has shown that it is willing to continue refining its laws to support the world’s most ambitious entrepreneurs and innovators by enabling them to profit from this powerful and innovative entity. 

The Series LLC: Not Your Average Business Entity

SeriesLLC.com Founder John Legaré Williams recently gave a TEDxWilmington Talk on the series LLC. This is what he discussed.

  • The Series LLC allows you to separate your assets
  • Many business types can use the Series LLC
  • The Delaware Series LLC is a popular choice

I need you to suspend your disbelief just for a second and imagine I am Mick Jagger. I am on a tour playing in small venues across the United States. I’ve just arrived in Wilmington, Delaware, where we’re performing a concert at the sold-out Queen Theater. While they’re serving cold beverages in the back, they’re also serving hot coffee. Someone orders a hot coffee, walks through the crowd, bumps his elbow and drops the cup of coffee on concert goers and staff resulting in minor burns. So, what happens next?

We’re in America, so people get sued. Those with the temporary discomfort of a cup of hot coffee to the skin decide to sue—and sue everyone they can. They sweep the streets. The allegedly injured see dollar signs and decide to sue the artist, the touring company, and the Queen Theater venue all as defendants, in addition to the man carrying the coffee. The man carrying the coffee is broke and essentially judgement proof, which is the reason so many get sued. The other defendants who may be indirectly to blame are thought to be wealthier or insured. This makes them attractive targets for the lawsuit.

You may think, “Really, do musicians get sued that often?” There are literally millions of lawsuits filed every year in the United States for all types of problems, whether real, exaggerated, frivolous, or laughable. The wealthy deep pockets of business and high net worth individuals including celebrity musicians can be the prime targets. Even Bruce Springsteen decided to call his tour in 1977 the “Lawsuit Tour” after a dispute with his business manager resulted in a protracted lawsuit. In terms of pre-litigation planning, the best time to prepare is before anyone gets hurt. It is best to plan ahead to prepare for these hypothetical judgement creditors, to avoid giving future judgment creditors a windfall. An ounce of prevention is better than a pound of cure. Taking prophylactic measures can make lawsuits less attractive to bring by turning what would have been deep pockets without planning into very shallow pockets with advanced planning. That can make defendants less attractive targets for a lawsuit.

Of course, insurance is also good to purchase. The problem with insurance is when coverage is denied or the amount of coverage is inadequate, excess liability results. Everything the policy gives you in the big print they take away in the small print. Therefore, business organization planning needs to be a primary consideration. It is best to minimize their negative financial impact up front, whether these future creditors are voluntary creditors who signed a contract with you or involuntary creditors who are injured without a contract signed in advance.

Incorporating Can Protect Your Personal Assets

One way to plan ahead is to incorporate. This creates a shield between your personal assets and the company’s liabilities. Limited liability is a wonderful thing we often take for granted. Even though the musician owns the touring company, the musician hasn’t done anything wrong directly. The musician is protected from liability because he formed his touring company as a Delaware Limited Liability Company, so although the LLC may be a proper party, the musician himself is not personally responsible, and the musician can be removed from the lawsuit. Had the touring company not incorporated, the musician and possibly all of his bandmates would be personally liable for all actions and liabilities of the touring company. If the company is incorporated, a negative judgment would only be against the company and not against the owner-musician personally. The LLC has a shield to protect its owners from this liability.

Nevertheless, even if incorporated, the other revenues of the LLC from the whole tour in every city may be exposed. The revenue from the very profitable concerts which the touring company organized since the LLC was formed could be available to the judgment creditor. That’s a much bigger pool of assets to which the creditor may have access, compared to only the revenue from the show at the Queen Theater.

What if there was a better way to set up the LLC to protect the revenue from the other cities and only expose the revenue from the Queen Theater? What if there was a way to turn one big pocket into many small pockets?

The Series LLC Allows You to Separate Your Assets

There’s a conventional way to separate these assets to prevent many assets from being exposed to any given creditor liability. Many attorneys and business owners know the conventional way. To turn a big pocket into little pockets, the touring company could set up many separate LLCs. Each venue’s revenue would be in its own LLC “box”. This could be dozens of LLCs. For example, the Queen Theater would be in its own particular LLC under the touring company. This way, only the revenues associated with the Queen Theater are available to the judgment creditor because that is where the injury took place and the other venues are separately incorporated. The creditor would not have a right to collect against any of the other assets from the performances in other cities. This approach is proven but it has drawbacks. It requires many filing fees and organization to maintain dozens of short-lived single-purpose LLCs. This can become really cumbersome to set up and maintain. In reality, not many touring companies go out of their way to set up dozens of LLCs for a band’s US tour.

There is an alternative streamlined way to have this type of limited liability without many LLCs. A Series LLC is a particular type of LLC that the Delaware legislature invented in 1996 that lets you take one LLC and break it down into its component parts. Instead of having just one overarching shield to protect owners from the liabilities of the company they own, one Series LLC allows you to establish an unlimited number of protected shields associated with assets of the company. That way if you have a problem with one aspect of the company, then you have pre-isolated and partitioned assets each into their own protective series, fenced off from other assets. Therefore, the entire Series LLC and every other one of its particular protected series aren’t necessarily responsible when something goes wrong with any one ring-fenced protected series of that series LLC. For instance, if a coffee burn occurs at the Queen Theater, the injured plaintiffs should not be able to sue both the Series LLC and all of its other protected series. Only the Queen Theater series should be exposed to the creditor. The series LLC may be a practical way to limit the plaintiffs to suing only one protected series that only holds the revenues from the Queen Theater and other related parties whose actions or inactions gave rise to the transactions or occurrences. This should work because each protected series within the Series LLC is a “legal person” in the eyes of the law. The protected series can sue and be sued separately. The other protected series are unrelated to the injury and could be dismissed, even if named in the lawsuit.

The exciting thing about the Series LLC is that it’s not limited to just Delaware. Delaware was the first state to have the Series LLC, thirteen states have since adopted it. The Uniform Law Commission, which is an organization that gets together and creates proposed laws across the US, just finalized an act with the objective to unify the way these laws are created by other states. This is no longer an obscure type of business entity. More states are adopting the Series LLC. Virginia and Arizona are proposing to be the next two states to adopt the laws.

The Way the Series LLC Works Is Simple

A Series LLC is like safe deposit boxes in a vault. If you go into a vault you might see shelves of locked boxes on the walls. A Series LLC lets you establish an unlimited number of little boxes with keys within this one company. That way, if a creditor has a judgment against one protected series, that creditor just has a judgment against that one particular protected “box”. It’s a way to segregate out and partition other assets from any given liability.

Real estate investors are using the Series LLC to set up, for example, ten properties in ten protected series. The investors may form a Series LLC and establish ten protected series in the name of protected series one, protected series two, etc. The owners can internally establish these protected series without having to go back to the secretary of state and file a new Certificate of Formation. The records of protected series establishment are all internal under the Series LLC Operating Agreement.

The protected series are legal persons. This is first time in United States history where private citizens have been empowered to establish an unlimited number of persons with only one Certificate of Formation. It is blank check to establish as may legal persons as you would like. How amazing is it that you can decide to wake up one day and establish new protected series as separate persons without even a trip to the filing office to designate series or an additional fee after the initial Certificate of Formation filing?

There are about 100,000 Series LLC’s in use across the country in the 13 states that now allow them. Each Series LLC may have only one or two protected series. Some may have dozens, hundreds, thousands, or even millions of protected series established in any given Series LLC. While this large number may be disconcerting, most are being used safely and not being sued. Very few cases have involved Series LLCs or their protected series. This is a wild world we’re moving into with business entities.

Many Types of Businesses Can Use the Series LLC

This Series LLC can be beneficial to all types of businesses. Serial entrepreneurs who want to incubate different businesses, real estate investors, and even big businesses can use it. The power brokers who initially created the legislation for the Series LLC are the ones who want to keep this for themselves and not for the common man. They are using these Series LLCs for mutual funds, private equity, and captive insurance companies.

One example of a company with a high number of protected series within a single Series LLC is a fleet of autonomous vehicles. Every vehicle could be in its own protected series. Or Getty Images—they have millions of copyrights. Every image could go into its own protected series to have them licensed separately by separate owners. This is one way to reduce enterprise-wide risk down into specific risk vectors and separate them legally.

The Series LLC is a way to revolutionize the way we think of entities. Entities don’t have to be static. Entities can constantly evolve. The organization can automatically establish a new protected series to itself as it acquires assets. It may not even be people who establish these new protected series within the Series LLC. It may be the companies themselves automating this process with computer software to establish rules and triggers through artificial intelligence. Those rules could say that as the Series LLC acquires new assets, it will dynamically establish a new protected series, fund the protected series, and keep track of the records in the protected series for each new asset it acquires.

The Future of the Series LLC

We may even use further technology to bulletproof the series protection. You wouldn’t want people accusing your Series LLCs of mischief or playing a shell game. The series LLC could use Blockchain technology that puts asset ledgers on a public or private distributed ledger that no one person can change. This way, anyone can know what assets were owned by any protected series at the time when someone drops the coffee. This allows the business owner to prove definitively what assets were owned by which protected series. It’s a real innovation in mitigating the risks associated with deep pockets. It allows businesses to do things that are beyond the scope of what they’ve ever been able to do before. Every asset is tagged and tracked to easily report on its ownership at any point in time.

Surprisingly only 1% of the new Delaware LLC’s now are taking advantage of the Series LLC provisions available in Delaware. Thirteen other states have the Series LLC law. Most are copying the Delaware version of the law to avoid losing business to Delaware. In addition, just recently the Uniform Protected Series Act was adopted when the Uniform Law Commission approved it in July 2017. This is an invitation in neon lights for the other 37 states to adopt a Series LLC act.

You haven’t heard about the Series LLC yet because they don’t teach it in law schools, business schools, and it doesn’t appear in entrepreneurship books. I invite you to look into the series LLC to determine if it would be a good fit for you or someone you know. The limit on the number of protected series is your imagination and your ability to keep track of the records.

Don’t think big about business. Think small.

MORE: Series LLC Structure

MORE: The Delaware Series LLC vs. other states