How to Create a Series LLC in Utah

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 entities, known as "series," under a single master LLC. Each series can have its own assets, liabilities, and members, and is treated as a separate entity for liability purposes. This structure is particularly beneficial for businesses that require asset segregation, such as real estate investment companies, where each property can be held in a separate series.

Does Utah Allow Series LLCs?

Yes, Utah permits the formation of Series LLCs under its state laws. The governing statute is the Utah Revised Uniform Limited Liability Company Act, specifically under Utah Code § 48-3a-1201. This statute outlines the requirements for establishing a Series LLC, including the necessity of including specific language in the Certificate of Formation to authorize the creation of series.

How a Utah Series LLC Works

In a Utah Series LLC, the master LLC, also known as the parent LLC, has the authority to create individual series. Each series operates independently, with its own assets and liabilities, and is protected from the liabilities of other series within the same LLC. This separation requires meticulous recordkeeping to ensure that the assets and operations of each series remain distinct.

Benefits of Forming a Series LLC in Utah

• Cost Efficiency: Forming a Series LLC can be more cost-effective than establishing multiple traditional LLCs, as it allows for the consolidation of administrative tasks and fees.
• Asset Segregation: Each series can hold its own assets and liabilities, providing protection from the liabilities of other series.
• Administrative Flexibility: The structure allows for streamlined management and operations across multiple series under a single umbrella.

Limitations and Risks of a Utah Series LLC

• Legal Uncertainty: The Series LLC is a relatively new entity type, and its treatment in jurisdictions outside of Utah may vary, leading to potential legal uncertainties.
• Banking and Lending Challenges: Some financial institutions may be unfamiliar with Series LLCs, complicating banking and lending processes.
• Tax Complexity: Managing tax compliance for multiple series can be complex, requiring careful attention to state and federal tax obligations.

Who Should Consider a Utah Series LLC?

A Series LLC is ideal for businesses that require asset segregation, such as real estate investors, asset holding companies, and intellectual property management firms. However, businesses that do not need such segregation or operate in jurisdictions that do not recognize Series LLCs may find a traditional LLC more suitable.

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

Step 1: Choose a Name for the Series LLC

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

Step 2: Appoint a Utah Registered Agent

A registered agent must be appointed for the Series LLC. This agent must be a resident of Utah or a business entity authorized to do business in Utah, responsible for receiving legal documents on behalf of the LLC.

Step 3: File the Certificate of Formation

The Certificate of Formation must be filed with the Utah Division of Corporations and Commercial Code. This document includes essential information such as the LLC's name, registered agent, and the principal office address. Filing can be completed online or by mail.

Step 4: Include Series LLC Language

The Certificate of Formation must explicitly state that the LLC is authorized to establish series. Failure to include this language may result in the inability to form series under the LLC.

Step 5: Draft a Series-Compliant Operating Agreement

An operating agreement is crucial for governing the internal operations of the Series LLC. It should outline the management structure, asset and liability separation, and the rights and responsibilities of members.

Step 6: Establish Individual Series

Individual series are created internally by the LLC. Proper documentation and recordkeeping are essential to maintain the separation of assets and liabilities between series.

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 operations and tax obligations.

Step 8: Open Separate Bank Accounts

Each series should have its own bank account to ensure financial separation and prevent the commingling of funds, which could jeopardize liability protections.

Step 9: Comply With Utah Tax Requirements

The Series LLC must comply with Utah's tax requirements, including state income tax and any applicable sales tax. Each series may have separate reporting and payment obligations.

Utah Series LLC Filing Fees and Costs

The filing fee for the Certificate of Formation is $59. Additional fees may apply for each series and for annual renewals. It is important to verify the current fee schedule with the Utah Division of Corporations and Commercial Code

Utah Franchise Tax and Series LLCs

Utah does not impose a franchise tax on LLCs. However, each series may have separate tax reporting obligations, and it is advisable to consult with a tax professional to ensure compliance.

Ongoing Compliance Requirements for Utah Series LLCs

Series LLCs in Utah must file an annual report and pay the associated fee to maintain good standing. Proper recordkeeping and compliance with state regulations are essential to preserve liability protections.

Common Mistakes When Forming a Series LLC in Utah

• Missing Required Series Language: Failing to include series authorization language in the Certificate of Formation can prevent the formation of series.
• Poor Recordkeeping: Inadequate documentation can lead to the loss of liability protection between series.
• Mixing Assets Between Series: Commingling funds or assets can jeopardize the liability separation between series.

Series LLC vs Traditional LLC in Utah

A Series LLC offers a flexible structure for businesses needing asset segregation, while a traditional LLC may be more straightforward for businesses without such needs. The choice between the two depends on the specific requirements and operations of the business.

Additional Resources

• Utah Division of Corporations and Commercial Code
• Utah Code - Complete Statutes
• Utah Online Business Registration System
• Utah State Tax Commission
• Contact: Utah Division of Corporations and Commercial Code - Phone: (801) 530-4849, Email: corpucc@utah.gov

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