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A New Formation Solution – is the SSLC Right for Your Business?

Client Alert
March 4, 2021

In early January 2021, Ohio adopted Senate Bill 276 which established a Revised Limited Liability Company Act (“ORLLCA”) as Ohio Revised Code Chapter 1706, which effectively replaces the current Ohio Limited Liability Company Act (Ohio Revised Code Chapter 1706). The ORLLCA will become effective on January 1, 2022.

One of the principal changes within the ORLLCA is the ability to establish “series LLCs”. Ohio becomes the 15th state to adopt a “series LLC” (“SLLC”). The below FAQs will help you better understand the mechanics and nuances of a series LLC.

Is forming a Series LLC right for you?

SLLCs provide unique benefits for individuals and entities. If you own multiple businesses, the SLLC structure can assist with minimizing risk and limiting exposure to liabilities with respect to certain assets held by SLLC.

  1. What is a Series LLC?

The formation of the SLLC was introduced in Delaware in 1996 by top business lawyers in the state. This was prompted by business owners who wanted to form a unique entity that consisted of separate, individual interests but had the same asset and liability protection as the traditional limited liability company (“LLC”). Due to the rising popularity of SLLCs in Delaware, many states have adopted similar statutes. Synonymous with Delaware law, a SLLC in Ohio can establish, through its operating agreement, multiple divisions or “series” with separate assets, purposes, business objectives, members, and ownership interests. Each series is legally separate from one another and is only liable for its own debts and obligations. In short, each series operates similar to an independent subsidiary under the master limited liability company.

    2. How is it different from a traditional LLC?

The traditional LLC protects the owners from liability – but, in an effort to diversify risk within an entity structure – many entities form an “umbrella” of LLCs. The umbrella generally consists of a parent LLC and several subsidiary LLCs under the parent LLC’s control.

The SLLC is a variation of the traditional LLC and offers additional simplicity and flexibility to a business owner. The SLLC offers reduced setup and maintenance costs because only one Secretary of State filing is needed, regardless of how many series are a part of it. The most significant difference between these two types of entities is the enhanced liability and asset protection offered by the SLLC. With an SLLC, an owner no longer has to form the “umbrella” structure of several LLCs. So long as the entities with the SLLC adhere to the rules of the ORLLCA, the liabilities of the master LLC are not enforceable against any series that is a part of it and the liabilities of each series are not enforceable against another series.

    3. What types of businesses would benefit from the SLLC?

The SLLC structure can be beneficial for many different types of business owners. Specifically, real estate investors who own investment properties can utilize the SLLC structure to diversify risk within a portfolio. This structure is extremely valuable for business owners who have capital and other assets invested in multiple segments of an LLC and wish to have those assets protected.

    4. What are the drawbacks?

Since the SLLC structure is relatively new and only 14 other states permit their formation, there is little guidance by the IRS and state tax departments on the tax treatment of the SLLC. As such, there are tax risks associated with the formation of a SLLC and individuals and entities should consult their tax advisors regarding such risks.

To explore if utilizing and/or forming a SLLC will be advantageous for you or your business(es), please contact BMD Corporate and Mergers & Acquisitions Attorney Michael D. De Matteis, Esq. at mddematteis@bmdllc.com.

business and corporate lawMichael D De MatteisOhio Revised Limited Liability Company ActSeries LLC
Client Alert

Telehealth Flexibility Updates: HIPAA, DEA, and CMS

May 12, 2023The Covid-19 Public Health Emergency (PHE) officially ended on May 11, 2023. But what does that mean for telehealth, a field that expanded exponentially during the PHE? Fortunately, many of the flexibilities will remain intact, at least temporarily. This client alert presents a brief overview of the timelines that providers need to follow, but for a more comprehensive review of telehealth flexibilities and when they will endClient Alert, Multimedia

WEBINAR SERIES RECAP | Ending the Public Health Emergency + Post-Pandemic Check-Up

May 10, 2023Some may take the position that the rest of the country already returned to a new “normal” following the COVID-19 pandemic.  But healthcare providers continue to implement COVID protocols and navigate the ever-changing healthcare regulations at both the federal and state levels.  It is important for healthcare providers to take time for a “Healthcare Check-Up” with the start of 2023 and the ending of the Public Health Emergency (“PHE”).Client Alert

Sharp Rise in False Claims Act Cases - Navigating the FCA Waters

May 5, 2023Recently, on April 18, 2023, the United States Supreme Court heard arguments regarding the FCA’s scienter, or mental state, requirement. To prove violation of the FCA, the statute requires that a defendant “knowingly” file false claims for payment. The term “knowingly” is defined within the statute to mean a person that acts with actual knowledge, deliberate ignorance, or reckless disregard. Circuit courts are split on how to interpret and apply the knowledge element of the FCA, and based on the Supreme Court’s decision, there will be a large impact on healthcare defendants and their businesses as well as anyone who contracts with, or receives money from, a federal program. A broader interpretation of the FCA would unnecessarily target and stifle healthcare, and other businesses, for simple errors in daily operations. This goes against the intended application of the FCA, which was to prevent fraudulent activity.Client Alert

Areas of Opportunity in Columbus: Highlights from the Columbus Opportunity Summit

May 5, 2023On April 27, 2023 Columbus Business First held its annual Columbus Opportunity Summit, bringing together business and economic development leaders to provide an update on how Central Ohio is preparing for expected growth in the coming years, an issue heightened by the arrival of Intel at its 1,000 acre site in Licking County, just outside of Columbus. The site will be home to two new chip factories with room to grow to a total of eight factories and is a $20 Billion investment.Client Alert

BREAKING: Biden Administration Has Officially Ended the Two Remaining COVID Vaccine Mandates

May 2, 2023As of May 1, 2023, the Biden Administration has officially ended the two remaining COVID vaccine mandates: (1) the Federal Contractor Mandate, and (2) the CMS Healthcare Provider Vaccine Mandate.
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