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OHIO ADOPTS THE SERIES LLC: Implementation of Ohio’s Revised Limited Liability Company Act is Coming

On January 7, 2021, Ohio adopted S.B. 276. The new legislation establishes the Ohio Revised Limited Liability Company Act (“ORLLCA”), which effectively replaces the current Ohio LLC Act. ORLLCA will be fully effective as of January 2022. While the new law contains numerous changes to the existing LLC landscape, below is an overview of some of the key differences under the ORLLCA.

Series LLCs

The ORLLCA now makes Ohio one of only 16 states that permit the formation of “series LLCs.” The significant advantages of series LLCs are their flexibility and simplicity. They allow a single entity to own multiple “series” of assets, each of which are shielded from liability. Real estate investors are prime users of series LLC’s. Rather than creating multiple companies to own investment property, each series within a single LLC isolates one property from the rest thereby adding protection for the investor.

Under the ORLLCA, an LLCs operating agreement may establish or provide for one or more designated series of assets that has one or more members and may include:

  • Separate rights, powers, obligations or duties with respect to specific property within each of the series;
  • Separate rights concerning profits and losses associated with each series; and
  • A separate purpose or investment objective for each series within the LLC.

Each series formation has a separate operating agreement and is authorized by the articles of organization. The articles of organization only require a simple statement that the LLC may have one or more series of assets.

Series LLCs also enjoy cost and tax advantages. Standard LLC formation requires registration fees for each LLC created. Series LLC registration fees are only charged for the master LLC, and each series created thereafter do not have an associated fee. There is also only one tax identification number (EIN), and all the series are listed on only one tax return. This cuts down on time for tax preparation. In addition, and subject to certain criteria, series LLCs have the potential to avoid Ohio’s commercial activity tax, which is imposed on taxable gross receipts in excess of $150,000.

Management Structure Flexibility

The ORLLCA provides more flexibility in LLC management structures. The current LLC Act requires an LLC to either be member-managed or manager-managed. Default rules in the current LLC Act provide baseline authority of either the member or manager to perform certain actions, which can be modified through an operating agreement. Under the ORLLCA, the distinction between member-managed and manager-managed LLC’s has been eliminated; a person’s ability to act as an agent of the LLC now comes from authorization outlined in the operating agreement, decisions of the members as provided for in the operating agreement, the filing of a “Statement of Authority” with the Secretary of State, or from the default rules contained in the ORLLCA. This new feature of the ORLLCA provides more flexibility for LLC management, allowing each LLC to use a management structure that works best for its unique needs.

Statutory Penalty

There will now be a penalty for not maintaining a statutory agent and/or up-to-date contact information with the Ohio Secretary of State. Under the existing LLC Act, there is no statutory penalty for an LLC that fails to maintain a statutory agent. Under the ORLLCA, the Secretary of State will be required to cancel an LLC that fails to maintain a statutory agent, though the LLC may be reinstated upon the appointment of a new agent and the payment of additional fees. This is particularly important as the cancellation of an LLC may open its members up to personal liability. Under the new ORLLCA regime, it is of paramount importance to appoint a statutory agent and maintain accurate contact information.

The ORLLCA represents a significant shift in the law as it pertains to limited liability companies in Ohio. As the implementation of the new law approaches, businesses operating as LLCs should examine their current operating agreement to make sure its provisions comply with the ORLLCA. To undertake such a review or examine how the series LLC may benefit your business, please contact your BMD attorney, or Blake Gerney at Brgerney@bmdllc.com, S. Matthew Harris at Msharris@bmdllc.com, or Kevin Burwell at Kdburwell@bmdllc.com.

COVID, Privacy and More! New Challenges for Physicians in 2021

While hopefully we are coming out of the pandemic, the legal repercussions related to legislative initiatives and other actions during that time continue to apply to businesses in general and healthcare practices. It is a helpful reminder that practices make certain that they maintain accurate records in order to satisfy the reporting requirements under the various COVID-related bills and protect yourself from future employment claims.

Banking and Cannabis: Bank Lending, The Next Frontier

A fortuitous combination of developments and circumstances present the banking and cannabis industries a large opportunity to enhance each of their respective bottom lines: conventional bank lending, payment processing, treasury management and other services, and bank administered SBA and revenue bond financing to cannabis businesses.

EKRA Updates: COVID-19 Testing, Employment Agreements, and More

Ever since the Eliminating Kickbacks in Recovery Act (“EKRA”) was passed by Congress in 2018, we have been waiting to see how the law is interpreted and ultimately enforced. As a reminder, EKRA seeks to eliminate kickbacks in return for patient referrals to facilities that treat those overcoming addiction, such as recovery homes, clinical treatment centers, and laboratories. (NOTE: EKRA applies to all laboratories, not just those related to addiction treatment.) It is essentially an expansion of the Anti-Kickback Statute, which only applies to those services that are reimbursable through federal healthcare programs such as Medicare and Medicaid, to now also cover services reimbursable through private insurers.

New Interpretation of the Fair Debt Collection Practices Act Rocks the Industry

It’s not lost on us that our interpretation of § 1692c(b) runs the risk of upsetting the status quo in the debt-collection industry. This quote from the Eleventh Circuit Court of Appeal in its April 21, 2021 opinion from the case of Hunstein v. Preferred Collection and Management Services, Inc. is possibly the biggest understatement in the history of the Fair Debt Collection Practices Act. At a minimum, the Eleventh Circuit’s opinion has sent shockwaves and fear throughout multiple sectors of the financial services industry.

Construction Industry Trends and Predictions Through 2021 and Beyond: Insurance and Emerging Threats

A 2021 survey identified three key issues impacting the construction industry in 2021: (1) the financial health of contractors; (2) the continuing risk of the pandemic; and (3) technology driving productivity, but also increasing the risk of cybersecurity threats. With this backdrop, insurance premiums in the construction industry are generally on the rise in 2021.