If a business investor owns multiple business assets, he or she may be able to further protect his or her assets by forming a separate LLC to own and hold each separate asset. If the separate LLCs are properly formed and maintained, then theoretically only the assets owned by a specific LLC would be subject to claims or lawsuits against that LLC. However, there are costs and administrative burdens associated with forming, qualifying (if necessary), and properly maintaining multiple LLCs, which should be considered in deciding whether to form separate entities for each business asset. For example, each separate entity will have to obtain the necessary licenses to conduct business.
Another option to consider, if permitted under applicable law, is a series LLC, which is an umbrella entity consisting of one LLC with multiple "series" or "cells." Series LLCs may be of interest to individuals who have several large assets (such as multiple vehicles) for which they desire to maintain separate liability protection.
To best understand how an LLC and a series LLC differ, a typical non-series LLC (if properly formed and maintained) will generally protect its owner's personal assets from the LLC's business obligations. However, it will not protect one asset owned by the LLC from being used to satisfy a judgment relating to another LLC asset. Under a non-series LLC, all assets owned by the LLC are potentially subject to any claim or lawsuit against the LLC. For example, assume that a typical non-series LLC holds several assets. If a person is injured by one of the LLC's assets and sues and wins, then all of that LLC's assets -- even the other assets that it owns -- can be used to satisfy the judgment obtained against the non-series LLC. The LLC could potentially lose all of its assets based on a lawsuit or claim that is related to only one of its assets.
A properly formed and maintained series LLC will treat each created series as a separate entity, with its own rights and obligations. Theoretically, under a series LLC, if someone is injured by Asset #1 (which is an asset of Series #1) and sues the LLC and wins, then only the assets of Series #1 should be at risk with regard to the claim. Companies should consult the applicable state and federal laws and registration requirements to determine if it is necessary for each Series of a series LLC to separately register its vehicles or obtain licenses in the name of the Series.
The series LLC originated in Delaware, but the laws of some other states (such as Illinois and Oklahoma) also provide for the formation of a series LLC. The Company Corporation has extensive experience in setting up series LLCs in Delaware, Illinois or Oklahoma, and can help business owners properly form and maintain a series LLC.