The series LLC is only available in certain states, including Illinois. A series LLC is a collection of LLCs that are grouped under one parent LLC. This enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
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Illinois is one of several states that offer a series LLC as an option for entrepreneurs. But starting an Illinois series LLC is an important, complex process. It’s more nuanced than forming a standard LLC. In this guide, we’ll cover the basics of starting a series LLC in Illinois: how it works and the essential steps you’ll need to complete to create one.
At this time, ZenBusiness doesn’t provide series LLC formations, but we hope this article will provide useful information for anyone thinking about starting one.
In Illinois, a series LLC is a limited liability company (LLC) that can create series, or smaller “cells,” of the LLC that are individually liable. LLCs gain this privilege in Illinois by filing a special formation document and creating an operating agreement that authorizes series.
In a way, an Illinois series LLC acts like a holding company, complete with an umbrella company (called a parent LLC) and smaller entities underneath it. These smaller entities (sometimes called child LLCs) can have separate rights, unique business assets, and even unique memberships. But unlike a holding company, a series LLC only requires formation paperwork for one entity. And as an LLC, there aren’t as many formalities to uphold as a corporation would have. It’s a relatively flexible business structure.
Forming a series LLC is a complex process, but it does boil down to seven basic steps. For some of these steps, you might decide to have a business attorney help you, but that’s ultimately your call.
Before we dive in: if you’re operating in a regulated profession, such as law or medicine, you may have to form a professional limited liability company (PLLC). We don’t offer formation services for these entities, but we can help you understand the process a bit more.
Decide on a name for your LLC. Naming a series LLC is relatively simple because it’s not much different from naming a regular business. For starters, Illinois law requires your name to be completely distinct from other names in the state. You can use our business name search tool to check this easily.
On top of that, your name must include the phrase “limited liability company” or one of two abbreviations: “LLC” or “L.L.C.” Illinois also doesn’t allow a name to imply government affiliation or use obscure symbols or characters.
A series LLC will also have to pick a name for each individual series. According to Illinois law, each series LLC name must begin with the full name of the parent LLC. After that, you can decide what to name each one on your own. Generally, it’s a good idea to have a structured approach that makes it easy to keep each series straight.
For many series LLCs, this means picking a name that clearly describes the property that series holds. For example, a real estate investment company named “Smith and Jones Properties LLC” might name a series “Smith and Jones Properties LLC — 101 North Street Apartments.”
If you want to operate a series under a slightly different name, you can do so by filing an assumed name with the Secretary of State.
Designate your registered agent. Illinois requires every LLC to appoint a registered agent (For more information, please see our what is a registered agent page), an individual or business entity that accepts service of process and important state communications on your behalf. Generally, we recommend appointing someone to fill this role. That’s because the agent must be available at their listed address during all regular business hours.
Technically, an agent representing a series LLC is only representing a single legal entity. But you should let them know that you’re a series; some agents have different fees for these entity types. If you’re not sure who to appoint, our registered agent services can fill this role for you easily.
Fill out and submit your series LLC formation document. With a name picked out and an agent appointed, you’re ready to file your Articles of Organization. Unlike some states, Illinois actually offers a specific form for series LLCs: Form LLC 5.5(S). Don’t confuse it with Form LLC 5.5!
This form requires some basic information about your series, including:
Since Illinois provides a statement that the LLC is authorized to create series, you won’t have to include any additional language for that. That said, you may use the supplemental provisions to add any additional information you want to include. This form costs $400 to submit.
Create an operating agreement to govern your series LLC. The operating agreement is an essential tool for a series LLC; this document acts like a constitution for your LLC. (For more information, please see our operating agreement definition page.) It governs how your LLC is run, including management structure, ownership, how profits will be distributed, how membership can change, and more.
As a series LLC, your operating agreement is also essential for defining the parent LLC and how new series can be created. The agreement should clearly delineate the assets, rights, and divisions for each series. It should also describe the overhead governance of the parent LLC. If you’re feeling overwhelmed, our guided operating agreement template can help you get started easily.
Formally designate your parent LLC. Technically speaking, this step overlaps with steps 3 and 4; the LLC you list in LLC Form 5.5(S) is, by default, your parent LLC. So be sure to list the right LLC on the form.
You should also designate your parent company within your operating agreement. By having this designation in writing in multiple places, your series LLC is clear on the public record and within your own records.
Bring individual series under the parent LLC by registering them with the state. Unlike some states, you can’t automatically create a legitimate series. You have to file an additional form, the Certificate of Designation. This form is pretty simple, requiring the name of the parent LLC, the name of the child series, management information, and a few other items.
The filing fee for this form is $50. You will need to file a unique Certificate of Designation for each individual series in your business.
Register for an employer identification number (EIN) for each series. An essential component of running an effective series LLC is to keep the finances for each series separate. And to do that, you’ll need a business bank account for each series. But to get a business bank account, you’ll need to have an EIN for each.
An employer identification number is a nine-digit code that acts like a Social Security number for a business. You can get one for free with the IRS. These codes don’t change how your whole series is taxed. After you’ve obtained an EIN for each series, you’ll be able to get a bank account for your series.
Once your Illinois series LLC is established, you’ll want to take good care of it! There are a few key steps to making sure your business stays compliant year after year.
As long as every series of the LLC is kept completely distinct, then each separate series will have a liability shield. But to maintain that liability protection, you have to vigilantly keep each series distinct. That means each series should be treated like a separate entity, with separate bank accounts, separate financial records, and separate books.
If bookkeeping isn’t your strong suit, we recommend hiring someone to handle this crucial task.
ZenBusiness is a financial technology company and is not a bank. Banking services provided by Thread Bank, Member FDIC.
Depending on your industry, you might need to get licenses and/or permits for your LLC. The most common ones are industry-specific, which you might need to get on the state or federal levels. It’s up to you to do the legwork to find out which licenses apply to your series LLC.
Illinois does not have a statewide general business license. That said, if you’re selling qualifying goods and services, you’ll have to collect sales tax. That requires a seller’s permit.
Every year, your series LLC — through the parent LLC’s umbrella — must comply with some important requirements. Thankfully, the Illinois requirements are pretty simple. The most basic one is your Illinois annual report; it’s a simple form that keeps the Secretary of State updated regarding your business’s information. Illinois also recently reduced filing fees, so it only costs $75 per year.
Then, of course, there are taxes to consider. By default, any LLC (including a series LLC) is considered a “pass-through” entity for federal tax purposes. The LLC passes its tax burden through to its members, who pay tax based on their distributive share of the profits. This is as opposed to a typical corporation, in which profits are taxed at both the business level and the individual owner level. The LLC owners report that information on their personal tax returns. Illinois follows this approach for state income taxes, too.
The biggest benefit of forming a series LLC is its flexibility and easy maintenance. Normally, an entrepreneur with several similar companies would have to create a separate LLC for each or form a holding company. A series LLC offers a little bit of both. As an LLC, it’s pretty easy to run with fewer formalities than a corporation. But each series has limited liability protection from the other series (provided they’re properly maintained).
Additionally, since the series LLC itself is considered a single filing entity, a business owner only has to submit annual reports and other filings for one entity.
Wondering about benefits of Series LLC in other states? Below are some resources to get started:
Right now, ZenBusiness doesn’t offer series LLC formations, but we do offer a wealth of services to help you keep it running smoothly. We can help you obtain your EIN, maintain your registered agent, or even stay compliant every year without hassle. Let us cover paperwork so you can focus on what really matters: running your business.
What’s the difference between a Texas series LLC and a regular LLC?
On the surface, nothing. A standalone LLC and a series LLC both operate very similarly. But a standalone LLC can’t create separate “Sub-LLCs” that are independently liable. A series LLC can. For certain entrepreneurs, such as real estate investors, the series LLC is helpful. Instead of forming a separate LLC to own each property, the investor can form just one LLC and let each series own a property. Each LLC in the series is then shielded from the liabilities of the others.
How much does it cost to set up a series LLC in Texas?
That depends on whether you’ll have protected series or registered series under the parent LLC. If you’ll just be creating a protected series, the most basic expense is the $300 Certificate of Formation fee. But if you plan on creating a registered series, the cost will be the $300 initial Certificate and then $300 for each series you register.
Can you convert a standard LLC into a series LLC in Texas?
Yes. To do so, you’ll need to file the Certificate of Amendment (there’s a $150 filing fee). You’ll also need to amend your operating agreement. With both amendments, you’ll need to integrate language that designates a parent company and authorizes the LLC to create series.
After that, if you plan to create registered series, you’ll file a Certificate of Registered Series for each series.
Can a single-member LLC be a series LLC?
A single-member LLC (an LLC with just one owner) can create a series following the same procedures explained above.
How do taxes work for series entities?
A series company is usually treated like a single taxable entity for federal income tax purposes. By default, that usually means the LLC pays taxes as a partnership or sole proprietorship. But that’s just for federal tax purposes; don’t forget that Texas has a franchise tax for all businesses on the state level.
What is an example of a series LLC?
One of the most popular uses of a series LLC is for protecting real estate assets. In the past, many real estate investors would form a separate company to own each piece of real property they held. But with a series LLC, an investor can create just one business, and each series can hold individual properties. This keeps liability shields in place for each property.
Can I expand my Texas series LLC into other states?
Forming a series LLC as a domestic entity in Texas is simple. But becoming a foreign entity in another state can be a bit trickier; not all states recognize series LLCs. If you anticipate expanding into other states, you might consider a different entity type, such as a profit corporation.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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