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How is a Series LLC, like a Fountain Soda?

By John Williams | Published December 31, 2011

I was thinking about a new way to describe the “series LLC” today: the analogy is “bags-in-a-box.” The series LLC has been described as many companies in one with internal asset segregation, not available elsewhere without multiple entity filings. We have been forming these since about 2004, and were one of the early adopters. We even registered the domain name www.seriesllc.com
Before I describe how this analogy works, I first want to mention that I worked in the patent legal department for The Coca-Cola Company in law school, which helps explain why I am familiar with the fountain beverage technology, known as “bag-in-box.” This may be good if you are an engineer who likes Popular Mechanics or Beverage Weekly, but may not be as interesting for the general audience. However, if you want to know more about the series LLC, please visit www.incnow.com, this just gives you a “taste” of it (no-pun-intended).
(If you are not familiar with how soda fountains work, the syrup is inside plastic baggies in a cardboard box. Each plastic baggie is connected to a hose which leaves the box and connects to the soda fountain where the syrup from the baggies travels through the hoses to be mixed with the carbonated water (a process known as “post-mix”). As the syrup is used up, the baggie deflates to nothing, leaving just an empty bag inside a cardboard box with virtually no wasted syrup.)
The Series LLC “mothership” is like the cardboard box. The series or “daughter cells” in a series LLC are like the baggies connected to hoses that flow into and out of the box. Each series inflates as assets are accumulated and deflates as assets are sold-off. The assets in the baggies are protected by internal cells (flexible plastic membranes) that keep the assets separate. The entire company is protected by the box. Each baggie operates autonomously from the box, but the box needs to be opened to let in a new baggie or to remove a baggie. (Opening the box is like the consent of the Founding Members – mothership members). Each baggie is run by the members associated with that series to determine what assets go into and out of the series, like they control the valve connected to the hose. Each baggie can contain different flavor syrups, so they don’t all get mixed together, for flavor or liability purposes.
I could write a whole chapter in a book about this analogy, so I will spare you all the details, but I may elaborate later in a more formal writing and will post a link when it is available. Perhaps a video-info-graphic would be a better way to illustrate it. I’ll try that when I have time.
Whether or not you decide the series LLC is right for you, it would be a great time to start a fresh company in January 2012 with the whole year ahead of you. Happy New Year. (BTW: This is not tax or legal advice).

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