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IncNow President John L. Williams, Esq. Appointed ABA Advisor to Uniform Laws Commission on Series of Unincorporated Business Entities Act

By IncNow | Published December 10, 2014

ABA RPTEL wideOn November 20, 2014, the American Bar Association Real Property, Trusts and Estates Section appointed IncNow President John L. Williams, Esq. as an American Bar Association (ABA) Section Advisor on the Uniform Laws Commission (ULC) committee to draft Series LLC provisions that numerous states will use as a model for laws establishing series entities, including the Series LLC. A ULC committee member is appointed to his position based on his knowledge in a specific area of law. John will bring a unique expertise to this committee from his practice in business entity law at The Williams Law Firm, P.A. and in helping form over 1,000 Series LLCs in Delaware through Agents and Corporations, Inc. (IncNow). Additionally, John is the inventor on a U.S. business method patent application to segregate dynamically business assets into series.

The ULC is a non-profit organization founded in 1892 that brings together lawyers, judges, legislators and law professors appointed by state governments to draft “model” state laws in areas of law where uniformity across states is desired. Any time you see the word “Uniform” used in a law, it is very likely that the act was drafted by a ULC committee. Examples include Uniform Commercial Code and the Revised Uniform LLC Act.

There are a few key areas of debate this committee is attempting to resolve, but chief among them are:

  1. What are the default rules pertaining to relationships with third parties (process servers, foreign state qualification, etc.)
  2. Can a series “spin off” into a separate entity?
  3. Should this be a stand-alone act, or amended to be included in an existing LLC statute?
  4. How are the internal barriers of a Series LLC amongst each protected series different from the external barriers between the business owner and the creditors of the LLC?
  5. What types of business does the Series LLC best serve?

The Series LLC is a type of legal entity that is a relatively new frontier in business entity law and is one of the most important developments in that area of law since the limited liability company. Since the Series LLC is one of the newest forms of legal entities, only a few states have adopted legislation for the Series LLC and the attorneys admitted in states without series legislation often have limited knowledge of the Series LLC. This “model” Act will aim to reduce conflict-of-law issues that may arise from Series LLCs doing business across state lines and give attorneys and judges a better set of rules under which to make decisions regarding the legal status of a Series LLC.

Under Delaware law, a Series LLC is essentially an LLC with divisions or “cells” that are treated as separate legal entities. Each series is allowed to contract in its own name, sue and be sued in its own name, obtain separate tax ID numbers and even make separate tax elections. Each series can even have different owners. A series is not subject to the liabilities of another series therein, and vice-versa.

One of the most common uses of the Series LLC is for holding real estate. Since real estate is a “cold” asset that is “not out hurting anyone” and is essentially passive and well-insured, many holding companies utilize the series provision to establish separate series for each parcel of real estate, all under the umbrella of the mothership LLC to save filing fees and administrative costs. This enables the owners to segregate the liabilities and risks of each individual parcel. This provides a basis to avoid subjecting each parcel to the other series’ liabilities.

Currently, 12 states, the District of Columbia and Puerto Rico have series legislation. IncNow has formed over 1,000 Series LLCs in Delaware since first offering the service in 2004 and even owns the domains seriesllc.com and series-LLC.com.

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When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go