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A New Formation Solution – is the SSLC Right for Your Business?

Client Alert
March 4, 2021

In early January 2021, Ohio adopted Senate Bill 276 which established a Revised Limited Liability Company Act (“ORLLCA”) as Ohio Revised Code Chapter 1706, which effectively replaces the current Ohio Limited Liability Company Act (Ohio Revised Code Chapter 1706). The ORLLCA will become effective on January 1, 2022.

One of the principal changes within the ORLLCA is the ability to establish “series LLCs”. Ohio becomes the 15th state to adopt a “series LLC” (“SLLC”). The below FAQs will help you better understand the mechanics and nuances of a series LLC.

Is forming a Series LLC right for you?

SLLCs provide unique benefits for individuals and entities. If you own multiple businesses, the SLLC structure can assist with minimizing risk and limiting exposure to liabilities with respect to certain assets held by SLLC.

  1. What is a Series LLC?

The formation of the SLLC was introduced in Delaware in 1996 by top business lawyers in the state. This was prompted by business owners who wanted to form a unique entity that consisted of separate, individual interests but had the same asset and liability protection as the traditional limited liability company (“LLC”). Due to the rising popularity of SLLCs in Delaware, many states have adopted similar statutes. Synonymous with Delaware law, a SLLC in Ohio can establish, through its operating agreement, multiple divisions or “series” with separate assets, purposes, business objectives, members, and ownership interests. Each series is legally separate from one another and is only liable for its own debts and obligations. In short, each series operates similar to an independent subsidiary under the master limited liability company.

    2. How is it different from a traditional LLC?

The traditional LLC protects the owners from liability – but, in an effort to diversify risk within an entity structure – many entities form an “umbrella” of LLCs. The umbrella generally consists of a parent LLC and several subsidiary LLCs under the parent LLC’s control.

The SLLC is a variation of the traditional LLC and offers additional simplicity and flexibility to a business owner. The SLLC offers reduced setup and maintenance costs because only one Secretary of State filing is needed, regardless of how many series are a part of it. The most significant difference between these two types of entities is the enhanced liability and asset protection offered by the SLLC. With an SLLC, an owner no longer has to form the “umbrella” structure of several LLCs. So long as the entities with the SLLC adhere to the rules of the ORLLCA, the liabilities of the master LLC are not enforceable against any series that is a part of it and the liabilities of each series are not enforceable against another series.

    3. What types of businesses would benefit from the SLLC?

The SLLC structure can be beneficial for many different types of business owners. Specifically, real estate investors who own investment properties can utilize the SLLC structure to diversify risk within a portfolio. This structure is extremely valuable for business owners who have capital and other assets invested in multiple segments of an LLC and wish to have those assets protected.

    4. What are the drawbacks?

Since the SLLC structure is relatively new and only 14 other states permit their formation, there is little guidance by the IRS and state tax departments on the tax treatment of the SLLC. As such, there are tax risks associated with the formation of a SLLC and individuals and entities should consult their tax advisors regarding such risks.

To explore if utilizing and/or forming a SLLC will be advantageous for you or your business(es), please contact BMD Corporate and Mergers & Acquisitions Attorney Michael D. De Matteis, Esq. at mddematteis@bmdllc.com.

business and corporate lawMichael D De MatteisOhio Revised Limited Liability Company ActSeries LLC
Client Alert

Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.Client Alert

Value-Based Care Advances – CMS Issues New Final Rules for Stark and Anti-Kickback Statutes

December 11, 2020The Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) issued two highly anticipated (and quite extensive) Final Rules to reform the Stark Law and Anti-Kickback Statute (“AKS”) regulations. The Final Rules generally take effect on January 19, 2021. The Final Rules include new safe harbors for the AKS and new exemptions to the Stark Law to allow for greater flexibility. According to the HHS, the goal of updating both laws is to make it easier for providers to engage in care coordination and value-based care programs without running afoul of the statutes. Please note that this client alert could not cover the full extent of the Final Rule changes so please contact your BMD Healthcare attorney with questions.Client Alert

Mandatory Filings Under CFIUS New Rules

December 11, 2020On September 15, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) promulgated a final rule modifying its mandatory declaration requirements for certain foreign investment transactions involving “TID US businesses” (sensitive U.S. businesses dealing in critical technologies, critical infrastructure and sensitive personal data) dealing in “critical technologies” – i.e., U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The new rule also makes amendments to the definition of the term “substantial interest” (used to determine whether a foreign government has a substantial interest in an entity). The final rule became effective on October 15, 2020.Client Alert

IRS Guidance on Employee Retention Credit

December 11, 2020The Employee Retention Credit created under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Since the adoption of the CARES Act, employers have expressed concern that if one employer acquires another employer that previously received a PPP loan, the acquirer’s entire aggregated group may no longer be eligible to claim the Employee Retention Credit.
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