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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

Pondering Over Patient Billing: CARES Act and Provider Relief Fund Lead to More Questions

April 16, 2020On April 11, 2020, HHS, along with the Department of Labor and Department of the Treasury, issued jointly prepared FAQs regarding the FFCRA, the CARES Act, and other health coverage issues. The FFCRA was enacted on March 18, 2020 and requires group health plans and health insurance issuers to provide benefits for certain items and services related to diagnostic testing for COVID-19. Additionally, plans and issuers must provide coverage without imposing any cost-sharing requirements (deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements.Client Alert

Important Update and FAQs: HHS Tweaks Guidance on The CARES Act Provider Relief Fund Terms and Conditions

April 16, 2020On April 10, 2020, many providers awoke to find electronic payment deposits from Department of Health and Human Services (HHS) in their bank accounts. This was the first round of $30 billion of payments from the HHS Provider Relief Fund as a result of the CARES Act, which was signed into law on March 27, 2020. All healthcare providers that received Medicare fee-for-service payments in 2019 should have received a payment.Client Alert

Returning to Work: Forecasting the New Normal in Business

April 16, 2020We cannot predict when businesses will reopen across the county. As we publish this Alert, dynamic business leaders are cooperating in comprehensive efforts to create safe work environments so that they can all re-engage the workforce. However, we can predict the new normal in business. Some important studies were published yesterday, and the new normal in business will be facemasks for all employees, and probably all business visitors.Client Alert

Updated Guidance on Ohio Department of Medicaid Telehealth Rules During the Covid-19 Public Health Emergency

April 15, 2020In its initial response to the COVID-19 public health emergency, the Ohio Department of Medicaid (“ODM”) issued emergency rule 5160-1-21, which dramatically expanded reimbursable telehealth services, telehealth providers, allowable technology, location of both providers and patients, and covered billing provider types. See BMD’s initial COVID-19 and Telehealth Resource Guide here. This emergency rule provides wide flexibility for patients to receive necessary healthcare services while Ohio’s Stay-At-Home Order remains in place. Regulations are continually changing in response to the public health crisis, and on April 13, 2020, ODM issued new guidance further expanding telehealth services reimbursable under Ohio’s Medicaid program.Client Alert

Essential Businesses during COVID-19: Identification and Operation FAQs

April 14, 2020During the COVID-19 pandemic, the ability to classify your business as “essential” could be the key to its survival. Almost every state in the United States has imposed a “stay-at-home” or “shelter-in-place” order that restricts the types of businesses that can remain open. In fact, as of the writing of this alert, there are only seven states that have not imposed state-wide restrictions on which businesses can stay open during the Coronavirus pandemic and even those states have individual cities and counties that have imposed stricter orders. However, these orders are not always clear, and interpretation is often left to the individual business. This alert will answer some of the most common questions about essential businesses.
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