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OHIO ADOPTS THE SERIES LLC: Implementation of Ohio’s Revised Limited Liability Company Act is Coming

Client Alert
February 24, 2021

On January 7, 2021, Ohio adopted S.B. 276. The new legislation establishes the Ohio Revised Limited Liability Company Act (“ORLLCA”), which effectively replaces the current Ohio LLC Act. ORLLCA will be fully effective as of January 2022. While the new law contains numerous changes to the existing LLC landscape, below is an overview of some of the key differences under the ORLLCA.

Series LLCs

The ORLLCA now makes Ohio one of only 16 states that permit the formation of “series LLCs.” The significant advantages of series LLCs are their flexibility and simplicity. They allow a single entity to own multiple “series” of assets, each of which are shielded from liability. Real estate investors are prime users of series LLC’s. Rather than creating multiple companies to own investment property, each series within a single LLC isolates one property from the rest thereby adding protection for the investor.

Under the ORLLCA, an LLCs operating agreement may establish or provide for one or more designated series of assets that has one or more members and may include:

  • Separate rights, powers, obligations or duties with respect to specific property within each of the series;
  • Separate rights concerning profits and losses associated with each series; and
  • A separate purpose or investment objective for each series within the LLC.

Each series formation has a separate operating agreement and is authorized by the articles of organization. The articles of organization only require a simple statement that the LLC may have one or more series of assets.

Series LLCs also enjoy cost and tax advantages. Standard LLC formation requires registration fees for each LLC created. Series LLC registration fees are only charged for the master LLC, and each series created thereafter do not have an associated fee. There is also only one tax identification number (EIN), and all the series are listed on only one tax return. This cuts down on time for tax preparation. In addition, and subject to certain criteria, series LLCs have the potential to avoid Ohio’s commercial activity tax, which is imposed on taxable gross receipts in excess of $150,000.

Management Structure Flexibility

The ORLLCA provides more flexibility in LLC management structures. The current LLC Act requires an LLC to either be member-managed or manager-managed. Default rules in the current LLC Act provide baseline authority of either the member or manager to perform certain actions, which can be modified through an operating agreement. Under the ORLLCA, the distinction between member-managed and manager-managed LLC’s has been eliminated; a person’s ability to act as an agent of the LLC now comes from authorization outlined in the operating agreement, decisions of the members as provided for in the operating agreement, the filing of a “Statement of Authority” with the Secretary of State, or from the default rules contained in the ORLLCA. This new feature of the ORLLCA provides more flexibility for LLC management, allowing each LLC to use a management structure that works best for its unique needs.

Statutory Penalty

There will now be a penalty for not maintaining a statutory agent and/or up-to-date contact information with the Ohio Secretary of State. Under the existing LLC Act, there is no statutory penalty for an LLC that fails to maintain a statutory agent. Under the ORLLCA, the Secretary of State will be required to cancel an LLC that fails to maintain a statutory agent, though the LLC may be reinstated upon the appointment of a new agent and the payment of additional fees. This is particularly important as the cancellation of an LLC may open its members up to personal liability. Under the new ORLLCA regime, it is of paramount importance to appoint a statutory agent and maintain accurate contact information.

The ORLLCA represents a significant shift in the law as it pertains to limited liability companies in Ohio. As the implementation of the new law approaches, businesses operating as LLCs should examine their current operating agreement to make sure its provisions comply with the ORLLCA. To undertake such a review or examine how the series LLC may benefit your business, please contact your BMD attorney, or Blake Gerney at Brgerney@bmdllc.com, S. Matthew Harris at Msharris@bmdllc.com, or Kevin Burwell at Kdburwell@bmdllc.com.

business and corporate lawMatthew HarrisBlake R. GerneyKevin BurwellOhio Revised Limited Liability Company ActORLLCA
Client Alert

Ohio Hospitals and Healthcare Clinics: It’s Time to Revisit Your Billing and Collection Practices

February 1, 2021According to a recent Cuyahoga County case, certain healthcare entities may not be protected from liability when engaging in unfair or deceptive billing acts. This decision is consistent with the growing trend across the country to encourage price transparency and eliminate unfair surprise billing practices by health care organizations. Now is the time for hospitals and other health care organizations to revisit their billing and collection policies and procedures to confirm that they are legally defensible and consistent with best practices.Client Alert

HIPAA Business Associate Agreements: Why These Contracts Matter

January 27, 2021No one loves drafting, reading or negotiating HIPAA Business Associate Agreements (BAAs). Yet many of us need to do so, and some of us do so daily. They are often boring, dense and technical, but BAAs are important from both a legal and a business perspective, and they deserve our attention. Failure to enter a BAA when one is required can constitute a HIPAA violation that results in substantial liability, as demonstrated by certain recent Department of Health & Human Services (HHS) settlements.1 A business associate who makes a disclosure that is not authorized by the applicable BAA or required by law can be subject to civil and, in some cases, criminal penalties. Further, parties are often presented with BAAs that contain onerous one-sided indemnification and other provisions that can be devasting to an organization in the event of a HIPAA breach. The significance of a BAA is often not fully understood by the parties until something goes wrong (e.g., a HIPAA security incident or breach, an Office of Civil Rights (OCR) audit or a fracture in the relationship between the parties) and, at that point, there is limited opportunity to mitigate legal and business risk. Ideally, attention should be given at the commencement of the business associate relationship, when the parties are able, to thoughtfully addressing regulatory requirements, planning and preparing for potential adverse events and appropriately allocating risk among the parties. As with most healthcare regulatory compliance initiatives, a proactive approach with respect to BAAs is preferable. This article provides a broad overview of certain BAA requirements and some practical negotiating tips for the parties involved.Client Alert

“I’m Out Of Here!” Now What?

January 27, 2021We all know that the healthcare industry is experiencing a wave of integration. This trend has been evident for many years. Fewer physicians are willing to assume the legal, financial and other business risks associated with owning their own practices. More and more physicians, including anesthesiologists, are becoming employed by large physician groups, health systems and national providers. This shift necessarily involves not only entry into new employment arrangements but also the termination of existing relationships. And those terminations are often governed by written employment agreements, state and federal healthcare laws and employer benefit plans and other policies and procedures. Before pursuing their next opportunity, physicians should pause for a moment and first attend to the arrangement that they are leaving. Departing physicians need to understand their legal rights and obligations when leaving their current employment relationships in order to avoid unintended consequences and detrimental missteps along the way. Here are a few words of practical advice for physicians contemplating an exit from their current employment arrangements.Client Alert

Investment Training for the Second and Third Generations

January 19, 2021Consider this scenario. Mom and Dad started the business from the ground up. Over the decades it has expanded into a money-making machine. They are able to sell the business and it results in a multimillion-dollar payday for their labors. The excess money has allowed Mom and Dad to invest with various financial advising firms, several fund management groups, and directly with new startups and joint ventures. Their experience has made them savvy investors, with a detailed understanding of how much to invest, when, and where. They cannot justify formation of a full family office with dedicated investors to manage the funds, but Mom and Dad have set up a trust fund for the children to allow these investments to continue to grow over the years. Eventually, Mom and Dad pass. Their children enjoy the fruits of their labors, and, by the time the grandchildren are adults, Mom and Dad's savvy investments are gone.Client Alert

Provider Relief Funds – Continued Confusion Regarding Reporting Requirements and Lost Revenues

January 15, 2021In Fall 2020, HHS issued multiple rounds of guidance and FAQs regarding the reporting requirements for the Provider Relief Funds, the most recently published notice being November 2, 2020 and December 11, 2020. Specifically, the reporting portal for the use of the funds in 2020 was scheduled to open on January 15, 2021. Although there was much speculation as to whether this would occur. And, as of the date of this article, the portal was not opened.
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