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Ohio Modernizes and Improves its Laws Governing Limited Liability Companies

Client Alert
February 17, 2022

Effective Feb. 11, 2022, the Ohio Revised Limited Liability Company Act (“Revised Act”) now governs all limited liability companies formed under Ohio law. The law updates and replaces the existing LLC Act and has important implications for business owners in Ohio. Passage of the Revised Act makes Ohio one of only 16 states that permits the formation of “Series” LLCs. The legislation is intended to be one of the most progressive LLC acts in the country, but retains the terminology used in Ohio’s current LLC act. A summary of important changes is provided below.

Governance of Ohio LLCs

The Revised Act grants LLC members more control over conducting the LLC’s affairs. The Revised Act eliminates the distinction between member-managed and manager-managed LLCs and allows members of an LLC to organize their business as they see fit. The LLC’s governance structure may be set forth in the operating agreement or by decision of the members in accordance with the operating agreement. Under the Revised Act, LLCs may implement a structure similar to for-profit corporation governance, such as a board of directors.

‘Series’ LLCs Permitted in the Revised Act

The Revised Act makes asset protection simpler and more flexible for Ohio investors. The Revised Act reduces shared liability among multiple properties or assets because of its acceptance of Series LLCs. A Series LLC creates one “parent” LLC and several "children" sub-LLCs among which to split assets. Practically, if one of the sub-series LLCs gets sued, the assets held by the other children sub-LLCs and the parent LLC are shielded from any shared liability. While investors obtain the same asset protection that comes with using multiple, traditional LLCs, in a Series LLC model, only one parent LLC is opened. Assets owned by one Series are shielded from the risk of liability of others within the same Series LLC. 

Practically, a Series LLC structure is useful in a limited set of circumstances.  Real estate investors are primary users of Series LLCs because of the ease and applicability of Series LLCs to investment property portfolios. Rather than creating multiple companies to own investment property, each Series LLC adds inherent investment protection by isolating one property from the others.

Cancellation for Failure to Maintain Statutory Agent

The Revised Act also imposes statutory penalties on LLCs that fail to maintain (or fail to update) their statutory agent’s name and address. The Revised Act directs the Secretary of State to cancel an LLC’s registration, after providing the LLC with notice and a 30-day opportunity to cure. The Revised Act provides for the ability to reinstate a cancelled LLC by submitting the appropriate form and paying a fee.

Cost and Tax Benefits

The Revised Act has strong cost and tax benefits, too. For example, investors will pay fewer registration fees for multiple LLCs when using the Series LLC model. Additionally, only one federal employer identification number is needed for a Series LLC and each sub-series is listed on one singular tax return.

The incorporation of Series LLCs into state law represents a noteworthy change in the law pertaining to limited liability companies in Ohio. To ensure compliance with the Revised Act, to examine how the Series LLC may benefit your business, or for strategic planning for your business, contact Brandon Pauley, btpauley@bmdllc.com or 614-246-7510 or any member of the BMD Business Law team.

Ohio Revised Limited Liability Company Actllcsohiorevised actBrandon Pauley
Client Alert

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Safer Federal Workforce Task Force - Guidance for Federal Contractors and Subcontractors

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Banking & Cannabis: The Next Frontier Webinar

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Is Your Bonus System Creating Wage and Hour Violations? A Hidden Impact of the Labor Shortages

September 22, 2021As employers struggle with attracting and retaining talent, many have turned to incentives such as Signing Bonuses and Retention Bonuses. In doing so, employers may be inadvertently exposing themselves to overtime law violations. Employers with non-exempt employees know that the Fair Labor Standards Act (FLSA) requires an overtime premium to non-exempt for work in excess of 40 hours per week. However, all too often, employers miscalculate the “regular rate” of pay, which is used for calculating the “overtime rate.” The miscalculation is becoming more prevalent in today’s market when employers fail to include supplemental compensation, such as certain Signing Bonuses and Retention Bonuses into the regular rate of pay. An example: A non-exempt employee is hired at a rate of $20 per hour, and also receives a retention bonus of $1,200 after working for 12 weeks. In her 11th week of work, employee works 50 hours. In her 14th week of work, employee works 50 hours. What is her paycheck in week 11? What is her paycheck in week 14?
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