You may be familiar with both a series LLC and a holding company when it comes to business structuring. Although they may appear to be comparable, the two have clear distinctions that must be recognized before choosing.
A holding company is a type of firm that controls and owns other businesses, frequently by holding the majority of the stock in other businesses. Instead of running a business, its main goal is to manage and hold assets, including real estate or intellectual property. Other than holding and managing the assets of its subsidiaries, a holding company normally has no employees or other operations.
A series LLC, on the other hand, is a single legal entity that permits the creation of numerous “series” inside it, each of which has its own assets, liabilities, and members. Within the bigger LLC, these series function as separate entities that are shielded from one another’s responsibilities. This gives organizations with numerous projects or investments more flexibility and security.
A separate series agreement must be written and submitted to the state in order to lawfully incorporate a series LLC. This Agreement sets forth the management and operational procedures, as well as the rights and obligations of each Series. Series LLCs are not permitted in all states, thus it is essential to check the regulations in your jurisdiction before moving forward.
Series LLCs are legal in some states, including North Carolina, but it’s crucial to be aware of the risks. The operating agreement is one important thing to keep an eye out for. An operating agreement that describes the management and operations of each series under the LLC is required. To minimize ambiguity or potential legal concerns, it is crucial to make sure that each agreement is properly formed and implemented.
How to divide up the assets and liabilities between each series is a factor to take into account while forming a series LLC. The process of “internal liability shields,” which effectively divides the assets and liabilities of each series from the others within the LLC, can be used to accomplish this. To ensure that each series is shielded from the liabilities of the others, it is essential to structure these internal liability shields properly.
In conclusion, while both holding corporations and series LLCs include overseeing numerous entities, they differ significantly from one another. While series LLCs are a single company with numerous series, each of which can have its own assets and liabilities, holding corporations generally manage and hold assets. Make sure your state permits series LLCs before considering one, and correctly create and execute individual series agreements and internal liability shields.
While bylaws are a set of rules and regulations that regulate the administration and management of a corporation, an operating agreement is a legal document that describes the management structure and operating processes of a specific LLC. While bylaws are particular to a corporation and an operating agreement is specific to an LLC, both papers form the legal structure for a business.
No, the operational agreement and the articles of organization are not the same. The operating agreement is an internal document that describes how the LLC will be managed and run, whereas the articles of formation are filed with the state and establish the LLC’s existence.