How To Start A Series LLC In Delaware

We have created a step by step guide to help business owners with the formation of their Delaware series LLC. A series LLC is a form of LLC that allows its members to divide the assets and operations of a “parent” LLC into a set of “child” series.

The child series, also known as “individual protected series,” are protected against liability and losses that might be incurred by the other child series and the parent LLC.

If you are unfamiliar with the series LLC, you can also take a look at our guide about what the series LLC is, including its risks and benefits.


Step 1: Name Your Series LLC

Before naming your series LLC, you should know the answers to these questions:

  • What are the laws for naming a series LLC?
  • What are some general tips for naming a series LLC?
  • Is my business name available in Delaware?
  • Is my business name available as a URL and if so, how do I buy it?

 

1. Naming Rules: Series LLC naming rules vary from state to state. In Delaware, the name of each child series must contain the name of the parent LLC and be distinguishable from the name of any other child series. Remember you must also follow the traditional LLC naming rules.

Follow the required Delaware LLC Naming Rules:

  • Your name must include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
  • Your name cannot include words that could confuse your LLC with a government agency.
  • Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.

2. Consider these general tips for making your series’ names more recognizable, uniform, and clear:

  • Use the word “protected series” within the name of each company.
  • Name the parent LLC in a way that distinguishes it from the child series.
  • Include the full name of the parent LLC in the name of each child series.
  • The name of the child series should include the name of the assets it holds. This creates a clearer asset picture to the public and creditors.

Example of a series LLC naming system that uses both the state of Delaware requirements and general tips:

My Holdings Co., LLC, a series LLC

123 Main Street, LLC, an individual protected series of My Holdings Co., LLC, a series LLC

123 Division Street, LLC, an individual protected series of My Holdings Co., LLC, a series LLC

3. Is your business name available in Delaware? Make sure the name you want isn't already taken by doing a name search on the State of Delaware's website.

4. Is your business name available as a URL? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.

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Use a DBA (doing business as) for the child series if the name is too long for good business branding.

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Step 2: Choose a Registered Agent

You are required to nominate a Registered Agent for your Delaware LLC. The Registered Agent for the parent LLC will need to be the same for each child series.

What is a Registered Agent? A registered agent is a person or business that agrees to send and receive legal papers on behalf of your LLC. Such papers include service of process of legal action (if you are sued) and state filings.

Who can be a Registered Agent? A registered agent must be a resident of Delaware or a corporation authorized to transact business in Delaware. You may elect an individual within the company including yourself.

Learn more about the role of a registered agent and why you should consider hiring a professional service.

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Recommended: Northwest provides registered agent services for series LLCs. A subscription will need to be purchased for each LLC in the series ($125/year/LLC).

Step 3: File The Certificate of Formation

To register your series LLC, you will need to file the Certificate of Formation with the Delaware Secretary of State. This can be done by mail or in person. In Delaware, you are only required to file a Certificate of Formation for the parent LLC.

Experts suggest going beyond Delaware’s requirements by adding specific language about the series LLC in an addendum to the Certificate of Formation. We recommend hiring an attorney to advise you.

The cost of filing the certificate of formation is $90.

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We recommend working with an Attorney to help you complete your series LLC Certificate of Formation.

 

Or read our free guide to form a standard single or multi-member LLC in Delaware

Step 4: Create An Operating Agreement

An operating agreement is required when forming a series LLC in Delaware. The operating agreement doesn’t have to be filed with the state.

What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.

Why are operating agreements important? The operating agreement is important for a Delaware series LLC because it creates the protection between the child series and parent LLC. The operating agreement outlines the liability limitations (asset protection) of the child series.

We recommend working with an attorney to draft your Delaware series LLC operating agreement.

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TIP: New child series can be added to the series LLC by amending the operating agreement.

Step 5: Obtain an EIN

What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. Each of the child series in your series LLC will require an EIN.

 

Why do I need an EIN? An EIN is required for the following:

  • To open a business bank account for the company
  • For Federal and State tax purposes
  • To hire employees for the company

 

How do I create an EIN for my series LLC? The IRS doesn’t have specific guidelines for creating an EIN for the child series of a series LLC. Experts suggest using the name of your series LLC combined with the child series name for each additional EIN.

Example Series LLC EIN

 

Series LLC Name: My Holdings Co., LLC, a series LLC

EIN entry: My Holdings Co LLC a series LLC

 

Child Series Name: 123 Main St., LLC, an individual protected series of My Holdings Co., LLC, a series

EIN Entry: 123 Main St LLC an individual protected series of My Holdings Co LLC a series

Get an EIN

Option 1: Request an EIN from the IRS

Apply Online

- OR -

Option 2: Apply for an EIN by Mail or Fax

Download Form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

Fee: Free

Key Steps After Forming a Series LLC

OPEN A BUSINESS BANKING ACCOUNT

A dedicated business banking account is required for each child series of a series LLC. Without dedicated accounts, the child series are NOT protected from liabilities incurred by the other child series or the parent LLC.

SET UP ACCOUNTING

Accounting and record keeping for the series LLC MUST be clear, concise, and separate. Without careful record keeping, your series might not be protected. Separate record keeping helps ensure the courts will never allow a creditor or plaintiff to pierce the corporate veil.

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Expenses are sometimes shared across the series. For example, the series might share office space. Shared costs like rent can be spread out between the child series but it must be done in a logical way that will be defensible in court.

Accounting for your series LLC should be handled by a professional accountant or firm that is familiar with the series LLC.

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*Recommended: Mazuma’s team of CPAs and accountants can help manage your series LLC’s finances, including bookkeeping, accounting, and tax filing services. 

REGISTER YOUR SERIES LLC FOR DELAWARE STATE TAX

We recommend consulting a tax professional for help in tax planning and filing for your series LLC.

Maintain your LLC: Avoid fines and the risk of dissolution

FRANCHISE TAX

In Delaware, all series LLCs are required file and pay an annual franchise tax. This can be done online. The annual report will be filed by the parent LLC on behalf of all of the entities in your series LLC. Your franchise tax will be based on this information too.

FRANCHISE TAX IN THE STATE OF DELAWARE

File Online with the Delaware Department of State

FILE ONLINE


Free

Tax Calculation: $300 for all LLCs
Due Date: Tax filing and payment due on or before June 1st
Late Filings: Delaware charges a penalty of $200 plus 1.5% interest per month if you miss the June 1st filing deadline.

STATE INCOME TAX

Reporting income for your series LLC is best handled by an accountant who is familiar with series LLC tax code.


Delaware requires most multi-member LLCs to file an informational tax return on Delaware form 300-I. This can be done by mail.

FILE YOUR TAX RETURN

File your Delaware Partnership Return by Mail with the Delaware Department of Revenue

Download Form


Fee: Free

For instructions on how to fill out Form 300-I, see the instructions document from the Delaware Department of Revenue website.

Mail to:
Division of Revenue
P.O. Box 8703
Wilmington, DE 19899

REPORT LLC INCOME

Reporting income for your series LLC is best handled by an accountant who is familiar with series LLC tax code.

AVOID DISSOLUTION

Series LLCs may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines, and even submitting reports on your behalf for an additional fee.

*Recommended: Northwest provides registered agent service for series LLCs. A subscription will need to be purchased for each LLC in the series ($125/year/LLC).

Become a knowledgeable LLC owner. Learn more about these important topics.

OBTAIN A CERTIFICATE OF GOOD STANDING

A Certificate of Good Standing verifies that your series LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:

  • Seeking funding from banks or other lenders
  • Forming your business as a foreign LLC in another state
  • Obtaining or renewing specific business licenses or permits

You can order a Delaware Certificate of Good Standing online.

ORDER A CERTIFICATE OF GOOD STANDING

Request a Certificate by Mail from the Delaware Division of Corporations

Order Online


Fee: $50 for a Short Form Certificate, $175 for a Long Form Certificate, payable to the Secretary of State (Nonrefundable)

Mail or deliver your request to:
Division of Corporations
401 Federal Street
Suite 4
Dover, DE 19901
Fax your request to:
302-739-3812

DISSOLVE YOUR Delaware LLC

If at any point in the future you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:

  • Close your business tax accounts
  • File the Articles of Dissolution

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Closing a child series will not dissolve the parent LLC. Dissolving the parent LLC will dissolve all of the child series under it.