The Series LCC and States That Don't Recognize It: An Exploration

You're a budding entrepreneur, diving deep into the world of business. Amidst your exploration, you might have come across the term "Series LLC." By now, 18 states, along with the District of Columbia, have jumped onto the Series LLC bandwagon. But wait a minute! What if your state isn't one of them? Are you stuck in a business limbo? Not exactly. Let's delve in.

Here’s How It Works

At the heart of it, even if your state hasn’t adopted the Series LLC, you can still have one! But how? It's a bit like playing guest in another home. You'll have to register your Series LLC in whichever state you're operating. This is akin to notifying them, "Hey, I'm doing business here!" Usually, this heads straight to the Secretary of State.

You’ll share details about your entity, including its original state. Moreover, you'll appoint someone - a registered agent - right within the state to accept any official documents or legal notices on your behalf.

But Why?

This whole procedure acts as a security blanket. Imagine you're a consumer and have a dispute with a business entity. Rather than embarking on a wild goose chase across state lines, you can simply look them up in your state and deliver a notice to their registered agent. Efficient and headache-free!

If you're settled in the state where you're doing business, you can even be your own registered agent (though, be ready to have your address up for public view). If not, professional registered agents are always available for hire, usually charging anywhere between $50 to $200 annually.

Does My Home State Recognize My Series LLC?

Enter the U.S. Constitution! It ensures that every state respects the public acts, records, and rulings of other states. This means even in states like California, which haven’t adopted the Series LLC, a lawfully formed Series LLC from another state cannot just be ignored.

However, like every rule, this too has its complications. Consider two conflicting laws. For instance, while California might have a law stressing property ownership only by individuals or LLCs formed within the state, Nevada might empower its LLCs with rights akin to humans. In cases of such conflicts, a specific analysis, known as the conflicts-of-laws, is initiated to determine which state's laws take precedence.

Debunking Misconceptions: The California Example

Ah, sunny California! Often, it's cited as the state most skeptical of the Series LLC. You'll find many a claim floating around on the internet suggesting that California might not recognize or even dismiss Series LLCs formed in other states. A word of advice? Always do your homework.

Diving deep into California's relationship with the Series LLC reveals a heartening fact. Not only does California recognize the entity, but it even seems to have a soft corner for it. Cases in the state have consistently shown a positive acknowledgment of the Series LLC. From insurance companies to wellness centers, the courts have time and again recognized and affirmed the legitimacy of the entity.

The cherry on the cake? California, despite its supposed reservations, treats each series in a Series LLC as separate entities, echoing their very essence. However, it's essential to remember that while the Series LLC might save you renewal time and costs, you still have to contend with California's franchise tax - $800 for every series operating in the state.

For those residing in states that haven’t hopped on the Series LLC train, fear not! With due diligence and a keen understanding of the regulations, it's entirely feasible to establish a Series LLC, even if it means occasionally playing by another state's rules. Just remember to always keep your paperwork in order, and maybe, avoid relying solely on anonymous blog advice!

(This blog article is a much shorter version [written in a much more informal style and devoid of citations] of a chapter in my upcoming book, Law for Doctors: Written So Even Doctors Can Understand. We will announce when the book is published!)