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Corporate Law

Business formation and maintenance

Real Estate Investors: Illinois Series LLC Update Nov-Dec-05

                                 In previous issues we have highlighted the advantages of series limited liability companies  (“Series LLCs”).  Such companies are currently recognized under Delaware law and proposals for adoption of similar rules under Illinois law have been pending for some time.  

                        Delaware law enables an organizer to create Series LLCs, multiple and separate series within one LLC.  Each Series LLC may serve like a separate or “subsidiary” LLC within a “parent” LLC, without the creation (and additional costs) of separate entities.   Different series may be designed by member or manager groups or by creating classes of LLC interests that possess separate duties and obligations.  Series LLCs may be tied to specific assets and may have separate business purposes.  One subsidiary Series LLC may be terminated without affecting the other series.  A Series LLC may make distributions to its own members without regard to the financial condition or members of the other series.

                        Debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular Series LLC are enforceable only against that series, and not against the assets of the LLC generally or any other series.  This protection is available as long as each series is treated separately. Books and records must be kept for each Series LLC and the assets of each Series LLC must be held and accounted for separately.                  

                         Because of the foregoing characteristics, a Series LLC is a great vehicle for real estate investors and developers, and for a variety of other uses.  SB 504, which is now before Governor Blagojevich, and which we expect to be signed, would authorize Series LLCs under Illinois law.  It contains many provisions comparable to those contained in under Delaware’s law.  However, under the present proposal, fees in Illinois would be substantially higher than those in Delaware.  In Illinois, proposed fees would be $750 for the initial parent filing and $50 for each subsidiary designated series.  Annual report filing fees would be $250 for the parent plus $50 for each designated subsidiary series.   By comparison, it costs just $90 for an initial filing in Delaware and $175 to qualify to do business in Illinois as a foreign LLC.

                          We will keep you informed regarding SB 504 and any changes that might result in adoption of more “competitive” fee structures.  In the meantime, we expect Delaware filings to continue at a brisk pace.   

Attorney to Contact

• Thomas W. Rieck
• Ronald P. Duplack
• Douglas C. Conover