The limited liability company (LLC) has been an incredibly popular business structure for decades, but in the grand scheme of things, it’s still a relatively recent addition to the American business landscape.
There are actually still new variations of the LLC popping up across the country, with the most popular one being the series LLC.
Because the series LLC is still relatively new in some states, we get a lot of questions about what exactly the series LLC is, and how you can form one. That’s why we decided to write these articles, which break down how the series LLC formation process works in each state.
The series LLC is only available in certain states, including North Dakota. A series LLC is a collection of LLCs that are grouped under one parent LLC. For the most part, this enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
What Is a Series LLC?
Let’s start by briefly covering what a series LLC actually is. In general, a series LLC is exactly what it sounds like ― it’s a collection of LLCs that operate under the umbrella of a master LLC. While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In most states, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Each LLC in a series has the same limited liability protections that a standard LLC has, meaning that if you’re sued, creditors can only come after your business assets rather than pursuing your personal possessions. While a series LLC does still protect your personal car, house, bank accounts, etc., it also protects the other LLCs in the series from the lawsuit. In other words, creditors can only pursue the assets of one LLC, rather than the entire series.
However, North Dakota’s laws do not specifically allow for these liability shields between each individual LLC. While it’s not 100% clear how courts would treat lawsuits against one LLC in the series, it’s quite likely that your separate LLC segments will in fact share liability in this state.
Should I Form a Series LLC in North Dakota?
To be perfectly honest, we never advise that our readers form series LLCs in North Dakota. The way this state set up their laws for series LLCs entirely undermines the point of forming a series LLC in the first place. After all, if your separate LLC segments will have to share liability, there is no reason to form a series LLC.
If you don’t care about your separate LLCs sharing liability, then you can just form one traditional LLC. If you do want your LLCs to have isolated liability, then you should simply form several separate traditional LLCs.
If North Dakota updates their series LLC laws to make this a more viable business type, we will update this article to reflect that, but for now, there is no good reason for anyone to consider forming a series LLC in North Dakota.