How to Create a Series LLC in Kansas

What Is a Series LLC?

A Series LLC is a unique form of a limited liability company that allows for the creation of multiple, distinct series or cells within a single LLC. Each series operates independently, with its own assets, liabilities, and members. This structure allows for the segregation of assets and liabilities among the series, providing a flexible and cost-effective way to manage multiple business ventures under one umbrella entity.

Does Kansas Allow Series LLCs?

Yes, Kansas permits the formation of Series LLCs under its state laws. The authorization for Series LLCs is governed by the Kansas Revised Limited Liability Company Act. It is essential to include specific language in the formation documents to establish a Series LLC, ensuring that each series is recognized as a separate entity.

How a Kansas Series LLC Works

In a Kansas Series LLC, the master LLC acts as the overarching entity that controls the individual series. Each series can hold its own assets, incur liabilities, and have distinct members and managers. The separation of liabilities is a key feature, as it protects the assets of one series from the liabilities of another. Proper recordkeeping and adherence to structural requirements are crucial to maintaining this separation and ensuring legal protection.

Benefits of Forming a Series LLC in Kansas

• Cost Efficiency: Forming a Series LLC can be more cost-effective than creating multiple traditional LLCs, as it reduces the need for separate filings and administrative tasks.
• Asset Segregation: Each series can hold its own assets and liabilities, providing protection and isolation from the other series.
• Administrative Flexibility: The structure allows for streamlined management and operations across multiple business lines or investments.

Limitations and Risks of a Kansas Series LLC

• Legal Uncertainty: Some jurisdictions may not recognize the liability protections of a Series LLC, leading to potential legal challenges.
• Banking and Lending Challenges: Financial institutions may be unfamiliar with Series LLCs, complicating banking and lending processes.
• Tax Complexity: Navigating the tax obligations for each series can be complex, requiring careful compliance with state and federal tax laws.

Who Should Consider a Kansas Series LLC?

A Kansas Series LLC is suitable for businesses with multiple lines of operations, such as real estate investment, asset holding, or intellectual property management. It is ideal for those seeking to segregate assets and liabilities while maintaining administrative efficiency. However, for simpler business structures, a traditional LLC may be more appropriate.

Step-by-Step: How to Create a Series LLC in Kansas

Step 1: Choose a Name for the Series LLC

The name of the Series LLC must comply with Kansas naming requirements, including the use of "Limited Liability Company" or abbreviations like "LLC." Each series within the LLC should have a distinguishable name that includes the parent LLC's name.

Step 2: Appoint a Kansas Registered Agent

A registered agent must be appointed for the Series LLC. This agent must be a resident of Kansas or a business entity authorized to do business in the state, responsible for receiving legal documents on behalf of the LLC.

Step 3: File the Certificate of Formation

The Certificate of Formation must be filed with the Kansas Secretary of State. This document includes essential information such as the LLC's name, registered agent, and management structure. Filing can be done online or by mail.

Step 4: Include Series LLC Language

It is crucial to include specific language in the Certificate of Formation that authorizes the creation of series within the LLC. Failure to include this language may result in the inability to form distinct series.

Step 5: Draft a Series-Compliant Operating Agreement

An operating agreement should be drafted to outline the internal governance of the Series LLC. This document should detail the separation of assets and liabilities among the series and establish management protocols.

Step 6: Establish Individual Series

Individual series are created internally within the LLC. Proper documentation and recordkeeping practices must be maintained to ensure the legal separation of each series.

Step 7: Obtain EINs (Parent and Series, If Needed)

An Employer Identification Number (EIN) is required for the parent LLC and may be necessary for each series, depending on their operations and tax obligations.

Step 8: Open Separate Bank Accounts

Separate bank accounts should be opened for each series to maintain financial separation and prevent the commingling of funds, which could jeopardize liability protections.

Step 9: Comply With Kansas Tax Requirements

The Series LLC must comply with Kansas tax requirements, including applicable state taxes and reporting obligations for each series.

Kansas Series LLC Filing Fees and Costs

The filing fee for the Certificate of Formation is $165 if filed online and $160 if filed by mail. Additional fees may apply for each series and ongoing compliance requirements.

Kansas Franchise Tax and Series LLCs

Kansas does not impose a franchise tax on LLCs. However, each series may have separate tax reporting obligations, and it is essential to consult with a tax professional to ensure compliance.

Ongoing Compliance Requirements for Kansas Series LLCs

Kansas Series LLCs must file annual reports and maintain proper recordkeeping for each series. Compliance with state laws and regulations is essential to preserve liability protections.

Common Mistakes When Forming a Series LLC in Kansas

• Missing Required Series Language: Failing to include series authorization language in the formation documents can prevent the establishment of separate series.
• Poor Recordkeeping: Inadequate documentation can lead to the loss of liability protection.
• Mixing Assets Between Series: Commingling funds or assets can jeopardize the legal separation of series.

Series LLC vs Traditional LLC in Kansas

A Series LLC offers a flexible structure with potential cost savings and asset protection benefits, making it suitable for complex business operations. In contrast, a traditional LLC may be preferable for simpler business models due to its straightforward structure and management.

Additional Resources

• Kansas Secretary of State Main Page
• Kansas Department of Revenue
• Contact Information: Phone: (785) 296-4564, Email: kssos@sos.ks.gov

This article provides general information about Kansas LLC formation requirements under the Kansas Revised Limited Liability Company Act. It is not intended as legal advice. Persons forming an LLC should consult with a private attorney regarding their specific circumstances.