Help!

We've got a customer that wants to open a DDA for his series LLC. I didn't even know what a series LLC was before this morning.

Would each subsidiary LLC have its own LLC paperwork? What would the legal title be for the subsidiary account? Is the parent LLC name supposed to be in the legal title?

Any help would be appreciated!! Thanks in advance!

Don't feel too intimidated. If you only learned of it this morning you were a few hours ahead of me. First, no more than 9 or 10 states allow such an animal so there's no reason for anyone to assume you're not keeping up.

Here's an article that answers some of your questions directly, but I encourage you not to jump to facilitate something before you figure it out. Sit down with your legal counsel and see what he or she thinks before you begin being overly accomodative. Your CIP might need some tweaking...just take a breath.

Ken you are the best....you need to have Compliance Psychologist added to your bio! I too have had my share of questions with LLCs but this one takes the cake! Thank goodness they are not yet formed in Florida (I'm sure it is just a matter of time) but these sound like a nightmare for the folks that need to open these accounts. What about when we have to identify "beneficial ownership"!! If this concept was dreamed up by the IRS, I sure wish they would provide guidance on EINs.

Having said all that I am having trouble opening Ken's link so I don't know what it said but I did find an interesting explanation from Wikipedia when I googled Series LLC. It might give you some insight into ownership and titles, etc. Good luck ! Let us know how it turns out. I'm sure our day is coming when we have one walk in the door as well.

Try this: http://www.nolo.com/legal-encyclopedia/what-is-series-llc.html

Thanks, and you've raised another issue. Being legal in Delaware means it would probably be able to register to do business in Florida, but doesn't entirely predict how its protections would be interpreted by Florida law.

We recently found an account that was opened in 1 of our branches in NYC that might be a series LLC so I thought I would share the story here. It was an LLC that was formed in Nevada just a few days before the account was opened where 1 of the managing members is an LLC registered in St Kitts and Nevis with another managing member being a limited liability company in the Bahamas and whose Secretary is identified as another LLC. There were other interesting red flags as well. Needless to say the account was closed ASAP.

I wish more financial institutions understood series LLCs so I’m jumping in to post. There are some general reasons to use a SLLC but for two types of businesses they are invaluable.

(1) Segregated portfolio companies: “Many to many” The original intended purpose of series LLCs was to allow a series of different offerings to many individuals under a single registration. These are specialized and I admit I have never dealt with these.

(2) Segregated asset companies for regulated industries: “One to many” This is what I specialize in. For businesses where a professional license is required, from contractors licenses, to medical licenses, to property managers, how do they take advantage of the legal protections of separate legal entities without having to go through the time an expense of qualifying each business under their license in multiple municipalities? In states like Nevada and Delaware, series LLCs are a great solution. (The Illinois model is less flexible and so I’ve stayed away from that.)

There are nice benefits for other businesses in SLLCs but these are mostly cost savings. Some businesses that are just trying to save money without observing the forms will get in trouble and their SLLC won’t give them the protections they sought. (Which actually means no cost savings ultimately, right?)

So I’m an attorney and what I would like more banks to understand is first that SLLCs are not a sign that something illegitimate is necessarily happening. The IRS regs (http://www.irs.gov/irb/2010-45_IRB/ar11.html) mean that even late adopters are more comfortable with them.

Second, and the reason I’m posting is that banks have an opportunity to package multiple accounts for multiple series. The Nevada statute, for example, places great emphasis on separation of assets. The easiest way to show that would be to segregate funds in sub-accounts. I would love to have a relationship with a banker that understand SLLCs. If they can give my clients master accounts and the ability to easily create sub accounts for each series, that would give them an easy way to follow my instructions to segregate their assets. I acknowledge that the clients that are looking only at the cost savings of SLLCs might not be interested in the more sophisticated banking product, but those in categories 1 & 2 will be happy to move their banking out of online-only banks into the mainstream.

So, any ideas, are there robust subsidiary account products available? One of my real estate guys has a SLLC with 120ish series—one for each parcel of property. The fees on 120 bank accounts is a tough sell given they have two to four transactions a month. He’s an outlier with most clients having fewer than 8 series but you see the opportunity.

Cautionary note: Bankers need to know whether SLLCs are recognized by the laws of the states in which they operate.