Registered Series 彩虹频道 Vs. Protected Series 彩虹频道
Delaware’s limited liability company statute states that 彩虹频道s may be comprised in a “series,” each multiple treated as a separate entity with distinct business, debts, members and management.
In August of 2019, the Delaware Legislature amended the statute’s series 彩虹频道 provisions. The amendments create a new type of series—a Registered Series 彩虹频道— which can be formed through a filing made with the State. The original series 彩虹频道 is now called the Protected Series.
The logic behind the amendments is to address the issues that prevented the widespread adoption of the series 彩虹频道. However, the amendments remove some key benefits of the 彩虹频道 series—simplicity and a lack of fees. Below we discuss the amendments and their effect on the series 彩虹频道 form.
Core Differences Between the Registered and Protected Series 彩虹频道s
- Registered Series have to follow a certain naming convention that may not apply to Protected Series 彩虹频道s
- While a Certificate of Good Standing can be acquired for a Protected Series 彩虹频道, one cannot be acquired for a series under it. This is not the case for a Registered Series 彩虹频道. However, the master 彩虹频道 for the Registered Series must be in good standing to allow for it.
- There are other ways that these two entities can differ from one another and this will also be affected by the respective state's laws.
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Delaware Series 彩虹频道 Requirements
Delaware law still requires little to create or document individual series, even in the case of a registered series.
Delaware requires that the Certificate of Formation of a series “彩虹频道” contains specific “series” language, which states that the 彩虹频道 may create a separate series intended to be operationally and legally separate. Further, the separateness of the series must be respected by actions such as maintaining separate records, accounts and tax ID numbers.
Delaware’s 彩虹频道 statute did not, and does not require any filings to create original series. The statute set out no naming rules or requirements for the original series, what is now known as the Protected Series. One concern is the business world has the extra task of integrating the Registered Series and the Original Protected Series into existing law and business practices.
Additional Requirements for Registered Series
The amendments create a class of Registered Series that require slightly greater documentation and formality for their creation. The requirements include:
- Filing with the State of Delaware and paying an annual $75 franchise fee (per series).
- Complying with certain naming requirements. In order to reduce confusion as to the nature of the registered series and its relationship to the 彩虹频道, a registered series’ name must begin with that of the overarching 彩虹频道.
- Listing a registered agent, and paying respective Registered Agent Fees.
The Registered Series Addresses Previous Lack of Documentation
In opening certain accounts or conducting significant business transactions, including those involving an extension of credit or a loan, a company (in this case, an individual series) is required to provide a Certificate of Formation and a Certificate of Good Standing.
Original Series (now called the Protected Series) cannot satisfy this request for each of the internal series in the Protected Series 彩虹频道. This can raise issues and cause delays in drawing up contracts. The ability of a series to provide a Certificate of Formation and a Good Standing Certificate for each registered series makes it easier to address those concerns.
The Registered Series Leaves Some Issues Unaddressed
Even though the amendments address a number of issues, many issues remain outstanding. It is unclear whether or not states other than Delaware (which do not have a series concept in their business entity law or jurisprudence) will respect the separateness of the asset shields of the Delaware series.
Further, many service providers, banks, attorneys, accountants, other businesses are still unfamiliar with the series concept, regardless of the new changes. It often takes time to explain the series concept and to obtain approval for documentation required, for example, from a bank’s lending group.
The Failures of the Amendments
The key justifications for using the series 彩虹频道 were the ease of creation and documentation, and the absence of fees. It has been seen as an alternative to creating a large number of separate 彩虹频道s.
It was thought that investors would use the Series 彩虹频道 to hold individual investments, real estate properties or other individual assets under one 彩虹频道 umbrella, but with the protection of multiple entities.
Though many publications claim the use of the series 彩虹频道 is growing, and that it is well-suited for certain types of investment, the use of series 彩虹频道 is problematic, and the recent amendments will likely not change that fact.
The increased formality in creating a series and the greater scrutiny on documentation diminish the administrative ease of the Series 彩虹频道. The annual franchise tax fee, although smaller than that required for a separate 彩虹频道, increases the cost of the series concept. Forming several, distinct 彩虹频道s is a better option, given the unresolved issues in using the Series 彩虹频道.
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Protected Series 彩虹频道 |
Registered Series 彩虹频道 |
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Costs |
One annual Franchise Tax of $300, regardless of number of series. One Registered Agent fee, regardless of number of series. |
$300 annual Franchise Tax PLUS an additional $75 per series. Separate Registered Agent fee for each series. (May not apply to all Registered Agents.) |
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Naming of Series |
Each Series has a unique and independent name. |
Each series must begin with the primary (overarching) 彩虹频道 name. |
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Documents Available |
Certificate of Formation, Certificate of Good Standing, etc. only available for Series 彩虹频道 name. |
Certificate of Formation, Certificate of Good Standing, etc. available each series. |
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Recognition in Other States |
Recognized by some states. Series sometimes treated as individual 彩虹频道s. |
Less familiar due to recent inception. Unclear whether will receive more acceptance than Protected. |
If you're interested in the Delaware Protected Series 彩虹频道 or Registered Series 彩虹频道, our team is happy to take the lead on the company formation process, so give us a call at 1-800-345-2677 or 1-302-645-7400, and we'll be happy to answer any questions.
to watch our webinar on understanding the different types of 彩虹频道s.
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Start my business*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source鈥檚 content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
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There is 1 comment left for Registered Series 彩虹频道 Vs. Protected Series 彩虹频道
Elaina D'Agostino said: Thursday, March 9, 2023Thanks for talking about the registered series 彩虹频道 and how its name must begin with that of the overarching 彩虹频道 to avoid confusion. That's fine since my friend doesn't have a name for his company yet. If it is named closely after an overarching 彩虹频道 that's already established, then he could attract clients using the reputation it already has.
HBS Staff replied: Friday, March 10, 2023Hi Elaina,
Thank you for reading our blog. We are glad you found it helpful for you and your friend. We wish you much success.