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Editorial 9 MIN READ

Series LLC statutory creep: the four new states of 2020-21

Virginia, Iowa, Nebraska, and Arizona move into the column, and Delaware rewrites the taxonomy with registered series

The Editors
Staff, Incorporator.org
9 min read Updated
Contents 8 sections
  1. Virginia: the Uniform Protected Series Act, live July 1, 2020
  2. Iowa: the second UPSA adopter, 2020
  3. Nebraska: LB 263, effective January 1, 2022
  4. Arizona: HB 2467, effective August 27, 2021
  5. Delaware's split: registered series and protected series
  6. The count, as of August 2021
  7. What this means operationally
  8. Sources

he series LLC count is no longer a curiosity. As of August 2021, roughly eighteen U.S. jurisdictions authorize a series LLC in some form, with Virginia, Iowa, Nebraska, and Arizona added in the last fourteen months and Delaware having split its own series regime into two tiers in 2019. The form is not yet mainstream, but the statutory surface has grown past the point where a practitioner can keep the list in memory.

This piece walks through the four new adopters, the Delaware restructuring, and what the pattern tells you about where the form is headed. It is a companion to our prior series LLC coverage from 2016, 2018, 2019, and the June 2021 reassessment.

Virginia: the Uniform Protected Series Act, live July 1, 2020

Virginia became the first state to enact the Uniform Law Commission's Uniform Protected Series Act, which was approved by the ULC in 2017 after several years of drafting committee work. The General Assembly passed the adoption as HB 1329 during the 2019 session; it was signed by the Governor on March 18, 2019, codified at Va. Code Ann. §§ 13.1-1088 through 13.1-1099.15, and took effect on July 1, 2020. The one-year lag between signing and effective date was deliberate, to give the State Corporation Commission time to build filing infrastructure.

The UPSA is the cleaner of the two statutory families in the market. Where the old Delaware model (8 Del. C. § 18-215, dating to 1996) created a series as a contractual matter inside the operating agreement with almost no public filing, the UPSA requires a protected series to be formed by a filing with the state: a "protected series designation," which the SCC publishes on the entity record. The result is a series that third parties can find without demanding a copy of the operating agreement, which is the single biggest objection the insurance industry and secured lenders have had to series LLCs for the last twenty-five years.

Virginia's formation fee for the series LLC itself is the same as any other LLC, $100 under Va. Code § 13.1-1005. Each protected series designation requires its own filing and its own fee. The SCC fee schedule at the time of enactment set the protected series designation fee at $100 as well, with the same $50 annual registration fee that applies to the parent LLC. That matters: under the old Delaware contractual-series model, creating a hundred series cost you nothing in state filing fees, which was part of the appeal and part of why the rest of the country was suspicious.

Iowa: the second UPSA adopter, 2020

Iowa followed Virginia almost immediately. The General Assembly passed SF 569 in the 2019 session, which amended the Iowa Revised Uniform Limited Liability Company Act (Iowa Code ch. 489) to add a new subchapter implementing the UPSA at Iowa Code §§ 489.1201 through 489.1206 (renumbered in codification). Governor Reynolds signed the bill on May 1, 2019, and the series provisions took effect on January 1, 2020.

The Iowa version follows the uniform text closely. It uses the same "protected series" terminology, requires the same public designation filing with the Secretary of State, and preserves the internal-shield mechanics: a judgment creditor of one series cannot reach the assets of another series or of the parent LLC, provided the separateness formalities are observed. Iowa SOS filings for a protected series designation cost $50, in line with the ordinary LLC filing fee in the state.

The ULC's pitch for the UPSA was that the 2017 text fixed three of the four biggest problems with the 1996 Delaware model. It made series publicly visible, it provided a clear name convention (the protected series must be named in a way that identifies the parent), and it gave series the ability to sue, be sued, and hold property in their own name without the fiction that the parent was doing so on their behalf. The remaining problem, federal tax treatment, is not something a state statute can fix; Treasury's 2010 proposed regulations under Prop. Reg. § 301.7701-1(a)(5) still sit unfinalized, more than a decade on.

Nebraska: LB 263, effective January 1, 2022

Nebraska's LB 263 was introduced by Senator Matt Hansen in the 2021 session and signed by Governor Ricketts on May 26, 2021. It amends the Nebraska Uniform Limited Liability Company Act (Neb. Rev. Stat. §§ 21-101 through 21-197) to add a new Article 14 implementing the UPSA, with an effective date of January 1, 2022. By the time this article publishes, the bill is law but the statute is not yet operational; practitioners have roughly five months to get up to speed.

Nebraska is the third UPSA state, and the pattern is becoming clear. Every state that adopts a new series LLC statute from this point forward is likely to take the UPSA rather than the old Delaware contractual model. The uniform text is available, the drafting work is done, and the secretary of state's offices prefer it because the public filing requirement gives them a record to maintain. Legislators prefer it because it answers the "but what about transparency" question that kills most business-entity bills in committee.

Nebraska's LLC formation fee is $100 under Neb. Rev. Stat. § 21-193; the protected series designation fee under LB 263 is set at $100 as well. The biennial report fee is $10 per LLC, a nominal figure that has not changed in years.

Arizona: HB 2467, effective August 27, 2021

Arizona's HB 2467 was sponsored by Representative Jeff Weninger and passed the legislature in April 2021. It was signed by Governor Ducey on April 14, 2021, and by the ninetieth-day rule under the Arizona Constitution, the provisions take effect August 27, 2021, about three weeks after this article's dateline. The bill amends Arizona's Limited Liability Company Act (A.R.S. Title 29, Chapter 7) to add a new Article 4 creating a series LLC regime.

Arizona is the outlier in the 2020-21 group because it did not take the UPSA. The drafters used language closer to the old Delaware-Illinois model, with the series created in the operating agreement and a brief "statement of series" filing rather than a full uniform protected series designation. The Arizona Corporation Commission, which handles LLC filings, has posted preliminary guidance but the form itself was still being finalized at the time of enactment.

The decision not to take the UPSA in Arizona was pragmatic rather than doctrinal. The state already runs a high-volume LLC registry, and the cost of rebuilding its filing system for a brand-new uniform regime was higher than the legislature wanted to absorb for a form that serves a niche market. The practical effect is that an Arizona series LLC will look more like a Delaware or Illinois series LLC than like a Virginia protected series: contractual creation, less public visibility, the same old questions about whether the internal shield holds up in a non-adopting state's court.

Arizona's LLC filing fee is $50 under A.R.S. § 29-3204, and the statement of series fee under HB 2467 is set at $50 as well.

Delaware's split: registered series and protected series

The most consequential series LLC development of the period is not a new state but a restructuring of the original. On August 1, 2019, Delaware's 2019 LLC Act amendments took effect, adding a new § 18-218 and renaming the long-standing § 18-215 series as "protected series" while creating a new category called "registered series." The new regime is codified at 8 Del. C. § 18-218.

A Delaware registered series is formed by filing a certificate of registered series with the Division of Corporations, and it appears on the public record much like a Virginia protected series designation. The filing fee is $110, and the registered series owes a $75 annual tax under 6 Del. C. § 18-1107, on top of the parent LLC's $300 tax. A Delaware protected series remains as it was, invisible to third parties and almost free to create, but it now sits alongside a registered variant that is visible and carries its own fee column.

The Division of Corporations pitched the split as a way to give Delaware a form that would satisfy secured lenders' demand for public series records without forcing existing protected series holders to convert. The subtext is competitive. With Virginia and Iowa coming online with UPSA statutes that matched what lenders were asking for, Delaware needed a registered option of its own or it would lose that class of transactions to the new states. The registered series is close enough to the UPSA protected series to be bankable in most lending situations, though the two regimes are not identical and counsel in a multi-state deal still has to check both.

The count, as of August 2021

A rough accounting of jurisdictions with series LLC statutes in some form, in order of first enactment:

Delaware (1996), Illinois (2005), Iowa (2008, original non-UPSA version), Nevada (2005), Oklahoma (2004), Tennessee (2005), Texas (2009), Utah (2006), Wisconsin (2002), Kansas (2007), Missouri (2013), Montana (2011), North Dakota (2015), District of Columbia (2011), Puerto Rico (2010), Virginia (2020, UPSA), Iowa (2020, UPSA replacement), Nebraska (2022, UPSA, enacted 2021), and Arizona (2021, non-UPSA).

Iowa appears twice because the 2020 UPSA adoption replaced its earlier 2008 statute rather than sitting alongside it; the state is on its second-generation series regime.

The total sits at seventeen states plus the District of Columbia and Puerto Rico, depending on how you count Iowa's replacement and whether you include the territories. Practitioners who round to eighteen are not wrong. Those who say fifteen are counting only primary states and excluding DC and PR; those who say twenty are double-counting Iowa.

What this means operationally

The federal tax question remains unresolved. Prop. Reg. § 301.7701-1(a)(5), issued September 14, 2010, would have treated each series as a separate entity for federal tax purposes, but the regulation has never been finalized. The IRS has taken no formal position beyond the proposed regs, and practitioners continue to file as if each series is a separate entity on the strength of the proposal. This is the single biggest risk in using a series LLC for tax-sensitive transactions.

The foreign-qualification question also remains unresolved. A series formed in Virginia under the UPSA looks like a separate entity to third parties, but a court in a non-series state asked to enforce the internal shield between series is on its own. The case law is thin, and what exists is mostly bankruptcy court decisions under § 18-215 that do not translate cleanly to a UPSA regime.

What has changed is the addressability of the first problem: a registered series in Delaware or a protected series in Virginia, Iowa, or Nebraska can at least be named, found, and served like a normal LLC. The lenders who would not accept a § 18-215 series as a borrower in 2015 are starting to accept a Virginia UPSA series in 2021, because the filing exists and the name is on record. That is a meaningful operational shift, even if the tax picture behind it is still undetermined.

The bet the ULC made in 2017 was that public filing and statutory uniformity would pull the form into the mainstream. Four states into the uptake, with Delaware having adjusted its own regime in response, that bet looks closer to paying out than it did when we first covered this form in 2016. What is still missing is a Treasury final rule under § 301.7701-1, and on that front there has been no movement since the Obama administration.

Sources

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