Series LLCs vs. Standard LLCs: Key Nuances and How to Preserve the Liability Wall
Illinois (like Delaware, Indiana, Iowa, Montana, Tennessee, Texas, Utah, Virginia, and Wyoming) gives you two different flavors of LLC protection: the traditional (single-entity) LLC and the Series LLC. The headline difference is simple: a regular LLC puts all assets and activities inside one legal “bucket,” whereas a Series LLC lets you create multiple, separately insulated “cells” (each a “series”) under one umbrella LLC. But the insulation only works if you build and maintain real, practical separation. Illinois appellate guidance has made that point sharply.
Below is a concise, practitioner-focused guide to the key differences and the concrete steps you must take to keep a Series LLC’s internal liability shields intact.
1) Structural Basics
Traditional LLC (one bucket).
One entity holds all assets and operations. Creditors of one business line can typically reach all LLC assets (subject to charging order/veil-piercing doctrines).
Series LLC (many buckets under one lid).
Illinois law allows an LLC to establish one or more “designated series” if the operating agreement authorizes it. When statutory conditions are met, debts and liabilities tied to one series are enforceable only against that series’ assets and not the umbrella LLC or other series. Each series may own property, contract, sue/be sued in its own name.
Key statutory requirements for limited-liability status of each series include (summarized):
The operating agreement must authorize series and give notice of series-level liability limits.
Each series must maintain “separate and distinct records” and be “accounted for separately.”
The umbrella LLC must file a Certificate of Designation (Form LLC-37.40) for each series with the Secretary of State; upon filing, the series’ legal existence begins.
Naming: a series name must begin with the entire name of the umbrella LLC and be distinguishable from other series.
The umbrella LLC’s registered agent/office serves for each series.
Statutory text & forms: Illinois General AssemblyIllinois Secretary of StateIllinois General Assembly
2) What Illinois Case Law Teaches (and Why It Matters)
City of Urbana v. Platinum Group Properties, LLC (Sunnycrest Series) (4th Dist. 2020)
Illinois’ first published appellate decision touching Series LLCs underscores that paper structure isn’t enough. The City prosecuted property-maintenance violations. When the defendant later argued the correct party was a series (not the umbrella), the court rejected the attempt, emphasizing that the series failed to present a file-stamped Certificate of Designation and did not substantiate separateness. The court walked through §37-40’s requirements—separate records, separate accounting, and the filed certificate—and stressed that conclusory assertions of a separate series won’t carry the day. Result: the orders stood against the “series.”
Practice takeaway: If you want the court (or a counterparty) to respect the internal liability wall, be ready to prove the series’ legal existence and separateness with state filings and records, not just an operating-agreement recital.
Related Illinois authority has recognized series naming in captions and addressed service/jurisdiction issues (not liability segregation per se). See, e.g., Arch Bay Holdings, LLC-Series 2010B v. Perez (2d Dist. 2015).
3) The Practical-Separation Playbook (What to Do in Real Life)
If you adopt a Series LLC, treat each series the way you would treat a separate LLC. Courts (and creditors) will look for real-world separation. At minimum:
File It Right:
Use Articles of Organization that authorize series and include notice of the series liability limitation.
File a Certificate of Designation (LLC-37.40) for each series; existence begins on filing. Keep stamped copies handy.
Name It Right—Everywhere
Use the full umbrella name at the start of each series name (per statute) on deeds, leases, contracts, invoices, insurance, letterhead, email signatures, website, signage, and litigation captions. Don’t shorten or “nick-name” the series.
Banking & Accounting
Separate bank accounts for each series; no commingling.
Series-specific books/ledgers (GL, AP/AR, trial balances, balance sheets, tax workpapers). The statute literally requires “separate and distinct records” and separate accounting. Justia Law
Asset Titling & Contracting
Title real estate, vehicles, equipment, IP, and receivables in the series’ exact legal name.
Execute all contracts (leases, vendor agreements, loans) in the series’ name with an authorized signatory of that series. Avoid umbrella-level signatures for series deals.
Insurance
Maintain separate liability and property policies (or endorsements) per series listing the series as named insured where appropriate. If using a master program, ensure series-specific schedules and limits.
Tax & EIN
The IRS often treats each properly formed series as a separate taxpayer; obtain EINs where applicable and file/present tax items separately as advised by your CPA. (IRS treatment is fact-dependent.)
Governance Artifacts
Maintain series-level consents/resolutions, member rosters, and management authority records (which may differ by series). If a series has different managers/members than the umbrella, list them in the Certificate of Designation, as Illinois requires.
Litigation Hygiene
If a dispute touches one series, appear and plead in that series’ name and be prepared to prove the filed designation and separate records. Mishandling service, captions, or proof of separateness can collapse the distinction (see City of Urbana).
4) When a Traditional LLC May Be Better
Single asset / single line of business. Simpler governance and fewer ways to make costly separateness mistakes.
Banks & counterparties unfamiliar with Series LLCs. Some lenders, title companies, and out-of-state counterparties are wary of internal shields and may require stand-alone LLCs anyway.
Bankruptcy/uniformity concerns. The Bankruptcy Code does not expressly address Series LLCs; treatment can vary (a known uncertainty noted in commentary). If a clear, court-tested silo is essential, separate LLCs remain the gold standard. Emory Law Scholarly Commons
5) Illinois Filing & Reference Pointers
Statute: 805 ILCS 180/37-40 (series authority, separate records/accounting, “sue and be sued,” naming, certificate of designation, registered agent rule). Illinois General Assembly
SOS Form: LLC-37.40 Certificate of Designation (existence begins on filing; change/termination mechanics). Illinois Secretary of State
SOS Series Guidance: Formation/series instructions and annual-report resources. Illinois Secretary of State+1
Case Law: City of Urbana v. Platinum Group Properties, LLC (Sunnycrest Series), 2020 IL App (4th) 190356 (first Illinois published decision discussing §37-40 requirements in context; failure to prove series separateness). Justia Law
6) Quick Decision Framework
If you prioritize administrative simplicity and don’t need internal silos → Traditional LLC.
If you want internal silos without forming multiple LLCs and you can rigorously maintain separation and filings → Series LLC, but run the separation playbook above and keep a litigation file ready (stamped designations, naming evidence, separate books).
For critical or high-risk assets (e.g., development parcels, operating companies with employees), consider stand-alone LLCs or a holding-company structure if counterparties or risk profile justify belt-and-suspenders.
Final Word (and a Caution)
Series LLCs can be efficient—but only if you treat each series like a real company in daily practice. The most expensive Series LLCs are the ones that fail when tested because records, titles, banking, or filings weren’t truly separate. Illinois law gives you the tools; courts will look for proof you used them.
*This post is for general information only and isn’t legal advice.