NOTEBOOK: New series LLC ‘a common-sense thing,’ Pate says

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Iowa business owners, particularly those who are organized as limited liability companies, may want to take a closer look at a new state law that was recently signed by Gov. Kim Reynolds. 

The legislation, Senate File 569, the Protected Series Act, creates a new type of protected series LLC that provides “horizontal” liability shields in addition to the “vertical” liability shields that are part of traditional LLCs. 

The Iowa State Bar Association was a driving force behind getting the legislation enacted, because it was something its clients were asking for, Iowa Secretary of State Paul Pate said. 

“It’s a common-sense thing,” Pate told me. In other states that have already allowed them, series LLC filings are very popular for real estate holdings such as fast-food restaurants or hotels, he said. 

“When you own a lot of stores, you want to be able to cover each store independently but have an umbrella over all of them. This way they can do it in a way that enables the individual liability for each, but having the umbrella over them. … Some call it the ‘mother ship,’ because you have all these other LLCs under them.” 

Iowa is just the fifth state to pass legislation authorizing protected series LLCs, according to the Uniform Law Commission, along with Arkansas, Connecticut, Nebraska and Virginia. 

The new law goes into effect July 1, 2020. “My office has a number of things to work out to make sure we’re doing them the right way,” Pate said.  

Iowa has had some pretty explosive growth in LLCs over the past several years. From the beginning of 2015 through the end of 2018, 69,804 new LLCs were formed in the state. There are currently 138,611 active LLCs on record, according to data provided by Pate’s office.