Arkansas Adopts the Uniform Protected Series Act for the Series LLC
You can soon create a Series LLC in Arkansas—thanks to the state legislature’s recent adoption of the Arkansas Uniform Protected Series Act (UPSA) that takes effect on October 1, 2019.
The Act defines Arkansas’ version of the Series LLC, explains how to establish a so-called “protected series,” and lays out the state’s annual franchise tax report requirements for the Arkansas Series LLC.
What is a Series LLC in Arkansas?
In Arkansas, a Series LLC is defined as a type of limited liability company with one or more protected series (divisions) each with separate limited liability protection. This basically means an Arkansas Series LLC can segregate its assets in individual protected series that function a lot like separate organizations even though they are not, in fact, separate legal entities.
The term “protected” in “protected series” is simply a reference to an individual series’s separate limited liability. It means that the series is insulated from the obligations and liabilities of the Arkansas Series LLC as a whole and any other protected series within it.
One benefit of the Series LLC structure is that it provides a way for a company to separate its assets while avoiding the expense of forming a host of independent LLCs.
Highlights of the Arkansas UPSA
The Series LLC business structure isn’t unique to Arkansas (it was invented in Delaware in 1996 and has since spread to more than a dozen other states and jurisdictions), but the Arkansas Uniform Protected Series Act has special features you’ll need to know about if you decide to start an Arkansas Series LLC and establish protected series.
You can read the Act (Arkansas’ Act 665) online at the Arkansas state legislature’s website, but we’ve included some of the most important details below. Details not discussed here include state record-keeping requirements, the difference between an “associated asset” and “non-associated asset,” and the various management structures available to a protected series of an Arkansas Series LLC.
1. Naming an Arkansas Protected Series
As in most states that allow for the formation of Series LLCs, the name of each protected series you establish must begin with the name of your Arkansas Series LLC. Unlike in some other states, however, an Arkansas protected series’s name should include one of the following designations: “protected series,” “PS,” or “P.S.” The idea is to clearly differentiate each protected series within your Arkansas Series LLC while still identifying each series with the parent organization.
2. Filing an Arkansas Protected Series Designation
Establishing a protected series of your Arkansas Series LLC is fairly simple. First, your organization must vote to establish a protected series. Second, you need to submit a “protected series designation” to the Arkansas Secretary of State for each protected series you want to establish. The protected series designation must include the name of your Arkansas Series LLC and the name of the protected series you want to establish.
3. AR Annual Franchise Tax Report Requirements
An Arkansas Series LLC, like a traditional Arkansas LLC, must submit an annual franchise tax report by May 1st each year. The special requirement for a Series LLC, however, is that its annual franchise tax report must include the names of each protected series it has established (so long as the series hasn’t yet been dissolved). The Arkansas annual franchise tax costs $150 for Arkansas Series LLCs (a flat fee).
4. Certificate of Good Standing for a Protected Series
A nice feature of Arkansas’ Uniform Protected Series Act is that it allows a protected series to receive a certificate of good standing from the Arkansas Secretary of State (this is only possible in some states that allow for the formation of Series LLCs). Just make sure that your Arkansas Series LLC’s annual report includes all of the required information. An Arkansas protected series can only receive a certificate of good standing if its name was included in the Series LLC’s (the parent organization’s) annual report.
5. Arkansas Registered Agent Requirements
As with an ordinary Arkansas LLC, an Arkansas Series LLC must appoint an Arkansas registered agent to receive service of process (legal notices) on its behalf. The registered agent, moreover, must be the same registered agent for the Series LLC and each of its protected series—something the registered agent must agree to before you can submit the necessary protected series designations to the Arkansas Secretary of State.
Beyond the Arkansas Protected Series Act
Interested in learning more about the Series LLC business structure? We’ve been watching the Series LLC spread and evolve for years, and we like to keep up with all the latest Series LLC-related news and changes to state law. Check out out these articles and pages on the following topics:
- The Series LLC Guide: Northwest’s general guide to the Series LLC concept and the basic steps to forming a Series LLC.
- How to Start a Series LLC in Alabama: Northwest’s coverage of the ins and outs of starting an Alabama Series LLC.
- How to Start a Series LLC in Illinois: Northwest’s comprehensive overview of starting and maintaining an Illinois Series LLC.
- How to Start a Series LLC in Delaware: Northwest’s step-by-step guide to forming a Series LLC in Delaware, including information state filing requirements, fees, tax, and annual compliance.
- Changes to the Delaware Series LLC: Learn about recent amendments to the Delaware LLC Act that created the Delaware “registered series”—a new type of series option available to Delaware Series LLCs.
- Defining the Series LLC: Get our chief legal strategy officer’s (Drake Forester’s) clear explanation of the Series LLC business structure (published at Score.org).
