This section answers common questions regarding the Series LLC.
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A Series LLC is created when the Master creates the smart contract that holds that Series' LLC Operating Agreement (the "Agreement").
This smart contract is created by signing a transaction on the Ethereum blockchain which triggers
otoco.ethcontract contains the Master LLC Operating Agreement which derives its authority to establish Series LLCs directly from the Act, e.g. in the case of Delaware:
Pursuant to Section 18-215(b) of the Act and the Limited Liability Company Agreement of the Master LLC (the "Master LLC Agreement"), the Master LLC is authorized to establish separate members and limited liability company interests with separate and distinct rights, powers, duties, obligations, businesses and objectives (each a "Series").
After the transaction confirms, typically , the Series LLC Operating Agreement is signed with the public wallet address of the sender, which legally becomes the LLCs first Member.
The Agreement makes sure that equivalence is given to the use of a user's private key with his/her digital or wet signature.
Any signature or execution made through the use of private keys on the blockchain for any matters relating to the Company shall be valid, as if signed in writing.
As a result, the individual Series LLC is owned by the smart contract created by the Master.Can I become who I want to be?
That's a tough question but thankfully, our team is on it. Please bear with us while we're investigating.
The principle that one individual Series cannot be contaminated by what happens in the other Series LLCs under the Master is the very reason why Delaware and other States in the US created the Series LLC structure.
In a traditional context, the Master is typically the "sponsor" of a common project that requires individual LLCs for each asset held, e.g. individual properties financed by the same sponsor who is typically Member in each of the LLCs.
However, there is no requirement for the Master to be a Member in the individual Series LLCs and in our setup, the Master is expressly excluded from Membership. Also, there is no requirement for the individual LLCs to have any communality. In our setup, the Series will not even know of each other's existence since in Delaware (in contrast with e.g. Wyoming) there is no need to report the names of the individual Series LLCs in the Annual Filing by the Master.
Such structure could not work if there is any risk of cross-contamination, and this key operating principle is expressly articulated in the Agreement.
[...] none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Master LLC generally or any other Series of the Master LLC will be enforceable against the assets of the Company. A member participating in one Series will have no rights or interest with respect to any other Series, other than through that Member's interest in that Series independently acquired by that Member. This Agreement and all provisions herein will be interpreted in a manner to give full effect to the separateness of each Series.
and further down in Article II:
The dissolution and termination of the Company will not, in and of itself, cause or result in the dissolution or termination of the Master, LLC or any other Series.
Categorically yes. Your LLCs is entirely independent from other Series LLCs: it has its own Members, Managers, assets and liabilities, just like a normal LLC.
As a result, whatever happens to the other Series LLCs will not affect your LLC.
The advantages of the Series LLS is that you have a valid legal entity that can be spun up immediately, fully online and at very low cost:
- You do not have to make any filing to form your LLC.
- Your LLC will be spun up with a ready Operating Agreement rather than having to instruct and pay a lawyer or service provider to draft one for you.
- You do not have to pay the Delaware or Wyoming Annual Franchise tax since only the Master, resp. OtoCo DE LLC and OtoCo WY LLC, pays the tax, not the individual Series.
- Your LLC is automatically given a Delaware address. For a small extra fee you can have Otonomos provide a business address in all major US States where you can receive physical mail and have it scanned to you.
- The LLC is also entirely private: there is no public filing of a Certificate of Formation with the name of the first Member and Manager.
- Finally, the LLC can also be entirely anonymous if setup via Otonomos: as long as the address you use to spin up your LLC is not whitelisted, your identity will not be publicly linked to the ownership of the LLC (see below "How about identity").
All this improves significantly on the speed, costs, maintenance and privacy of the traditional LLC, which typically takes 2 days to form and a couple of hundred dollars in setup costs and annual maintenance.
OtoCo takes a fee a small fee on all transactions within the platform. The average cost to create an LLC, including the gas, is $25 USD.
Its low price and instantaneousness makes our OtoCo LLC product ideally suited as a vehicle to hold physical assets e.g. real estate but also digital property such as patents, trademarks and copyright.
We also see high demand for the LLC as an instant limited liability wrapper around smart contracts, reducing the legal risk to developers of self-executing code.
Finally, the LLC is an ideal vehicle as an issuer of a SAFE/SAFT/SAFTE or as the issuer of a Token Purchase Agremeent after the Series created and issued a token.
There are only a few steps:
- First, you enter the name you have in mind for your LLC to check its availability.
- If the name is available, just connect your wallet you want to use and sign a transaction on the Ethereum mainnet with the corresponding gas fees. Note that the wallet you are connected with controls the smart contract of your Series. This instead every time you are going to perform an action in relation to your LLC, you will need to connect with that same wallet. Effectively, it is the first member of your LLC.
- After confirmation of your transaction, your company will typically activate within 6 seconds. The address for your LLC smart contract will show and you will be able to download an executed copy of its Operating Agreement from the Dashpanel. That Dashpanel can be used to then access additional services.
Yes as long as the name is not yet taken. This is why we first perform a name check (see previous FAQ).
The chosen name will appear on the cover page of the LLC's Operating Agreement. The business of the Company may be conducted under that name or under any other name that the Manager may determine.
Under the Delaware Act regarding Series LLCs, there is no obligation though it is standard practice to refer the Master when using the LLC's offical name.
E.g. for Acme LLC, in Delaware conventional naming would typically be:
Acme LLC, a Series of OtoCo DE LLC however there is nothing in the Act that prohibits the use of the Series LLC by its individual name,
In Wyoming, naming is more restrictive and a Series LLC's full legal name would be in the following format:
OtoCo WY LLC - Acme - Series [Number of Series] however users can do business as "Acme". To see their trade name protected, they would want to file a Doing Business As (DBA) with State Registry which Otonomos can help file.
There's several smart contracts at work and a fair bit of legal engineering.
Your Series LLC smart contract is controlled by the wallet you used to sign the transaction that created your company. This means that the first Member of the LLC is effectively a wallet address, since it is that address that signed the new LLCs Operating Agreement.
The smart contracts are fully open source and can be found on our GitHub.
No. Its term is indefinite until terminated in accordance with the provisions of the Series LLC Operating Agreement.
There are four circumstances:
- the final Distribution of the net assets of the Company to the Members or a Liquidating Vehicle in case of an involuntary winding-up;
- The dissolution of the Master LLC;
- a voluntary winding-up; or
- entry of a judicial decree of dissolution of the Company pursuant to the Act.
The Master is automatically dissolved if there are no individual Series left.
If there are any issues that may result in the dissolution of the Master LLC whilst there are still Series LLCs, the Master will undertake reasonable efforts, to the extent legally allowed, to notify each Series so they can take appropriate measures.
You can chose any address as your principal office, also outside of the US, subject to local rules. Inside the US, specific regulations may apply in the State where you have your principal office.
The Registered Agent, i.e. Otonomos LLC or its appointed agent, is the LLC's registered agent for service of process, as per the Series Operating Agreements:
You can engage in any lawful activity.
Article IV of the Series LLC Operating Agreement deals with Membership Capital, and most provisions reflect common practice across all LLCs. It expressly provides that the Manager, in its sole discretion, may accept Digital Assets as a Member's Capital Contribution.
Otonomos LLC as Registered Agent on file for the Master LLC has an obligation to be able to receive process for each Series LLC. You would hence need to convert your Series LLC into a full stand-alone LLC with its own Registered Office if you would no longer want Otonomos LLC to be the process agent.
A Series LLC is for all intents and purposes a full legal LLC and hence the Series LLC's Manager will be responsible for the preparation of its Annual Report.
Otonomos can help with the actual filing but does not provide tax services.
Yes. As with a traditional LLC setup, an Entity Identification Number ("EIN") will be required which you can obtain directly from the US Internal Revenue Service or which we can obtain on your behalf.
When you apply for your EIN, you should ensure that the name you apply with clearly denotes that your LLC is a Series LLC. This can be done by using the format: ABC Company LLC, a Series of OTOCO DE (or WY) LLC.
Instructions on obtaining an EIN from the IRS are outlined in detail here: https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
If you are an American citizen, this process is very easy and can take as little as a week. If you are the foreign owner of an LLC, it can take 60 days or more. Make sure to plan ahead!
Once you have an EIN, you'll want to build up your online presence. Many banks will want to be able to easily identify what your company does. If you have an informational website, documentation (like this Gitbook!), and social media accounts, it goes a long way in terms of making your business appear legitimate. This is especially true for Neobanks and digital-first banks.
We recommend applying for an account with Mercury via our partner link here. Please follow the steps below carefully:
- 1.Type your organization name on file as ABC Company LLC, a series of OTOCO DE for Delaware or OTOCO WY LLC - ABC Company LLC for Wyoming.
- 2.Upload the Master LLC Certificate of Formation when it asks for the first document upload.
- 3.There is an optional document upload field that asks for a DBA (doing business as)/trade name documentation. Upload the Series Operating Agreement there.
If Mercury denies your application, please feel free to email [email protected] for support!
In the US, Members of LLCs to do not have to provide attestation of their identity at the moment of formation of their LLC.
The Certificate of Formation of an LLC does not mention its first Member(s), ony the Operating Agreement and the latter is a private document.
In the case of a protected Series LLC, there is no filing of a Certificate of Formation, only a signing of the Series LLC's Operating Agreement.
When such protected Series LLC is spun up via our smart contract technology, its Operating Agreement does not have the first Member(s) names but only the public address of the wallet they chose to activate their LLC with.
If you work on the assumption that blockchains are anonymous and the wallet you are using is not traceable to your real-world identity, then indeed your LLC can be formed and remain entirely anonymous.
However, this may limit its actions in the real world: attestation of identity of ownership of the controlling wallet may kick in e.g. when the Series LLC is looking to open a bank account, or - depending on the applicable regulations - when its first Member looks to transfer part of its ownership interest.
Banks may ask for a Certificate of Incumbency, which would require your LLC to become registered (vs. protected) in Delaware. This is a simple process involving a filing and we would be happy to help.
Crypto-currency exchanges have varying degrees of KYC and may want to see a copy of the Operating Agreement.
Otonomos, as initial sponsor of OtoCo, will ultimately become just another service provider to Otoco, providing offchain services such as a prestigious office address, real-world mailscan, entity structuring, legal level-ups, etc.
So the way to think about Otonomos is that it will continue to innovate and as much as possible automate offchain entity formation and maintenance, whilst OtoCo is engineering onchain organizations and automating their capital formation and governance by using smart contracts.
Updated 2 months ago