Florida’s New Protected Series LLC Legislation: Part II

This Part II article is the second of what is now a three-part series designed to give readers the “what, how, and why” of Florida’s new protected series LLC legislation (§§605.2101 – 605.2802 of the Florida Revised Uniform Limited Liability Company Act, F.S. Ch. 605) (the act).^[1]

This article addresses important aspects of forming, operating, and utilizing a Florida protected series limited liability company (protected series LLC or PSLLC), the risks associated with improperly operating a PSLLC in Florida as well as in other jurisdictions, and important aspects of operating and utilizing foreign series limited liability companies in Florida.

Part III addresses substantive issues including the new filing requirements to form, qualify, administer, and operate series limited liability companies under the protected series LLC legislation, and addresses issues relating to the use of one or more Florida protected series being operated and qualified to do business in other states. Part III is expected to be published in the September/October 2026 issue of The Florida Bar Journal.

Forming a Florida Protected Series LLC

Protected series LLCs can seem ephemeral to fully grasp as an initial reaction upon a first reading of Florida’s new protected series LLC legislation. However, upon reflection, and with a review of the official commentary to the Uniform Protected Series LLC Act (the UPSA)^[2] and The Florida Bar Drafting Committee white paper on the new Florida legislation, the PSLLC comes into focus and becomes more straightforward in concept and understanding.

Formation of a PSLLC can be done in either of two ways:

1) An existing Florida LLC in good standing may become a PSLLC by: a) filing a protected series designation with the Florida Department of State (department) designating one or more protected series (PS); b) amending its articles of organization to include PS; and c) drafting a new operating agreement to address all of the important issues that are required for a Florida PSLLC under Ch. 605 as amended, including requirements necessary to sustain the dual liability shields afforded to a Florida PSLLC;

2) Forming a new Florida LLC by: a) filing articles of organization to form a PSLLC with the department; b) designating one or more PS as part of the filing of the articles of organization including a protected series designation signed by the PSLLC for each PS along with the articles of organization,^[3] approved by the affirmative vote or consent of all members of the PSLLC; c) naming each PS being designated by the PSLLC in the protected series designation (complying with appropriate naming obligations);^[4] and d) drafting a PSLLC operating agreement (as defined in the act), which must include provisions for each PS designated by the PSLLC.

In either case, the PSLLC must also have a registered agent for service of process in Florida, and that registered agent must serve as the registered agent for the PSLLC, as well as for all PSs designated by the PSLLC.^[5]

The internal affairs of a protected series LLC, and of each protected series designated by that PSLLC, are governed by the laws of the state of Florida. That includes the entirety of Ch. 605 (the Florida Revised Uniform LLC Act, including the new PSLLC provisions). The Florida Bar’s Series LLC Drafting Committee went further than the UPSA by statutorily applying all of Ch. 605 to Florida PSLLCs, rather than specifically enumerated sections of the Florida Revised Uniform LLC Act.

Key Matters in the Florida Protected Series LLC Operating Agreement

A Florida LLC operating agreement is defined in the act as “an agreement which may be oral, implied, in a record, or in any combination thereof.”^[6] Although this definition would appear to permit an oral operating agreement for a protected series LLC, the Uniform Law Commission commentary to the UPSA makes clear that, given the complexity inherent in the protected series construct, prudence demands a written operating agreement, which may not be amended except in a signed writing.

The importance of a written operating agreement is supported by F.S. §605.0403(1), which provides that “[a] promise by a person to contribute to the limited liability company is not enforceable unless it is set out in a writing signed by the person.”^[7] The very nature of a PSLLC requires a written operating agreement in order to keep track of the contributions being made by, and the respective financial interests of, the members of the PSLLC and each protected series.

Given the complexities of series limited liability companies, the best practice when forming a PSLLC is to have a comprehensive written operating agreement and to comply with the statutory record keeping requirements. The failure of a protected series LLC to utilize a comprehensive written operating agreement also opens the door to bad actors moving assets and liabilities among the protected series or taking other actions that adversely impacts the members associated with each PS. Consequently, it is unwise and irresponsible to rely on an oral operating agreement for a Florida PSLLC.

As a default rule, a protected series of a protected series LLC technically does not have an operating agreement of its own but is governed by the operating agreement of the protected series LLC, which must address issues pertaining to each PS of the PSLLC. An operating agreement may do so in its main body through a different exhibit or appendix for each PS (which may be in the form of a separately focused operating agreement for each PS), a side agreement or memorandum among its associated members and/or associated managers, an exhibit or appendix applicable to all PSs of the PSLLC, or through some combination. The operating agreement should expressly identify the PSLLC as a “protected series limited liability company.”

• Establishment of One or More Protected Series, Members, Managers, and Personhood — The protected series LLC operating agreement must affirmatively: 1) authorize the establishment of one or more protected series; 2) address the association of members and managers of the PSLLC; 3) describe the PSLLC membership interests including different classes of interests (if intended); 4) address the association of members and managers of each protected series; and 5) address the association of assets and association of liabilities within the PSLLC and within each PS of the PSLLC.

With respect to associated members, the protected series LLC operating agreement should distinguish between members of the PSLLC generally and members associated with a particular protected series, since rights, obligations, allocations, and distributions in respect of a PS flow only to its associated members. If no member is associated with a particular PS, the PSLLC itself is deemed to be the sole member of such PS. Every associated member of a PS must also be a member of the PSLLC in order to be associated with one or more PSs. However, there is no requirement that the PSLLC’s members be associated with every (or any) particular PS of the PSLLC.

The operating agreement should also include a clear statement of intent that each protected series of the protected series LLC is a distinct “person” within the meaning of the UCC and each PS may incur its own debts and obligations, assemble and maintain its own assets, and run its own business operations with its own members and managers; and is separate and distinct from the PSLLC and every other PS formed by the PSLLC by way of a protected series designation.

The operating agreement should also include a clear notice and intent provision that the debts, liabilities, obligations, and expenses of a particular PS are enforceable only against the assets of that particular PS, and not against the assets of the PSLLC generally or any other PS of that PSLLC, mirroring the statutory shield language.^[8]

The operating agreement should fully address all separate rights or limitations on both the activities of the protected series LLC and each protected series, and the consequences for failing to adhere to the rights and limitations expressly provided for in the operating agreement. Transfer restrictions should address both PSLLC-level and PS-level interests, including any consent rights of the managers and/or the members of the PSLLC and the managers and/or the members of the respective PS.

A Florida LLC that does not designate at least one protected series will not be treated as a protected series LLC unless and until at least one PS is designated by a filing with the department. Only upon a delivery the department of a protected series designation of a PS will a Florida LLC become a PSLLC.

If that sole designated protected series is later dissolved, the protected series LLC will cease to be a PSLLC and will revert to being a traditional Florida LLC. Nevertheless, if, for example, a week later such Florida LLC were to file a new protected series designation for a new PS, the traditional Florida LLC will once again become a PSLLC.

• Governing Law — The operating agreement should confirm that Florida law governs the internal affairs of the protected series LLC and of each protected series of the PSLLC, including: relations among associated members; between each respective PS and any associated member, manager, or assignee; and governance decisions concerning each PS.

• Powers, Purposes, and Statutory Limitations — The operating agreement should reflect that each protected series of a particular protected series LLC has the capacity to sue and be sued in its own name, to carry on any lawful business, to contract, to hold title to assets (including real, personal, and intangible property), to grant liens and security interests, and otherwise has the same powers and purposes as the PSLLC. The agreement should note that a PS of a particular PSLLC cannot be a member of the PSLLC, cannot itself establish a PS, and cannot exercise any power that Florida law prohibits a limited liability company from exercising.

• Naming and Designation of Each Protected Series — The operating agreement should require, consistent with §605.2202, that the name of each protected series begin with the name of the protected series LLC and contain the words “protected series” or the abbreviations “P.S.” or “PS,” and should obligate the PSLLC to file a corresponding statement of change if the PSLLC’s name changes. It should also describe how additional PSs are authorized and how amendments to a protected series designation are made.

• Registered Agent and Service of Process — The operating agreement should confirm that the registered office and registered agent of each protected series are the same as those of the protected series LLC. It is also advisable that the operating agreement addresses how service of process, notice, or demand on a PS are handled.

Process against a protected series LLC, a protected series of a PSLLC, a registered foreign series limited liability company, or a registered foreign protected series of a registered foreign series limited liability company, respectively, may be served in the same manner as service is made on a Florida LLC or a foreign LLC, respectively, under F.S. §48.062, and either F.S. Ch. 48 or 49.

• Management — A clear statement must be made as to whether the protected series LLC is member-manager or manager-managed, and whether each protected series of the PSLLC is member-managed or manager-managed, and describe the terms for the respective controllers’ voting rights and any limitations on their powers, roles, removal, replacement, and any majority or super-majority voting or other approval rights that should be explicitly addressed for the PSLLC as well as for each PS designated by the PSLLC.

Management and voting can also be specified for each protected series distinctly separate and apart from the protected series LLC management. The management, voting rights, and structure may be different in each PS, as long as it is clearly described in the operating agreement of the PSLLC.

Note that each protected series may have its own separately focused operating agreement, whether as an addendum or exhibit to the protected series LLC operating agreement, or as a side agreement or memorandum among its associated members and/or associated managers. No specific form of an operating agreement for a PS is specified in the new protected series LLC legislation. However, §605.2106 provides that the operating agreement of a PSLLC will govern the following:

(a) The internal affairs of a protected series, including all of the following:

1. Relations among any associated members of the protected series.

2. Relations between the protected series and:

a. Any associated member of the protected series;

b. Any protected-series manager; or

c. Any protected-series transferee.

3. Relations between any associated member and:

a. Any protected-series manager; or

b. Any protected-series transferee.

4. The rights and duties of a protected-series manager.

5. Governance decisions affecting the activities and affairs of the protected series and the conduct of those activities and affairs.

6. Procedures and conditions for becoming an associated member or a protected-series transferee.

(b) Relations between a protected series of the series limited liability company and each of the following:

1. The series limited liability company.

2. Another protected series of the series limited liability company.

3. The protected series, any of its protected-series managers, any associated member of the protected series, or any protected-series transferee of the protected series.

4. A person in the person’s capacity as:

a. A member of the series limited liability company which is not an associated member of the protected series;

b. A protected-series transferee or protected-series manager of another protected series; or

c. A transferee of the series limited liability company.

• Capital Contributions, Allocations of Profits and Losses, Distributions and Waterfalls, and Rights to, or Limits on, Distributions Should be Specified — The operating agreement of a protected series LLC should address all the essential terms that would be included in a well-drafted operating agreement for a non-series limited liability company, plus more. Of course, a PSLLC operating agreement can be expected to be much more complex than an operating agreement for a non-series LLC. There are likely to be different investor capital contribution requirements, associated members, associated managers, different ownership priority rights and limitations, distribution rights, and likely different management and controls for the business activities of each PS.

Moreover, some investors in a protected series LLC will be limiting their investments and ownership rights to a single asset project or single asset class in a specific protected series. These investors will want to understand how and when the profits of the particular PS in which they invest will be distributed and how the income and expenses from operating that particular PS will mesh with the allocation of income and expenses for running the PSLLC (where most of the shared overhead will usually be re-allocated among the respective PSs of the PSLLC). For example, the operating agreement will be expected to address whether the income and expense allocations will be proportional to the income and expenses of each asset project or class of assets or what other particular method of allocation of the overhead will be utilized.

• Limitations on Protected Series Operating Agreements — Florida’s new protected series LLC legislation follows the UPSA in placing restrictions on certain matters of statutory LLC law, which may not be varied by the operating agreement.^[9] The new list expands the existing list of “non-variable” statutory rules in Ch. 605, which is now expanded to preclude changes to the nature of a protected series LLC and any protected series of the PSLLC; the capacity to sue and be sued; the powers of a PSLLC or PS; the duration of a PS beyond the duration of the PSLLC; the rules for designating or amending a PSLLC or a PS established by the act and/or by the department; the naming requirements; the rules for associating members, managers, assets and liabilities; the duties of protected series managers and members; the provisions concerning dissolution of the PSLLC; the ability to expand the entity transaction restrictions; the ability to vary the registered agent and other statutory or department filing requirements; and the ability to vary a few other miscellaneous provisions specified in the new legislation.

• Recordkeeping Identifying and Segregating Associated Assets and Liabilities — The operating agreement must include detailed recordkeeping covenants because the horizontal liability shield depends on properly identifying and segregating “associated assets” of each protected series and the protected series LLC.

Clear, distinct, and accessible records must be maintained for each of the protected series LLC and each protected series designated by the PSLLC, identifying and segregating assets and liabilities pertaining to the PSLLC and to each PS.

If the recordkeeping requirements are not maintained in accordance with the new Florida protected series LLC legislation, the liability shields break down and creditors may have access to all assets of the PSLLC and of each of its PSs to satisfy creditors’ claims, as discussed in more detail in the “Potential Risk of Veil Piercing” section below.

• Limitations on Liability; Creditor Remedies — The operating agreement should address the statutory liability shield providing that a debt, obligation, or other liability of the protected series LLC or a particular protected series is not the obligation of any other PS of the PSLLC or of the PSLLC itself, and that the assets of a PS of a particular PSLLC are not available to creditors of any other PS of that particular PSLLC or of the PSLLC itself.

Although it is not something that needs to be in the operating agreement, it may be advisable to include in the operating agreement charging-order language consistent with §605.0503, which makes the charging order the exclusive remedy of a judgment creditor of a member of a protected series LLC or of a PS of such PSLLC, should be applicable to associated-member interests of the PSLLC or of the particular PS of such PSLLC if, as the case may be, there is more than one associated member of the PSLLC or the PS.

• Information Rights — It is advisable for the operating agreement to expressly include information rights of persons who are associated members of the protected series LLC and of each particular protected series, as compared to the information rights of persons who are not associated members of the PSLLC or of a particular protected series (to the extent negotiated).

• Dissolution — As is the case for an operating agreement of a traditional LLC, it is advisable that the operating agreement should address the events causing dissolution of the protected series LLC and the winding-up process for the PSLLC. It also should address the events causing dissolution of each respective protected series and the respective winding-up process for each respective PS. This is particularly important because a PS may be terminated and wound up without causing dissolution of the PSLLC; on the other hand, however, a dissolution of the PSLLC will automatically trigger the dissolution and termination of all PSs established under that PSLLC.

Risks, Limitations, and Mitigation

• Risk Mitigation for Diverse Assets, Operational Efficiency, and Potential Cost Savings — One of the primary benefits of forming a protected series LLC with one or more protected series is the resulting risk mitigation for diverse assets or businesses. Any creditor who has a claim or judgment against a particular PS cannot pursue the assets of any other PS, or the assets of the PSLLC; and any creditor who has a claim or judgment against the PSLLC cannot pursue the assets of any PS of the PSLLC. However, as discussed in more detail in several places in this article, this isolation and segregation of associated assets and associated liabilities is lost if the PSLLC and/or its PSs do not strictly adhere to the statutory recordkeeping requirements for documenting the respective associated assets and associated liabilities of the PSLLC and each PS.

Another benefit in forming a protected series LLC with one or more protected series is the resulting operational efficiency: by avoiding multiple entity formations, the parties are able to set up operational, managerial, administrative, accounting and financial systems, banking, and tax reporting that apply to each PS and to the PSLLC, without the need to set up independent individual LLCs and separate systems, banking and tax reporting for each of the separate businesses or investment activities.

A useful example of why parties may want to use a protected series LLC is for a company that owns or plans to own diverse asset categories, separate franchise locations, or separate independent businesses, using separate LLCs, with all of the separate businesses incurring costs and expenses for formation, administration, entity maintenance, governance, accounting, bank accounts, HR/employment, and tax returns. A real estate investment fund might fit into this example. If such a real estate investment fund were to use a PSLLC instead of a traditional “non-series” LLC holding company structure, the fund would be able to create an unlimited number of categories of separate real estate investment portfolios in which investors may invest in separate protected series within the same PSLLC. For example, such a fund could have protected series A for shopping center assets, protected series B for office building assets, protected series C for commercial/warehouse assets, protected series D for apartment complex assets, protected series E for multi-family condo assets, protected series F for single-family home assets, and protected series G for data center assets. Each of the seven categories of assets could be in a separate PS within the PSLLC. To go even further, such a fund could even choose to set up a separate PS for each real estate asset, rather than for each portfolio of real estate assets.

While each individual protected series benefits from being part of the PSLLC from a risk mitigation and efficiency standpoint as discussed above, in its most basic essence, the “mothership” PSLLC and each PS function as if each were an independent LLC. Each PS can operate as an independent, fully functional unit because it can do all of the following in its own name: 1) enter into contracts; 2) acquire, hold, lease, or sell assets; 3) grant liens and security interests; 4) have separate associated managers; 5) have separate associated members; 6) operate independently; and 7) sue and be sued individually. Each of the PSLLC and each PS of the PSLLC is subject to certain naming protocols and administrative mandates as set forth in Florida’s protected series LLC legislation, which must be adhered to in order to conduct its own business activities under separate names, in separate locations, and with separate assets, liabilities, management, and ownership.

• Uncertainty Regarding Dual Liability Shields — If a protected series LLC formed in Florida will have one or more protected series doing business in foreign states, particularly in any state that does not recognize series limited liability companies in its home LLC act, there is a risk that a court in the other state may choose to disregard the separate nature of the PS operating in that foreign state, thus, potentially exposing the assets of the PSLLC and the assets of the other PSs of the PSLLC to the claims and judgments of creditors of the PS operating in that foreign state.

Furthermore, there are significant distinctions in the statutory provisions for series LLCs from jurisdiction to jurisdiction. For example, the UPSA has thus far been adopted in only seven jurisdictions: Arkansas, D.C., Florida, Iowa, Nebraska, Virginia, and West Virginia. Another 14 jurisdictions have some version of a “series LLC”: Alabama, Delaware, Illinois, Indiana, Kansas, Missouri, Montana, Nevada, North Dakota, Oklahoma, Puerto Rico, South Dakota, Tennessee, Texas, Utah, Wisconsin, and Wyoming. There is less concern regarding respect for protected series liability shields in these 21 jurisdictions since those states have authorized the ability to establish and operate series LLCs in their jurisdictions.

Delaware series LLCs have been around for 30 years. Delaware was the first state to introduce series LLCs in 1996. That legislation adopted the first liability shield for each series created by a Delaware series LLC. Delaware has amended its series LLC legislation over the years and now permits three versions of a Delaware series LLC: 1) a series LLC; 2) a protected series LLC; and 3) a “registered series” LLC.

Delaware has a body of caselaw supporting the efficacy and viability of Delaware series LLCs. However, in contrast, other states with a version of a series LLC statute have only very limited caselaw addressing series LLCs operating in their home state. Moreover, most states, even Delaware, have very little in the way of reported caselaw addressing the efficacy of foreign series LLCs formed in other states operating in their state.

Because Florida’s protected series LLC legislation has an effective date of July 1, 2026, there is naturally no Florida caselaw that yet addresses the new Florida PSLLC. Florida may be fortunate to see Florida courts look to states like Delaware and Illinois for precedent, where tens of thousands of series LLCs have already been formed, utilized, and are operating in each such state.

In one author’s view, having seen an array of Delaware-formed series LLCs operating across the country for over 20 years, without undue interference or rejection by the courts, Florida courts may well consider that the legislature’s approval of this new type of protected series LLC should be respected, as long as the requirements of the statute are strictly adhered to by the members and managers of a Florida protected series LLC and its protected series.

• Uncertainties Relative to How Florida’s Protected Series LLCs and their Protected Series Will be Treated in Bankruptcy — There is an open question as to whether the liability shields of a Florida protected series LLC and any particular protected series of that PSLLC will be honored in the context of bankruptcy filings, and whether the PSLLC or any PS of a PSLLC can file a separate bankruptcy proceeding, or whether if one PS seeks to file a bankruptcy proceeding, all of the affiliated PSs of that PSLLC and the PSLLC itself will also need to file or otherwise be brought into the jurisdiction of the bankruptcy court.

A federal bankruptcy court judge or trustee might choose to ignore the vertical and horizontal liability shields in a protected series LLC, and the deemed treatment of each protected series to be separate and distinct from the PSLLC and the other PSs of the PSLLC.

Indeed, since Federal bankruptcy courts tend to have wide latitude and broad equitable powers, bankruptcy courts pose a serious potential problem for insolvent protected series LLCs in Florida, at least until greater clarity is developed through caselaw or bankruptcy code legislation. An expanded discussion of the bankruptcy court concern is beyond the scope of this article.

• Potential Risk of Veil Piercing and Strict Recordkeeping Requirements — Protected series LLCs may be subject to greater risk of veil piercing, not only vertically but also horizontally, if it fails to meet the rigorous recordkeeping requirements for associated assets and associated liabilities by the PSLLC and its protected series, in compliance with the required recordkeeping standards in §605.2301 of Florida’s new protected series LLC legislation.

Only an asset of a protected series may be an “associated asset” of the PS, and only an asset of a protected series LLC may be an “associated asset” of the PSLLC. An asset of a protected series of a protected series LLC is an associated asset of the PS “only if” the protected series LLC and its protected series: “creates and maintains records that state the name of the protected series and describe the asset(s) with sufficient specificity to permit a disinterested, reasonable individual to:” 1) “Determine when and from which person the protected series acquired the asset or how the asset otherwise became an asset of the protected series”; and 2) “If the protected series acquired the asset from the series limited liability company or another protected series of the series limited liability company, and…determine any consideration paid, the payor, and the payee.”^[10]

The records and recordkeeping required by §§605.2301(2) and (3) may be organized by specific listing, category, type, quantity, or computational or allocative formula or procedure, including a percentage or share of any asset, or in any other reasonable manner.

A “record” is “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.”^[11] The record may be in “a single record” or “set of records” that, when combined, would enable “a disinterested, reasonable individual” to make sense of the combination of records to ascertain the associated assets and associated liabilities of the protected series LLC, as well as each protected series designated by that PSLLC. This “disinterested, reasonable individual” standard for a review of the record-keeping is a new standard not previously in the Florida LLC act and is a non-variable statutory requirement for Florida protected series LLCs and related designated protected series.^[12] These new recordkeeping requirements must be clearly understood as a critical item by each of the parties considering the use of a protected series LLC and such parties are advised to address these recordkeeping requirements in consultation with counsel before the formation of the PSLLC.

• Limitations on Mergers, Conversions, Domestications, and Interest Exchanges — Except for a single “narrow channel” exception described below, a protected series LLC and any protected series cannot merge, convert, domesticate, or engage in an interest exchange under the new protected series LLC legislation. The fundamental reason is that the PSLLC is the sole legal entity. Hence, no PS may engage in entity transactions on its own. Although the PS is considered a “person” for Uniform Commercial Code purposes, it is merely deemed to be a separate legal entity from the PSLLC through which it was formed. A Florida PS is not a separate legal entity that can exist on its own apart from the PSLLC.

Under the authorized single “narrow channel,” a Florida protected series LLC and the protected series of such PSLLC may be a party to a merger only if: 1) each other party to the merger is a Florida LLC; and 2) the surviving Florida LLC in the merger is not being created in the merger.^[13] Moreover, the surviving entity in the merger must be another Florida protected series LLC and one or more protected series may survive, becoming a protected series of the surviving protected series LLC.^[14]

This column is submitted on behalf of the Business Law Section, Peter Valori, chair, and Kathleen DiSanto, editor.