- Hey, everyone, in this video,
what I want to do is talk about the importance
of doing things the right way
with series limited liability companies.
'Cause if you screw it up,
you could end up like these developers did in Illinois,
where all of their assets were at risk.
Okay, so what actually happened here?
So here's some real estate developers
and they buy some buildings
located in this little town called Urbana.
So they have these nice little properties that they acquired
and they had to pull building permits for them
in order to go out there and start the rehab work.
So they pull the building permits
under the name of Platinum Group
and they indicate on the actual filing
for the building permits, that Platinum Group is the owner.
Well, as things would happen, they don't get the work done
and then the city starts fining them.
And these fines ratchet all the way up to several $100,000.
So the city now sues Platinum Group.
Well, Platinum Group actually happens to be
a limited liability company and the company's name here is,
Platinum Group Properties, LLC.
So the city names, Platinum Group Properties, LLC,
in their lawsuit.
And they actually obtained a judgment
against Platinum Group Properties, LLC,
for close to a half a million dollars.
Now, of course,
the individuals who own this limited liability company,
they don't want anything about that,
because they have other assets
presumably in the name of this LLC
and at the city of Urbana has a judgment against the LLC
for a half a million dollars,
then all of those assets are now at risk.
So what they do is they appeal,
when they state that the assets themselves
are not really held by Platinum Group Properties.
In fact, Platinum Group Properties, LLC
is really a limited liability company, that is a series LLC,
and that the assets themselves were truly held by
Platinum Group Properties, LLC, Sunnycrest Series.
Now see, this is where the whole crux of this case turns on,
because if it was held in a cell,
of a series limited liability company,
then the city of Urbana wouldn't be able to get a judgment
against the parent because that's how series LLCs
are set up.
If you watch my other videos
on series limited liability companies,
you'll know that the reason we use these cells
is to ensure that we're protecting ourselves.
So if something goes wrong with one of the cells,
we haven't risked the entire structure
But see here's where the problem lies
with people who set up series limited liability companies.
Many times they're not aware of the details
and what is required in order to have that cell
obtain this separate status,
where it's going to be independent,
as far as its assets and liabilities are concerned.
These guys that set up this limited liability company,
they obviously did it on their own
because they didn't know what the hell they were doing
and they really set themselves up for a fall.
Because when the appeals court looked at it,
what they noted is that in order to set up a series
or a cell in Illinois,
you have to go through certain processes
and they failed to go through the processes
to set up the cell the appropriate way.
And in fact, what they found in looking
at the overall structure
and what they held in their opinion is they said that,
you know, "A mere statement of series LLC
is a separate entity from the LLC is
insufficient to establish as such."
'Cause that's what these guys were arguing.
They found that they didn't actually record it
as is required under the Illinois statute to create a cell.
And they said, if you said you didn't record it
and it didn't appear that you actually
operated your business under it,
because when you took out the permits,
you said the owner of the property was Platinum Group.
You didn't even specify
Platinum Group Limited Liability Company.
I mean, that could have been another angle,
had the city gone after them individually,
they may have got the judgment against them personally,
because they didn't specify that it was an LLC
that owned the property.
One could argue that they themselves owned it
in a general partnership format
because they forgot to put the word LLC on there.
So, the court held rightfully so that these individuals
screwed up the entire series, LLC.
So they got no benefit of the cells
and they should count themselves lucky
that they didn't go out for them individually as well.
Because just at the very beginning,
outset of creating this thing, as I showed you earlier,
when they put on their Platinum Group
and they failed to put that LLC designation
after their name,
that didn't put anyone on notice
that they were dealing with the limited liability company.
So you could potentially get them personally.
You see, these are the important things,
when you're creating limited liability companies,
be it standard LLCs or series LLCs.
It's the small details that matter and many of my videos,
I give you hints along the way and tell you strategies,
I bring up stuff that you may wonder,
is it really important? You know,
Clint said to do this and you may not understand,
some of the times when you're watching these videos,
that I'm telling you that for a reason.
So the small things do matter
and they can trip you up.
And unfortunately, for these developers,
what they found out is everything they own now was at risk
because they didn't pay attention to the details.
All right, hope you got something out of this.
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