We want an llc to protect family assets. we will quickly add two other llcs under this that do business as bus. 1. consulting and, bus. 2. Manufacture/Wholesale.
To answer your question, unless you are engaging in a few specific businesses where you are legally limited in the types of related business activities you can engage in, you don't have to give a specific business activity. Listing All Lawful Activities is sufficient.
As I'm sure you know, you need to be very careful when trying to set up an asset protection plan. Just because the Secretary of State will issue a Certificate of Formation doesn't mean you'll be protected if you're ever sued and the validity of the LLC's are challenged.
LLC's are good for certain things, but they don't provide blanket protection. LLC's may insulate you or your businesses in certain cases, but they don't shield you from liability for your actions.
Series LLC's are a relatively new concept and the general consensus I'm aware of is that they are risky, partly because there isn’t a lot of legal precedent for them. It may be better to establish individual LLC's for each business and have them owned by a trust rather than create Series LLC's. Talk to a business planning attorney to determine what the safest rout would be in your situation.
Definitely seek the counsel of an attorney who specializes in business planning. The whole point of what you're doing is to establish asset and liability protection. Unfortunately you won't know if you did it right until it’s too late - when you or someone in your family gets sued. Don't take the chance!
Attorney Voeller has given good advice on your situation. You can have a general purpose statement on your Certificate of Formation and there is little case law on series LLCs.
One other thing to keep in mind is that you will want to be careful about what assets you put into each LLC. You mention that you want an LLC to protect family assets. Anything you put into the LLC is subject to claims and judgments against the LLC. You want to keep personal and family assets outside of the LLC so that they will not be subject to creditors of the LLC.
There can be reasons why you might put property into an LLC for legacy planning purposes, similar to a Family Limited Partnership, but in general, you want to keep personal assets separate so that they are not subject to judgment against the LLC. Ultimately, you will have to evaluate your goals as to asset protection and legacy planning.
If you are considering setting up the LLC for legacy and tax purposes, then you will definitely want to consult with an attorney.
Best of luck.
This response is prepared for general informational purposes only and is not intended nor should it be construed as legal advice.
Many LLC Acts have been amended to provide that the LLC needs to have a "lawful" purpose, where they used to require the company to have a "business" purpose. If your State's LLC act has the lawful rather than business purpose, then you don't need a business purpose.
It sounds to me like what you are forming is a holding company to hold two other LLCs and perhaps other assets as well. If that is the case, I suggest you put "Holding Company" as the activity of the first LLC.
I hope you will discuss with an attorney in your jurisdiction how effective the LLC will be as an asset protection device. In June of 2008 the Illinois Bar Journal published my article "Don't Use an LLC for Asset Protection." I wish I could give you a link to the Article, but unfortunately it is password protected, and restricted to members of the Illinois Bar only. I will, however, give you some excerpts:
First and foremost, a creditor of a member of an LLC can assert that the transfer into the LLC constituted a fraudulent conveyance under 740 ILCS 160/1 et seq, the Illinois Uniform Fraudulent Transfer Act. Consider the definition of a fraudulent transfer at 740 ILCS 160/5.
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor...............
A good example of the use of this approach to defeat a partnership as an asset protection device is Firmani v Firmani, 332 NJ Super 118, 752 A2d 854 (2000). Here, a man who owed his ex-wife $25,000 transferred his residence, in which he had substantial equity, to a family partnership. The partnership agreement gave the husband a one percent interest as the general partner and a 94 percent interest as a limited partner, while the debtor's second wife and children owned the remainder.
The first wife sued to set aside the conveyance as a fraudulent transfer. The court granted the relief, reasoning that the conveyance had several of the "badges of fraud" in the New Jersey fraudulent conveyance statute. The court held that the defendant did not rebut the inference of fraudulent intent merely by showing that he established the partnership for "estate planning purposes." The court went on to discuss the charging order language, and concluded that the charging order substantially hindered and delayed the creditor in her attempt to collect.
To give rock-solid asset protection, the LLC must stand up even if the member is thrown into bankruptcy. The Bankruptcy Act, 11 USC 548, contains a provision analogous to the Fraudulent Transfer Act. This "claw back" provision, contained in section(e), permits a bankruptcy trustee to avoid transfers into "a self-settled trust or similar device" (emphasis supplied), if they were made fewer than 10 years prior to the bankruptcy petition. Is an LLC a "similar device" in the eyes of a bankruptcy court?
Then there is "reverse veil-piercing." This theory has been advanced to allow courts to permit creditors of a member to reach company assets, as opposed to traditional veil piercing through which creditors of the company can reach the member's assets. In both cases, it appears the underlying basis is to avoid an "unjust" result.
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