When we file a mortgage or UCC financing statement to perfect a lien for an LLC that has established a series, what name should we use for the borrower? For a mortgage, we use the grantor’s name, which typically is the name of the series of the LLC (e.g., “ABC Properties, LLC; #2 Any Road” or “1234 North Street, Series of ABC Properties, LLC”). Should we enter the name of the LLC itself, or is it appropriate to use the name of the series?

Subject to the discussion below, we believe that your bank may be able to perfect its security interests in property held by a series of an Illinois LLC by following your current practice, using the name of the series provided on the property title.

Illinois law permits series LLCs to establish any number of “series,” each of which may “in its own name, contract, hold title to assets, grant security interests, sue and be sued and otherwise conduct business and exercise the powers of a limited liability company.” In Illinois (unlike other states permitting series LLCs), a series LLC must file a certificate of designation with the Secretary of State in order to qualify as a “registered organization” for purposes of the Uniform Commercial Code (UCC).

Illinois law also provides limited liability for each entity in the series, meaning that each series’ debts and obligations are enforceable against that particular series, but only “if separate and distinct records are maintained for any such series and the assets associated with any such series are held (directly or indirectly, including through a nominee or otherwise) and accounted for separately from the other assets of the limited liability company, or any other series thereof.”

Based on the Illinois law governing LLC series, it appears that a series LLC may own property and enter into loans in its own name. Because each series must file with the Secretary of State, your bank may rely on this public record to provide the name and location of the debtor for purposes of filing a financing statement under the UCC. We believe that this approach also should be sufficient when naming the mortgagor on a mortgage of real property held by a series.

However, we caution that we are not aware of any courts that have interpreted Illinois law regarding property ownership by a series LLC as it applies to financing statements or mortgages.

Also, we note that series LLCs may be established in other states, such as Delaware, and other states’ laws on series LLCs differ significantly from Illinois law. For example, it is unclear whether a series established under Delaware law is a separate “person” from the LLC, in which case it would not be treated as the “debtor” in a UCC financing statement, among other potential issues in identifying the correct name and location for the series LLC.

Consequently, we do recommend consulting with your bank counsel to determine the best practices for obtaining and perfecting a security interest in property owned by a series LLC, particularly if you are dealing with an out-of-state series LLC.

For resources related to our guidance, please see:

Limited Liability Company Act, 805 ILCS 180/37-40(a) (“An operating agreement may establish or provide for the establishment of designated series of members, managers or limited liability company interests having separate rights, powers or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations, and to the extent provided in the operating agreement, any such series may have a separate business purpose or investment objective.”)

Limited Liability Company Act, 805 ILCS 180/37-40(b) (“Each series with limited liability may, in its own name, contract, hold title to assets, grant security interests, sue and be sued and otherwise conduct business and exercise the powers of a limited liability company under this Act.”)

Limited Liability Company Act, 805 ILCS 180/37-40(b) (“{I}n the event that an operating agreement creates one or more series, and if separate and distinct records are maintained for any such series and the assets associated with any such series are held (directly or indirectly, including through a nominee or otherwise) and accounted for separately from the other assets of the limited liability company, or any other series thereof . . . then the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and . . . none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of such series.”)

Limited Liability Company Act, 805 ILCS 180/37-40(d) (“Upon the filing of the certificate of designation with the Secretary of State setting forth the name of each series with limited liability, the series’ existence shall begin . . . .”)

UCC, 810 ILCS 5/9-102(a)(28) (“‘Debtor’ means: (A) a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor; (B) a seller of accounts, chattel paper, payment intangibles, or promissory notes; or (C) a consignee.”)

UCC, 810 ILCS 5/9-503(a)(1) (“A financing statement sufficiently provides the name of the debtor: (1) . . . if the debtor is a registered organization . . . only if the financing statement provides the name that is stated to be the registered organization’s name on the public organic record most recently filed with or issued or enacted by the registered organization's jurisdiction of organization which purports to state, amend, or restate the registered organization's name; . . .”)

UCC, 810 ILCS 5/9-102(a)(71) (“‘Registered organization’ means an organization formed or organized solely under the law of a single State or the United States by the filing of a public organic record with, the issuance of a public organic record by, or the enactment of legislation by the State or the United States. . . .”)

Mayer Brown, Fund Finance Market Review, Lending to Series Limited Liability Companies: Subscription Credit Facility Considerations (Spring 2018) (“A Series may or may not be a legal person separate from its related Series LLC under the laws of its jurisdiction of formation; if the Series is not a separate legal person, then the Series possibly cannot be a “debtor” for purposes of Article 9 of the Uniform Commercial Code (the ‘UCC’). As a result, consideration should be given as to whether the Series LLC, in addition to the Series borrower itself, should be included as a grantor under the security and pledge documentation and in the related UCC financing statement filings. . . . Because of such uncertainties, it may be prudent for a Lender to file multiple financing statements and require that the Fund specifically name each Series in the Operating Agreement and refer to each Series in a consistent way throughout the Operating Agreement and in its business dealings.”)