What Is a Series LLC?
A series LLC is a form of limited liability company with a unique structure. The series LLC consists of a master LLC and the individual series that branch off from it.
Read this article to learn more about:
- The benefits of the series LLC.
- The risks associated with the series LLC.
- How to set up a series LLC in your state.
How the Series LLC Works
What are the Benefits of a Series LLC
Protection:
- The most important benefit of a series LLC is the ability to protect each child series and its assets from the liabilities of the other child series and the master LLC.
- Investors can manage wealth by dividing investments between the child series based on potential return and risk.
- The series LLC is a favorite with real estate investors because it allows investors to separate (and protect) their individual properties.
Administrative:
- Currently, the child series do not have to file taxes. The master LLC files taxes on behalf of the full series. We strongly recommend working with an accountant familiar with series LLC tax code.
- There is often a reduction in paperwork and costs when compared to starting and operating multiple standard LLCs.
- The series LLC is less complicated and less expensive than creating a corporation with subsidiaries.
Other Benefits:
- Series LLCs accommodate growth.
- The series LLC allows you to create separate members and managers within each of the child series. Each member and manager can be given different percentages of ownership and separate duties, powers, and rights.
- Businesses with several profit centers can shield and separate business operations.
- Each individual child series can enter into contracts, acquire, hold and sell assets, sue, grant liens, and grant security instruments.
What Are The Risks of a Series LLC?
The series LLC can carry risk in some situations. It’s best to talk about the possible risk of forming and operating a series LLC with your attorney.
Things to consider:
- If you plan to sell goods or services in a state that does not allow the series LLC, your assets held by the child series might not be protected.
- The series LLC is complex and there haven't been many court cases to tell us what might happen in certain legal situations.
- It is not yet clear whether the child series are protected in federal bankruptcy court. The Uniform Protected Series Act, once adopted by the individual states, will provide this protection.
- You must follow the regulations carefully when forming and operating a series LLC. If you don’t, the series won’t offer the liability protection you were aiming for.
Which states allow the series LLC?
Regulations for the series LLC vary from state to state and only 14 states allow them. Recently, lawmakers created the Uniform Protected Series Act which, once adopted by the individual states, will help reduce the complexity and risk of the series LLC while encouraging its more widespread use.
Currently, the following states allow the Series LLC:
- Alabama
- Delaware
- District of Columbia
- Illinois
- Indiana
- Iowa
- Kansas
- Missouri
- Montana
- Nevada
- Oklahoma
- Tennessee
- Texas
- Utah
We have created a comprehensive guide to make it easier for you to research your state’s requirements for starting and operating a series LLC.
It is important to consult with your attorney to assure you are operating your series LLC within the regulations of your state.
Series LLC State Guides
Forming a series LLC is similar to setting up a “normal” LLC. Many of the steps are the same - they are just more complex.
How to Form a Series Limited Liability Company
Step 1: Choose a Name
Step 2: Select a Registered Agent
Step 3: File the Articles of Organization
Step 4: Create an Operating Agreement
Step 5: Obtain an EIN
Select Your State to Begin
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Series LLC FAQ
Can you change an LLC to a Series LLC?
Yes, in many states that allow the series LLC, you can add individual series by amending your operating agreement. To learn more about how to change an existing LLC into a series LLC in your state, choose your state from the list below.
Does California Allow Series LLCs?
No, but California allows foreign Series LLCs to register as a foreign LLC. Each individual series is required to pay an $800 annual tax. A series LLC will not be granted the individual protection by California courts that are given by states that honor the series LLC structure.
How does a Series LLC work in Texas?
A Texas series LLC works by separating the assets and operations of individual series LLCs under the umbrella of a master LLC. Each individual series is protected from losses suffered by the other series LLCs and the master LLC.
Setting up a series LLC in Texas is a straightforward process. We provide an easy to follow step-by-step guide for forming your Texas LLC.
What is a Master LLC?
A master LLC, also called a parent LLC, is the main LLC that the individual series are connected to. The master LLC is legally protected from liabilities and losses incurred by the series. The master LLC files taxes on behalf of the full series.
What is the difference between an LLC and a Series LLC?
An LLC is a single limited liability company. A series LLC is a limited liability company with a unique structure. A series LLC consists of a master LLC with one or more individual series LLCs branching off from it. The individual series are protected from liabilities and losses suffered by the other individual series and the master LLC. Read our What is an LLC guide to learn more about setting up an LLC.
How much does a Series LLC cost?
The cost of forming a Series LLC can vary between $50-$1000. Choose your state from the list below for the exact fees for forming a series LLC.
How do I use a Series LLC for real estate?
Most real estate investors use their series LLC to place each investment property into an individual series. This protects each investment property from any losses or lawsuits incurred by a particular property. To learn more about setting up a series LLC for your real estate business, click on your state from the list below.