What Is a Series LLC?

A series LLC is a form of LLC that allows its members to divide the assets and operations of a “parent” LLC into a set of “child” series.

The child series, legally known as “individual protected series”, are protected against liability and losses that might be incurred by the other child series.

Business owners create protection between the child series by carefully drafting their articles of organization and operating agreements to show the assets, structure, and liabilities of each series.

In this article we will discuss:


The Series LLC

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 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, and grant liens and security instruments.

What Risks are Associated With 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.

State Guides for 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.

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.

 

CHOOSE YOUR STATE

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