A Series LLC is a limited liability company that can have multiple separate series. Each series acts as a separate LLC, providing liability protection for each series. Real estate investors often use Series LLCs, with each property being its own series.
Benefits and Drawbacks
Benefits include contained liability within each series, while drawbacks include complicated taxes and rigorous recordkeeping requirements.
Formation and Operation
Some states allow Series LLCs, such as Delaware, Illinois, Nevada, and Texas. To form one, paperwork and fees must be filed for each series. An operating agreement outlines rules and members’ roles, with the ability to add or remove members by amending the agreement.
Utilizing a Series LLC
A Series LLC is ideal if at least two companies are needed to save costs compared to multiple LLCs. An umbrella Series LLC allows for opening unlimited subsidiary LLCs that act independently but share administration.
A Series LLC allows liability protection for each series, similar to different compartments or series within one entity. Real estate investors often use them to reduce risk for investments in case one part fails.
While there are advantages to forming a Series LLC, tax issues and rigorous recordkeeping are significant disadvantages. The specific tax treatment can vary, and state taxes may require separate fees for each entity.
A Series LLC is a special legal structure that helps in holding assets in multiple series for liability protection. Each series operates independently, reducing the risk for each financial investment or property held within the LLC.