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Series LLCs have their own unique characteristics. They are unique in the fact that they are segregated from the liabilities of the other LLCs in the series. That is good news, meaning the creditors of one series cannot and will not have access to the assets held in the other series.
A Series Limited Liability Company (LLC) is a type of business ownership structure that acts as an umbrella to allow protection and flexibility for multiple companies or avenues of business in your overall operation. Each Series operates on its own with a unique name, and bank account, and maintains separate books and records. You can also choose to have a different manager(s) and member(s) for each.
Series LLCs were made to mitigate the complexity of portfolio management. Since these are relatively new, only 22 of our states and territories recognize such and allow the use of a series LLC.
It is important to do research beforehand so you do not find yourself incorporated in a state that does not permit these.
The following states/territories allow Series LLCs:
| Alabama | Nebraska |
| Arkansas | Nevada |
| Colorado | North Dakota |
| Delaware | South Dakota |
| District of Colombia | Oklahoma |
| Illinois | Puerto Rico |
| Indiana | Tennessee |
| Iowa | Texas |
| Kansas | Utah |
| Missouri | Virginia |
| Montana | Wyoming |
First, and maybe the most important benefit is that a Series LLC provides protection for each child series and its assets from the liabilities of the other child series and the master LLC.
For developers, normally each project created mandates new LLC for that project. Looking into this type of business structure can be a good idea because it will allow the company to have one main master company and each project would be the child series.
This is also a benefit for real estate investors. This gives them the ability to separate and protect their individual properties. Investors can put their investments into different series based on each investment's possible risk.
Another benefit is that each child series does not need to file taxes, as the master LLC series files on behalf of them. This gives you a huge reduction in paperwork that is needed annually and substantially cuts costs compared to having multiple traditional LLCs.
Each series is also able to enter contracts, hold and sell assets, grant liens, and sue.
There are several other benefits to a Series LLC. It is best to contact a CPA or Tax Professional for advice on which structure is best for your business.
One disadvantage of a series LLC is that this business ownership structure is new and a bit unchartered. Because of this, there have not been many court cases to give us insight into what can happen in every legal situation. Following regulations and procedures when operating and forming your series LLC is imperative, or the liability protection you wanted may not be granted.
If you operate in multiple states some states may not recognize your series LLC. In addition, some states may require you to pay annual fees for each series. It is possible that your state will require you to have a different registered agent for each LLC in the series.
One of the simplest forms of a series LLC is shown below. Here you can see there are 2 owners of the main LLC, then multiple series were created. You can have a new series for each piece of real estate you own. For each series under your LLC, you have a different manager for each one or the same and/or different percentages of ownership.
There is no limit to how many series you can have. In the Master Series LLC that is established, each asset is protected from one another but you must keep all assets, records, and transactions separate.
Midland Forms is here to help you with all your LLC and business formation needs. Please reach out to us at (239) 472-0074 as we have a dedicated team waiting to assist.