A series LLC is a relatively new form of Limited Liability Company that is available in certain states. At this time, the states that recognize a series LLC include: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Wisconsin. The other 41 states do not currently recognize the series LLC. It is important to note that California does not support the formation of a series LLC, but allows for the registration of a series LLC if it was formed in another state.

What is It?

A series LLC is a master, or head LLC, with a setup that allows for separate units to operate as independent LLCs. With this, each series within the LLC is protected from the liabilities of the others. This is an ideal setup for companies that wish to get involved with more than one operation, but are interested in keeping liabilities of each separate. On the surface, a series LLC is similar to a traditional corporation which owns and operates several subsidiaries.

Features of a Series LLC

There are several key features of a series LLC:

  • Each series can have its owners, and be managed separately from the rest, although this is not a requirement.
  • It is a requirement that each series keeps its own records, including financial statements.
  • The owners of each separate series are not responsible for the overall debt of the company, just as a traditional LLC.
  • Each series is responsible only for their operations and creditors do not have the ability to collect from other units within the master LLC.

Advantages of a Series LLC

To fully understand a series LLC and whether it is a good idea, you must be aware of the advantages.

  • The ability to save money because you do not have to open several LLCs, but can instead rely on the one umbrella.
  • Can protect assets in one unit from liabilities of another.
  • Can be used to hold intangible assets, which makes it popular for real estate investors.

Disadvantages of a Series LLC

Just as there are reasons to setup a series LLC, there are disadvantages as well:

  • The LLCs are complicated to setup and will you will need to hire a professional who is familiar with the setup process.
  • It is important to keep records for each unit, otherwise your series LLC may be void and the assets of one unit could be attacked by creditors to pay for the liabilities of another.

If your state does not have laws that permit the formation of a series LLC it is best to opt for another form for your business. Some of the most popular alternatives are the conventional LLC, corporation or S-Corp. There are benefits and advantages of each type of business, but keep in mind that there area also drawbacks that will affect you during the start-up phase as well as when your business continues to grow.

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