A series LLC consists of a “parent” LLC with one or more sub-LLCs or “series” that branch off from it. All the child series are isolated from each other. Owners can create an unlimited number of child series with separate assets, members, and operations. Any company that intends to open and run several smaller, unrelated businesses may benefit from creating a series structure.
For example, ABC LLC (Master LLC) can have two series (Child LLC), Series A LLC and Series B LLC representing “mini LLCs” within the parent company. A series LLC is a way to organize a business as a series of separate legal entities. Each series can be taxed separately, so it may be beneficial to use them if you want to keep some assets or liabilities separate from others.
Series LLC Benefits and Drawbacks
Pros
- Operates similar to a holding company but requires only a single LLC formation for multiple assets.
- Mainly recognized for holding income-producing real estate properties, each property in a portfolio can have its own protected series.
- Separation of potential return and risk between series.
- Reduces paperwork and costs compared to operating multiple standard LLCs.
- Accommodates growth easily.
Cons
- Not recognized in every state.
- Some unresolved tax issues regarding series LLCs.
- May require rigorous recordkeeping for tax purposes.
Administrative Advantages
- Child series do not have to file separate taxes; the master LLC files taxes for the entire series.
States That Permit Series LLCs
Delaware pioneered the Series LLC in 1997, allowing for a single LLC to be broken down into component parts to insulate one series from the debts and liabilities of the others. Since then, many states have adopted similar legislation.
A Series LLC allows you to separate your LLC ownership, assets, and operations into different compartments or series independent from one another. Any company that intends to open and run several smaller, unrelated businesses may benefit from creating a series structure. A Series LLC or SLLC, often abbreviated as such, means the same thing and has become a popular option for holding various assets.
Is a Series LLC Worth It?
A Series LLC is a specific kind of limited liability company that combines the tax and operational benefits of different business structures with the flexibility of a traditional LLC with multiple layers or tiers. It can shield assets within one series from liabilities affecting other series within the parent LLC.
Before deciding on setting up a Series LLC for your business, consider the unique advantages and flexibility it offers, as well as the legal structure, liability protection, and potential tax implications.