Is a Series LLC Better Than an LLC?

A limited liability company (LLC) offers owners more flexibility than other types of businesses entities. As its name implies, an LLC also affords owners limited liability that can protect them from incurred debt or lawsuits. The Series LLC has become popular because more and more states are allowing these companies to operate. How does the Series LLC stack up against the traditional LLC?

What is the benefit of series LLC? A series LLC offers liability protection within each series. If one series in a Series LLC finds itself in hot water, the assets of the other series are generally safely insulated. This characteristic, known as asset protection, can be particularly advantageous for those using their Series LLC in Real Estate investments.

What is the disadvantage of a series LLC? The main disadvantage of a Series LLC is requiring separate banking and accounting. In addition, there are complications with taxation, legal disputes, and more.

Peeling back the layers of Series LLCs, it’s clear there are a few key distinctions when contrasted with traditional LLCs. To fully comprehend the benefits and unique structure, we first need to address what a Series LLC is. A Series LLC is a type of limited liability company that has a unique arrangement. This structure permits it to have multiple "series" or "cells", each functioning as a distinct entity with its own assets, members, and business activities.

Below are some examples of businesses that will benefit as a series LLC. Real Estate. Series LLCs are an ideal choice for real estate investors looking for a strong liability shield. When Jack’s LLC loses in court, the tenant can collect their damages from the assets held by the LLC. They can force the sale of two of Jack’s LLC’s properties and Jack’s personal wealth is protected.

The series LLC is less expensive than forming an LLC for each property. State laws may vary depending on the state, so before deciding on the series, be sure the laws don’t diminish the value of the series LLC. There is also the additional benefit of reduced costs and administrative tasks. In some states, the filing fee is less for one series LLC than the costs of setting up multiple individual LLCs.

The way the series LLC works is that you set up one parent company, which doesn’t own any real estate itself. And then you create a separate cell or “series” within the main LLC to hold each individual property you own. You list the parent company as the member-manager of the cell.
The series limited liability company provides liability protection across multiple "series" each of which is theoretically protected from liabilities arising from the other series. In overall structure, the series LLC has been described as a master LLC that has separate divisions, which is similar to an S corporation with Q-subs. The utility of a Series LLC may be explained by a comparison to the alternative. Many form an LLC to protect personal assets from a legal claim relating to their real estate investment or business liabilities.