Series LLC Structure Overview
A series LLC allows creating multiple series under a parent LLC to separately hold properties without fully forming additional LLCs. Cost savings and flexibility make the series LLC structure attractive for real estate buy-and-hold investors.
State Recognition of Series LLC
Currently, the following states recognize the Series LLC structure: Alabama, California, Delaware, District of Columbia, Illinois, Iowa, Kansas, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas.
Operating a Series LLC
Each series within your Series LLC must have its own bank account, since each produces separate financial statements. An LLC creates a boundary between owner and company, legally protecting the owner from company debts or liabilities.
Section 1: 17-76,143(a) and 347.186.1 – the Operating Agreement. The first section of each state’s series LLC law has four things. First, it allows current and future series establishment within the LLC. Second, it allows “designated series” of members, managers, or LLC interests.
Proper Structuring for Series LLC
Despite attractiveness, use is best limited to single-family investments. Commercial or multifamily investments should have own LLCs. These asset classes typically close in entity name, and unfamiliar lenders may refuse.
Recommendations for Real Estate Investors
If you operate businesses throughout several different states, check state laws to make sure each state in which you do business recognizes series LLCs. Going forward, make sure to maintain wholly separate and accurate accounts for each individual LLC.
Series LLC Benefits Overview
A Series LLC provides individualized liability protection to sub-companies (series) under one larger company. Assets owned by individual series are shielded from risks and liabilities of other series within the Series LLC.
What states are best for Series LLC?
Only certain states allow series LLC formation: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Puerto Rico.
Key Considerations for Series LLC
In summary, the series LLC allows real estate investors to segregate properties for liability protection without forming separate entities for each property. However, proper formation, documentation and maintenance is critical to gain these benefits in practice.