Series LLC Overview
Arizona does not allow for Series LLCs. Business owners might be able to set them up in other states. A Series LLC consists of the “parent” LLC with one or more series under the parent.
NewCo LLC can keep the Arizona creditor away from its real estate assets by spending a couple hundred dollars more — in Delaware —and forming two wholly-owned subsidiary LLCs. Just as likely, national companies using a Series LLC will avoid doing business in Arizona.
How to Set Up an LLC in Arizona
To use the online service or download the Articles of Organization form for your LLC, go to the website of the Arizona Secretary of State. All legal business entities in Arizona, including LLCs, must have a Registered Agent at all times. Here at Incfile, we provide a free Arizona Registered Agent service for the first year if you file through us.
LLCs in Arizona enjoy pass-through taxation, where business profits and losses are reported on members’ individual tax returns to avoid double taxation. Arizona allows LLCs to choose between member-managed or manager-managed structures. Cons include filing an annual report and paying a filing fee.
Series LLC Legislation Variance
Currently, 30 states do not have laws allowing domestic series LLCs or address how to qualify them from another state. In those cases, these “master LLCs” would meet the definition of a foreign LLC. However, there is a real risk to qualifying a series LLC in this way.
Tennessee allows series LLCs used for real estate investment to help protect assets of individual investors. Some potential advantages include isolating assets and liabilities, reduced administrative costs, and flexibility to change structure.
After establishing your Arizona LLC, you can concentrate on growing your company. An LLC is a single entity owning a corporation with complete control. This flexibility is ideal for startups lowering risks of other models. LLCs also have federal income tax.
Delaware was the first state to adopt Series LLCs to manage properties under one LLC separating each asset. Delaware has adopted substantial new rules governing this entity type.
States That Allow Series LLCs
The Series LLC structure is similar to a corporation with multiple subsidiaries. The states recognizing Series LLCs currently are: Alabama, Arkansas, Delaware, Illinois, Iowa, Kansas, Missouri, Montana, Nevada, Oklahoma, Tennessee, Texas, Utah. Puerto Rico residents also have this option. Series LLCs can be useful for LLCs with multiple businesses wanting to insulate each from the risks of others. Examples include real estate investors with rental properties and investment firms with various strategies. Without Series LLCs, separate LLCs would be needed for the same protection.
Most states don’t allow Series LLC formation but recognize those formed elsewhere, which can register as foreign LLCs to conduct business. States allowing Series LLC formation have varying rules so check individual state regulations when establishing a business. States recognize foreign Series LLCs, though rules differ.
Issues remain on federal taxation of Series LLCs with uncertainty over treatment. Proposed regulations aim to provide clarity, but the status remains uncertain. Consult an attorney to ensure a Series LLC meets business and personal needs.