Overview of Series LLC
A series LLC allows owners to consolidate activities under one LLC with separate child series branching from it. The key benefit is protecting each series’ assets from the liabilities of others. Forming a series LLC is easier than multiple LLCs. Each member is only liable for its debts, protecting other series if sued.
Tax Treatment and Formation
- An existing LLC can become a series LLC, but the process varies by state. Since series LLCs are state entities, their tax rules differ. Regulations are changing as they become more common. The IRS sees one entity, so members aren’t taxed separately federally. But income must be declared.
Conversion and Management
- You can convert an existing LLC into a series LLC by amending formation documents. For federal taxes, each member is treated as a distinct unit. So each can choose taxation. A multi-member series LLC defaults as a partnership, unless corporate taxation is elected. Members are separate entities for taxes. But if disregarded for one purpose, may not be for all.
Benefits of a Series LLC
- A series LLC lets owners structure multiple LLCs under one master LLC. This provides liability protection without extra fees. The IRS treats each member as a separate entity. So each can choose taxation like an S-corp or partnership.
Holding Properties and Distributions
- A series LLC holds properties or interests under one umbrella LLC. It can make distributions as state law allows. An LLC created to transfer family assets is not for doing business.
Conclusion
- Each series LLC is only liable for its debts, protecting other series if sued. Forming and managing a series LLC is simpler than multiple LLCs. A series LLC offers benefits while organizing multiple tiers under one umbrella, taking advantage of liability protection without additional fees. We’ll discuss what it is, how formed, and what owners should know before choosing one.