What is the difference between a standard LLC and a series LLC?
A series LLC has separate LLCs for liability protection, like compartments in a cabinet. The initial LLC may be called master, base, umbrella or parent LLC.
A Series LLC separates assets and liabilities under one entity. One protected series may be insulated from other series’ debts. Investors can hold each property in its own protected series.
Delaware invented the Series LLC in 1997, allowing one LLC to have parts.
Real estate investors use them so each series owns a property. A lawsuit on one property does not expose others.
It is formed like a regular LLC, but its articles must allow series. Its created series can be cells, containers, divisions, subsidiaries or units.
A master LLC holds separate LLCs treated as separate entities with own accounts, agreements, protections, members and names.
The structure has more liability protection between subsidiaries. Some businesses benefit, series LLCs have fees for each subsidiary and can create more work. Some states don’t allow series LLCs.
What are the disadvantages of Series LLCs?
While there are compelling advantages to forming a series LLC, there are also disadvantages. Some unresolved tax issues remain regarding series LLCs. The IRS has taken positions that, in certain cases, each series should be taxed as a separate business entity, but specific tax treatment may vary. Depending on state laws, series LLCs may be required to pay fees for each separate entity. Rigorous recordkeeping is essential for tax purposes of running a series LLC.
Is a series LLC worth it?
A Series LLC offers the same benefits as a regular LLC, with flexibility for multiple companies within your operation. The master LLC handles tax filings for the full series, potentially reducing paperwork and costs compared to operating multiple standard LLCs.
Series LLCs are innovative, flexible, and provide unique advantages. This in-depth look aims to explore whether this structure suits your business needs, especially for those running several smaller, unrelated businesses. The goal of a Series LLC is to protect each subsidiary’s independence and liability.
What States Offer Series LLCs?
Delaware was the first to offer Series LLC in 1996. Since then, many states have followed suit. Series LLCs have become popular for holding income-producing real estate properties, with the ability to keep certain assets and liabilities separate.