A Series Limited Liability Company (LLC) is a special legal structure that allows a limited liability company to hold assets in multiple "series". Each series is shielded from the liabilities of other series within the same entity.
Advantages and Structure
A series LLC can be formed like a regular LLC but its articles must allow for individual series. These series can be referred to as cells, containers, divisions, subsidiaries, or units. Delaware was the first state to authorize the Series LLC in 1997.
The master LLC, sometimes referred to as a base, umbrella, or parent LLC, owns other LLCs and creates this holding company structure. The Series LLC offers benefits such as not paying fees to form another structure and having multiple layers. Assets and liabilities are separated under one entity in a series LLC.
Disadvantages and Considerations
Disadvantages
While there are compelling advantages to forming a Series LLC, disadvantages include:
- Unresolved tax issues
- Possible multiple state franchise taxes
- Rigorous recordkeeping requirements
Considerations
Some states do not recognize the series LLC, and certain businesses might find it creates more work due to additional recordkeeping and management of each subsidiary. Furthermore, each protected series may need to maintain its own accounts, agreements, members, and names.
Tax and Liability Implications
When forming a Series LLC, it can offer liability protection, where a lawsuit against one property does not expose others. Additionally, each series can potentially be taxed separately, offering operational flexibility.
Is a series LLC worth it? This question depends on the specific needs of a business and its owners. If the goal is to minimize liability and maintain separate operations for different assets or properties, a Series LLC could prove beneficial.