Can You Benefit from a Series LLC?

I’m doing more and more Series LLCs for my clients these days. These are special LLCs that can create an unlimited number of subsidiaries. Each subsidiary can operate independently of the others, make its own tax election, have separate ownership and management, follow its own business path, and receive asset and legal protection from the other subsidiaries.

I love the structure, for many reasons. We’ve got all kinds of choices where taxation is concerned, and I love the idea of being able to create individual subsidiaries underneath the main LLC, at a low cost. My clients are happy because they aren’t paying hundreds or thousands of dollars every time they want a new business structure.

If you’ve got multiple business operations, then there’s a good chance that a Series LLC can work for you. This is especially true if you live in one of the 8 states that recognize the structure. You may also be able to use the structure successfully even if you live in another state, with some careful planning.

Here are some of the ways we’ve seen a Series LLC successfully used:

  • Real Estate Portfolio: If you have multiple real estate properties, especially where you’ve got lots of equity, different types of properties, or properties spread across multiple states, a Series LLC can be a great way to protect your portfolio, without setting up multiple LLCs. You can separate out your real estate holdings in whatever way works best for you. As long as you’re following the corporate formalities associated with Series LLCs (separate record-keeping, banking, etc.) state laws will uphold the liability protection between the Cells.
  • Multiple Businesses: When business opportunities come our way and you need to move fast, a Series LLC lets you do so. Because you create subsidiary Cells internally (in most states) you don’t need to wait for Articles to be filed. You can establish the paperwork, file for a Federal Tax ID number and get your bank account opened, all in the same day, with a minimum of time and little to no expense. This is one way we personally take advantage of the Series LLC.
  • New Business Relationship/Joint Venture: Sometimes you need to spend some time working with another company or individual first, on a trial basis, before you enter into long-term arrangements. Creating a new Cell to hold your ownership in a joint venture or trial arrangement lets you work with someone, without risking any of your personal assets or other business operations. If the relationship doesn’t pan out, the only thing at risk is the Cell you created.
  • Multi-Partner Deals: In this instance we’ve got several people working together, but who are not all in the same position from a tax perspective. We see this often when professionals get together to offer a service under one common umbrella. Having each professional holding his or her ownership through a Cell allows each professional to make the tax election that suits him or her best, while allowing the group to present one united face to the world.
  • Estate Planning: You can use a Series LLC in the same way you would divide up assets in a Trust. Divide up your assets into different Cells, and pass ownership in each Cell through the trust, to the beneficiary of your choice. Now you’ve got additional asset protection that a revocable trust alone may not provide.

Essentially, if you’ve got more than one business there’s a good chance that a Series LLC can work for you.

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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