Series LLC Preliminaries: Will this Structure Work for YOU?


If you’ve got multiple business operations or a large asset base, 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.

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

Real Estate Portfolio: This has been probably the most commonly used scenario. If you have multiple properties, if you’ve got lots of equity in some but not others, different types of properties, properties spread across multiple states, or properties owned together with multiple other owner, a Series LLC can be a great way to protect your portfolio. Rather than setting up multiple LLCs, you can simply create different Cells to hold different properties. You can establish different ownership, where necessary. You can divide your properties by equity, or by property use. You can use a different Cell for each state you are actively working in. You could separate and contain a commercial property, or an apartment building, which has a completely different set of risks from your single family homes and duplexes. As long as you are following the corporate formalities associated with Series LLCs (separate record-keeping, banking, etc., between Cells) state laws will uphold the liability protection between the Cells.

Multiple Businesses: When business opportunities come your 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.

Asset Separation and Protection: If you’ve got a business where you use expensive assets, or a business where you create content you sell, a Series LLC can help you to separate your assets and intellectual property from your active business operation. Let your business operate through the LLC, but have your assets or intellectual property held in a Cell. Now you can lease the equipment or intellectual property to your active business operation, and protect those assets from any claims being made against your active businesses.

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.
If your business fits into any of these scenarios, then it’s very possible that a Series LLC could 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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