Series LLC: Q&A


Diane Kennedy and I did a webinar recently on Series LLCs. You can see the replay for a short time over at www.ustaxaid.com/series. And check out our limited-time offer that incudes having a Series LLC formed for you, here: http://www.ustaxaid.com/shop/Series-LLC-Year-End-Special.html.

We had a bag full of questions and ran out of time. So this week all of my blog entries are going to deal with answering your questions from the webinar. And, of course, if anything you read this week brings on another question, ask away!

How Do Series Cells Operate in Different States?

Question:         Can a Series LLC be set up in Wyoming and do business in Wyoming, Colorado, etc. – or does there need to be a separate LLC in each state? Can Series LLC Cells operate under the Parent LLC in different states?

Answer:           Yes and no.

Wyoming doesn’t have Series LLC law. I wish it did, the state has some great asset protection laws. But so far, Series LLC law has not come to Wyoming. The states with Series LLC law are:

Delaware, Iowa, Illinois, Kansas Tennessee, Texas, Nevada, Oklahoma and Utah

Assuming you set up your Series LLC in one of these states, then yes, you can cross-register it into Colorado or anywhere else as a foreign LLC (in this case foreign just means formed outside a state, not formed outside the USA). Cross-registration gives your Series LLC full legal protection in all states where it is registered.

There is no mechanism to register just a Series Cell into another state. You can only register in the Parent LLC. What we typically suggest is that you either:

  1. Cross-register the Parent LLC into the state, using the name of the Cell, if state documentation lets you do that; or
  2. Cross-register the Parent LLC into the state, and then file a fictitious business name application to do business as the name of the Cell.

Here’s what I mean. Let’s say I have a Nevada Series LLC called ABC Proper-T, LLC. I also have a Cell called ABC Property-T LLC – Blue Sky Rentals Series, that holds 3 properties I picked up in Montana. To get full legal protection in Montana I would first try to register ABC Proper-T LLC into Montana under the name Blue Sky Rentals, or I’d register in as ABC Property-T LLC, then file a dba to operate as Blue Sky Rentals.

Do I have to live in a State with Series LLC Law?

Question:         I want to set up a Nevada Series LLC. Do I have to live in Nevada to do that?

Answer:           Not at all! I’d say 95% or more of the Series LLCs I form are for people who don’t live in Series LLCs states. Probably more than half of the Series LLCs I form are for people who don’t even live in the United States!

Question:         Can a series LLC be used with a self directed IRA LLC to purchase real estate?

Answer:           In theory yes. There isn’t anything fundamentally different about a Series LLC that should prevent it from being used with a self-directed IRA. I’ve had clients experience difficulties with Cells, though. My suggestion would be to first talk with your IRA custodian. Be prepared to do some education. Take in your Series LLC documents, and maybe take in a printout of the state law section that deals with Series LLCs. My sense is that there’s no real reason to disapprove of the Parent LLC, at the very least, but it may be more troublesome to have just a Cell approved to be owned by your IRA.

At Smart Business Incorporation, we specialize in helping investors and business owners develop structures to run their businesses, protect their assets and keep as much of their earnings as possible. If you want to know how to best structure your next business, visit our website or drop us an email at info@smartbusinessincorporation.com. We’ll be glad to help.

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