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!

Property Transfers

Question:         Do you change the ownership of properties on deeds to the name of the LLC? The name of the Cell? Or leave it in the name of the person who is on the mortgage?

Answer:           The only way to fully move the title from you personally into your Parent Series LLC or into a Cell under your Parent is to go through the formal deed recording process.

I’ve heard people suggest doing up a deed and not recording it, or even just preparing Minutes showing that their intent was to make the change. I can’t recommend either of these methods, to be honest. I have seen too many court cases that say without the formal filing, there is no legal recognition of the change. That means when you need it most, your asset protection strategy might let you down.

As for the exact name on the transfer, if you want the property in the Parent LLC directly, then title it as such – for example, Butterfly Holdings LLC. But if you want it in the Monarch Series, then make sure the title agent knows the deed needs to show Butterfly Holdings LLC – Monarch Series as the Transferee.

Can a Series LLC be formed Retroactively?

Question:         If I form a Series LLC now, what can I make retroactive for 2013?

Answer:           That depends. First of all, nothing can predate the Series LLC itself. So let’s say you started a business in May, and now want to form an LLC that makes an S Corp tax election to hold that business. The LLC’s start date will be November. So, the time period May through December, you will probably need to deal with on a Schedule C to your personal tax return. Income generated after November can go through the LLC.

Here’s a tip: If you were to buy a pre-formed Series LLC, or even a regular LLC that is amended to become a Series LLC, you may be able to make this strategy work. If you bought a pre-made LLC that was created in, say, February 2013, then you could drop all of your 2013 income from May through November into the structure. Talk with your tax professional on this strategy though – there are moving pieces to consider, including re-doing your bookkeeping for the year, and planning how best to deal with payroll requirements. The closer we get to the end of the year, the harder it will be to put this strategy into play.

Title transfers will be treated the same way. They can’t pre-date the LLC’s creation, and the deed can’t be back-dated for recording.

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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