Series LLC Record Keeping

It’s important to remember that to make your Series LLC work properly you need to keep things separated. The legal separations between Cells permitted by law work only where each Cell is treated as a separate structure. That means each Cell needs to keep its own accounting records, possibly have separate bank accounts, and generally follow all the same rules you would apply to separately-formed businesses. You don’t need to have separate filing cabinets for your records, but you do need to be able to prove that you are following corporate formalities. In fact, you’ll find this requirement set out in the Series LLC legislation in each state where it is a legislated option.

Be careful here. You may be able to consolidate some common management functions by creating a Management Cell (especially if you have a Series LLC with multiple Cells that all hold real estate properties), but you need to have that paper trail available to show to the IRS or your attorney, in the event of an audit or litigation. If you are using a Cell as a property manager, collecting rents and paying bills for several properties from one source, remember to make sure that you are carefully tracking the income and expenses attributable to each Cell. If you aren’t going to have separate bank accounts, you’ve got to be able to at least show how much money in the joint account belongs to each Cell.

Where you are operating multiple businesses through one Cell (like our affiliate marketing example), you may also separate out your accounting records to track income/expenses for each unit. (That would be good business practice in any event, so you can make sure you aren’t hanging onto an underperforming unit). However, in this case you are using a single Cell, so depositing income and paying expenses through a Single account is appropriate.

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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