Series LLCs: Answering Your Questions


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, I’m answering all of your questions in my blog. And, of course, if anything you read this week brings on another question, ask away!

Texas Series LLCs and Franchise Tax

Question:         How is the Franchise Tax dealt with in TX if you own real estate and want to set up a Series LLC? What if one of your cells is dealing with a web business?

Answer:           This is one of those situations where there isn’t an easy answer. Texas enacted Series LLC legislation, but the Comptroller’s office has trouble recognizing Cells when filing the franchise tax reports each year. We typically will suggest filing separate reports for different businesses – so a web business would file its own report. If the Cells roll up into the Parent, then we’d probably just suggest doing a franchise tax return for the Parent, as all of the income/expense for the Cells is rolled up into a consolidated figure. You may need to file reports via mail, or if you are in TX, walking them in. And, you may need to send in a cover letter explaining that you are filing on behalf of a Series LLC Cell, so there is no separate corporate file number.

Nevada versus Utah – What State is Best for a Series LLC?

Question:         What’s a better Series LLC state – Utah or Nevada?

Answer:           Utah is less expensive to set up and operate in, but there are no tax-filing obligations in Nevada. You file your federal return and that’s it. With Utah, you may have some state tax returns to file as well, which could increase your overall tax preparation costs.

Series LLCs and Profits/Losses

Question:         Do losses in one Cell offset profits in another?

Answer:           That depends. If the Cells are rolling up onto the Parent LLC’s return, they may. Let’s say you have a Series LLC with 4 Cells. Each Cell holds 2 rental properties. All the Cells are owned by the Parent LLC, and report on a Schedule E to your personal return. Cells 1, 3 and 4 are all profitable. Cell 2 is losing money. In that instance, because we consolidate everything together the losses in Cell 2 would offset, as much as allowable, the profits in Cells 1, 3 and 4.

Series LLCs and Wyoming

Question:         Is Wyoming a Series LLC state?

Answer:           No. Wyoming has not enacted its own Series LLC law.

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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