Overview:
The Series LLC is a fairly new type of LLC that has been around since 2009. Unlike a traditional LLC, the Series LLC allows for the sorting of individual properties into separate compartments that are isolated and insulated from each other. This type of LLC is especially useful for dealing with real estate investors and other clients dealing with multiple assets.
What is a Series LLC?
A series LLC allows for multiple “cells” to be set up within a single LLC name. Each sub-company can open open it’s own bank account, obtain it’s own EIN number and file lawsuits. Each sub-company simply operates under it’s own assumed name using an assumed name certificate filed with the Secretary of State. Although there can be multiple “cells” within the Series LLC, it still functions as single legal entity for tax and filing purposes.
What is the difference between Series LLC and Traditional LLC?
The main difference between a series LLC and a traditional LLC is in terms of liability and exposure. In a suit filed against a traditional LLC, all assets are available. In a suit filed against a Series LLC, only the assets within the specific “cell” being sued are available. Important point: A series LLC can still own property without a series designation if no specific “cell” is named in the transfer and thus, still available as an asset for suits against the general company.
What should/shouldn’t I transfer into the Series LLC?
Do not put companies that are vastly different in the same Series LLC. Also, do not put a specific LLC in one series that creates a much higher level of liability or potential for legal action than businesses in other series, has a different debt structure (involving development loans, personal guarantees, and the like) than that in other series, receives significantly different tax treatment from other series or is involved in a payment plan with the IRS or serves as a management entity with exposure to the public (tenants, vendors, contractors, and the like) since this function is better placed in a separate LLC altogether.
How do I form a Series LLC?
To create a Series LLC, there must be specific wording in the LLC Certificate of Formation to make it clear there will be sub-companies involved and there will be multiple layers. You can also amend an existing Traditional LLC into a Series LLC by filing a Certificate of Amendment. There are also subsequent documents that will need to be prepared such as the company operating agreement, minutes, etc.) These are all filed through the Secretary of State and should be done through an attorney and not through internet forms/other minimalist filing.