Under a series limited liability company (LLC), a main LLC can create separate LLCs to hold different assets that may or may not be under common ownership and/or management with the master LLC or any other series. A series LLC can serve many purposes, but it is most utilized by real estate investors who own several properties and companies that own multiple brands. The pros and cons can be unique to each company so I recommend speaking with a knowledgable business attorney. Nonetheless, here are a few:
- Legally separate. In theory, each series is separated as a separate entity with its own assets, members and operations. The debts, liabilities and obligations of one typically cannot be enforced against another series, or the series LLC as a whole.
- Lost cost set up and maintenance. In Delaware, only one LLC needs to be formed as the series within the LLC can then be formed internally via the series LLC’s operating agreement. Also, the single entity owes only one annual franchise tax payment of $300 to DE. If you were to form individual LLCs instead, you would need to pay a franchise tax of $300 for each LLC.
- They’re somewhat new and unclear. As with most new things in the law, there isn’t much to feel confident about a series LLC yet. Its unique structure has not really been tested in court. The IRS hasn’t been too clear on how to classify series LLCs too.
- Only a few states recognize them. Many states don’t recognize a series LLC and treat it as an individual LLC. This can cause problems when contracting with foreign states.
If you’d like to discuss your LLC series plans with a skilled business attorney then try out. We have a bunch of useful tools on our sites for new companies and offer attractive options such as flat-fee pricing and free no obligation price quotes. Good luck!