Series LLC Formation Attorneys
A Series LLC is a special form of a limited liability company. Series LLC’s were pioneered in Delaware in the 1990s and were recognized by the State of Texas in 2009. At Janik Vinnakota LLP, we help businesses and entrepreneurs evaluate whether a Series LLC is a structure that might benefit their business.
One of the primary purposes of incorporating a business, whether a C-corp. or an LLC, is to isolate your personal assets from any potential liability your business may face. With a regular LLC, all assets owned by the LLC are potentially vulnerable if an LLC is sued. In a properly formed Series LLC, however, a business can divide assets into different “series” or “cells.” If a particular series or cell is sued, only the assets inside the cell are vulnerable.
For example, a real estate investor may own 10 rental properties inside a traditional LLC. If a person sues the traditional LLC because they sustained injuries while at one of the LLC properties, all 10 properties are vulnerable to lawsuit. However, with a Series LLC, a real estate investor can place one or more properties inside different series or cells. If someone is injured at one of the Series LLC properties, the only assets at risk from the lawsuit are the specific assets inside the cell. Properties and assets located in different cells within the series are not vulnerable.
What Businesses Might Benefit from a Series LLC?
Series LLCs may be ideal for real estate companies who hold multiple properties. Series LLC are also useful in medical, dental, and healthcare practices that have multiple offices. Series LLC can also be used in place of family limited partnerships—a person can place property into different cells and assign those cells to particular “beneficiaries.”
How are Taxes Recognized in a Series LLC?
Series LLCs are flexible in terms of federal tax reporting. A Series LLC allows a business the option to roll-up all series into a single tax report, like a traditional LLC, for issuance of a single K-1 statement. Series LLCs can also file taxes on a cell-by-cell basis—thus, allowing a business to distribute multiple K-1s—based on the needs of the business. Janik Vinnakota LLP does not provide specific tax advice, but it puts its clients in contact with specialized tax advisors and counsel for all tax needs, including tax consequences in forming a Series LLC.
What are the Limitations of a Series LLC?
The primary limitation of a Series LLC is geographical. Series LLCs are only currently recognized in the following states and territories: Texas, Delaware, Alabama, Illinois, Indiana, Iowa, Kansas, Missouri, Montana, Nevada, Oklahoma, Tennessee, Utah, Washington, D.C., and Puerto Rico. Therefore, a Series LLC is best suited for businesses where 100% of their assets are within a state or territory that recognize Series LLCs. If your business owns property in a state that does not recognize Series LLCs, a Series LLCs is probably not a good fit for your business.
If you’d like to know more about Series LLCs, please contact Janik Vinnakota LLP at (214) 390-9999.