Series LLC

What is a Series LLC?

A Series LLC is a Limited Liability Company with more than one series of members, managers, or LLC interests having separate rights, powers, or duties with respect to specified property or obligations of the LLC (or profits and losses associated with specified property or obligations). Any such series may have a separate business purpose or investment objective. For years, Delaware law has permitted an LLC to register separate series, but use of this structure remains uncommon due to uncertainty over federal income tax consequences.

Other states which have enacted statutes permitting formation and qualification of Series LLC include Illinois, Iowa, Nevada, Oklahoma, Tennessee and Utah. 

In general, the separate series are not required to be named in the formation document filed with the state, but the formation document must contain a notice of limitation of liabilities of series.

Series LLC Benefits

• The Series LLC permits separate liability-insulated divisions within a single entity.
• A Series LLC could be used as a holding company owning intangible assets, or tangible assets such as real estate, or as an operating company conducting different lines of business.
• The Series LLC reduces costs associated with separate entity formation and maintenance.

How is a Series LLC Taxed?

Since the federal tax consequences of Series LLC are uncertain, a tax professional familiar with this type of entity should be consulted. It is possible that a Series LLC may be taxed either as a single entity or as multiple organizations. Because the state of Delaware considers a Series LLC only one entity for tax purposes, only one annual franchise tax of $250.00 is required prior to June 1 of each year. The California Franchise Tax Board, on the other hand, taxes each series as a separate entity if the Series LLC is registered or doing business in California.

Forming a Series LLC

LLC.com can assist in the formation of a Series LLC in states that recognize this type of entity. Fees and turnaround times will be the same as for a non-Series LLC in the state you select. We do not draft or provide sample operating agreements for a Series LLC. Since the operating agreement must include specific details relating to the series and their rights and obligations, we recommend that the document be created and maintained under the guidance of legal and tax advisors.

A Word of Caution

Because the Series LLC is a relatively new entity, its benefits are still largely theoretical. Protecting assets by separating them into LLC series is an approach that has not yet been tested and proven by case law. Because case law on the Series LLC is uncertain, this entity type should be established under the guidance of a legal professional familiar with its requirements.

Ready to Form a Series LLC?

We can assist in the formation of a Series LLC in Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee and Utah. Contact one of our LLC Business Specialists today at 877-261-9606 or 302-636-5457 to get started.