What is a Series LLC?
- A Series LLC is a unique form of limited liability company that provides protection from liability across multiple “child” Series, within each main “parent” Series LLC protected from liabilities arising from the other Series. Each “child” Series is treated as if it were its own LLC for liability purposes.
Why is a Series LLC better than a traditional LLC?
- It offers anonymity, lawsuit protection, compartmentalized liabilities, and it may reduce operating costs and streamline administration.
How can I create a Series LLC?
- Easy. The Series is a private document that you create on your desktop, sign, and store in your safe.
Who controls the Series LLC?
- The Series LLC is legally controlled by the anonymous trust, through a trustee. Any money generated by the company is split by the “beneficiary(s)” designated in the trust. This way, one partner can manage the company while the other partner(s) split profits evenly.
What will be my title within the Series LLC?
- You are the Trustee of Series LLC.
What should I call my LLC or DBA?
- If you want anonymity, don’t include a name that will connect with you personally. Otherwise, the name does not matter. The purpose of the anonymity is to make it harder for you to be found, thus protecting your assets.
What types of assets can be held in the same Series LLC?
- The Series LLC has one EIN number and should be treated for tax purposes as if it were one entity (though it has the liability protections as if it were many separate entities). Typically, only one type of income should be held in each Series LLC (e.x. rental income from investment properties should be held in a separate Series LLC than active “fix and flip” income).
Which real property should be held in the Series LLC?
- Any real property that you own should be held in the Series LLC. We recommend that all property be held anonymously through a Land Trust – if someone can find it they might sue for it.
Should my homestead property be held in an LLC?
- Homestead property is already protected under statute, but the value of the home may be more than the statutory protection. If the value of the home is less, then leave it alone. If it is more, then you should consider removing the equity in the property that is above the statutorily protected amount.
What is a land trust?
- A Land trust is a trust that holds a piece of land – it’s as simple as that. In a land trust used in conjunction with a Series LLC, the Series will be the grantor and beneficiary. The client will be the trustee in charge of managing the assets of the trust.
You mention anonymity – how is this achieved?
- Through an anonymous trust that can own the LLC itself, as well as serve as Title Holding Trusts for the real estate asset you wish to protect. The anonymous trust is the member listed on the filing and since it is a private document and it is not filed with the State, anybody researching the Owner or Beneficiary of the Trust will be unable to find that information in the public records.
Are trust documents public or private?
- Trust documents are private and they do not require public disclosures in most cases. Even where public disclosures are required, the penalty for failure to do so is negligible and is outweighed by the benefit of having privacy. You can modify the trust per the terms dictated in the Trust Agreement by issuing Resolutions of the trust.
Shall we get the Operating Agreement & Trust agreement notarized at our bank?
- Trust Agreements and Operating Agreements are not legally required to be notarized. However, some clients wish to notarize them for a sense of added security.
Should there be a separate Land Trust document for each property?
- Yes, every property should be held in its own land trust titled in the name of the property. If the property is located at 123 Main St., then it will be held in the 123 Main St. Trust=
What address should I use for a Land Trust when I am recording a deed?
- Any address you list on a deed is public information and you will want to use an address that does not go back to you directly. P.O Boxes are often not allowed, so we recommend either UPS address or the attorney address to be listed for the trust
Does each Series need its own bank account and credit card?
- This will depend on your own record keeping abilities. A Series can have its own bank account and credit card IF, AND ONLY IF, you are accounting for the money separately for each Series.
Why is the accounting so important?
- If you don’t manage it correctly all of the series can collapse into one and everything that we thought we have accomplished by isolating each of the assets – now it goes out of the window. Now we have one big pot of money for them to go after.
How is money moved into an LLC?
- You move money from your personal account into the LLC bank account as a capital contribution.
How do I pay myself from the LLC?
- You will move money from the LLC bank account to your personal account AND you will record it in your accounting as a dividend or distribution to the members of the LLC.
How do I sign on behalf of an LLC that is doing business under a “doing business as” (DBA)?
E.x. Real Estate Business LLC with a doing business as registration of REI Investors
- Scott Smith, Managing Member of Real Estate Business LLC, DBA REI Investors
How do I sign for an LLC that I own personally?
E.x. Real Estate Business LLC
- Scott Smith, Managing Member of Real Estate Business LLC
How do I sign for an LLC that is owned by a trust, of which I am the trustee?
E.x. Real Estate Business LLC, which has the registered member and owner as Real Estate Business Agent Trust, and Scott Smith as Trustee
- Scott Smith, Trustee of Real Estate Business Agent Trust, Managing Member of Real Estate Business LLC
How will I report my taxes from my Series LLC Asset Holding Company?
- The Series LLC structure we use is either a disregarded entity (individual or spousal ownership) or is classified as a partnership (if two non-spouse co-owners). A disregarded entity will simply report the income on the Schedule E of the personal income tax return of the solo owner. If there is non-spousal co-owners, then a partnership return must be filed on behalf of the LLC.
Where will the tax documents for my property be sent?
- Tax documents will be sent to the address of the Grantee on the deed. In the instance where the attorney address is listed as the address of the Trust, the client should contact the County tax assessor’s office and update the address to the client’s address so that they can receive the tax bills directly.
Should I have insurance?
- Yes, always have insurance. Insurance gets rid of the nuisance lawsuits like the slip and falls on your front porch. The Company structure protects you from the big lawsuits that would wipe you out.
Once the property is transferred into the Asset Holding Series LLC, what do I do with insurance?
- You will need to contact your insurance agent and add the entity as an additional insured.
Will a Series LLC in one state hold up in another?
- The presumption in American business is that legal entities (such as LLCs and corporations) of one state should be upheld in the other states.
Actual client questions and answers
- Should we use your Texas address for all of our paperwork because we are operating out of Texas or is a California mailing address ok?
Either address is fine. But we recommend using a Texas mailing address, so that it cannot be linked back to you personally. The Parent LLC must file annual reports and tax returns, among other paperwork. For clarification, please use Scott’s business address for anything of public record. You may use your address for anything private, such as bank statements, credit cards, etc.
- This will be a cash purchase, should we use the LLC’s name or our individual names?
You should try to use your individuals names a little as possible. One of the reasons for this type of structure is asset protection through anonymity.
- Do we need any other information to set up the business bank account?
No, just the standard information to set up a business bank account. However, a Series can have its own bank account and credit card IF, AND ONLY IF, you are accounting for the money separately for each Series. If you think you are going to get sloppy with your accounting, then it is important to have separate bank accounts and separate credit cards. If the Series is operating under a DBA, then the DBA name can be used for the bank account.
- When opening a bank account for the business, what business name do I use? KAR Assets LLC? How do I go about obtaining an EIN for that purpose?
The instructions for obtaining an EIN by internet, mail, telephone, or fax, are found at this link: https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
- Banking: Will I need to make any changes to current setup? I assume not but want to double check. (currently have 1 business account for all the properties and use QUickbooks to track the revenue/expenses of each series using class tracking)
If we want a different bank account for each property that we acquire in the LLC, do we open them in the name of the parent LLC or the series LLCs?
This is will answer your previous question, as well as this question. A Series can have its own bank account and credit card IF, AND ONLY IF, you are accounting for the money separately for each Series. If you think you are going to get sloppy with your accounting, then it is important to have separate bank accounts and separate credit cards. If the Series is operating under a DBA, then the DBA name can be used for the bank account.
- What is my title in KAR Assets LLC?
You are the Trustee of KAR Assets, LLC.
- I know you had mentioned that no annual meeting and minutes are required for an LLC. What is required to be done annually?
Texas only requires a yearly franchise tax filing – filed online with the comptroller. Otherwise no annual requirements are there unless the law changes.
- Insurance: what will be correct way to set up insurance once these changes are made?
Simple. Contact your insurance agent and add the entity as an additional insured.
- Bylaws: The trust docs reference Board of Trustee bylaws…can you help me understand that?
Bylaws are used to govern a company. They are company specific, so it’s really up to you as to what you would like in them.
- If Laura and I get hit by a bus, how do I ensure that the trustee of my personal estate can step in to manage the assets? Article III section 2D says if current trustees are unable to serve, then the Grantor (the LLC) can appoint a new trustee, but in this example, we’re also both the only members of the LLC.
Not sure how to answer this one. But I’m super interested in the answer. Would the court appoint a trustee? Or does it go to his/her heirs?
- Misc transactions: For things like property management agreements or arrangement with other vendors what’s the protocol? (eg do I set those up as agreements between them and me, the series, or the trust?
Always set these agreements up between the holding company (the individual series) and the vendor. The purpose is to create asset protection through anonymity, so using your individual name may defeat that purpose.