A limited liability company (LLC) is a popular way for entrepreneurs to file a business entity. A LLC offers owners a level of flexibility not provided through the formation of other types of businesses. As its name implies, an LLC also affords owners limited liability that can help protect them from incurred debt or lawsuits that may be filed against the business. A series LLC is similar to the more traditional LLC. Similar to a corporation umbrella, a series LLC has a “parent” LLC with one or more “child” LLCs that are filed beneath it. However, a series LLC has its differences as well. How do they stack up? Keep reading!
A traditional LLC and a series LLC follow the same formation regulations. Articles of formation, and any associated fees, will be to be filed with the appropriate government body. Most states also require an operating agreement. Both versions of the LLC protect owners from liabilities. Additionally, they do not limit the number of stakeholders or owners and permit non-US citizens to take part in the company.
Series LLCs, however, are not recognized by every state. Those that do recognize and permit the formation of a series LLC may have varying laws that dictate how to do so.
other states, like California, do not permit series LLCs to be formed but do recognize those legally established in other states. Others yet do not recognize series LLCs at all. Series LLCs allow a company to separate and “box” specific assets into various sub-LLCs to help protect them from each other. If a lawsuit is brought against one of the series LLCs, for example, the assets and earnings of the other LLCs are shielded from any legal consequences. A series LLC can also help to reduce startup and ongoing administrative costs. For example, if you file for a traditional LLC in Kansas, the fee is $160. If you file for a series LLC, the master will cost $250 and each series will be an additional $100. If you want to protect three separate assets from debt and litigation, under a series LLC, this will cost you $450. To get the same protection from a traditional LLC, you would need to file three separate LLC entities, for a total of $480.
Royal Legal Solutions can provide professional guidance to help you make the most of your entrepreneurial dreams. Our staff understands the nuances of state laws throughout the United States and Canada. As experts, our experience can help you avoid accidentally violating the various regulations your company may encounter and maintain your limited liability. If you would like to schedule a consultation, contact us today.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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