Series LLC for Real Estate Investors in California

For most real estate investors, experts recommend you consider investing through a series limited liability company (LLC). However, in the state of California, you should consider using a Delaware Statutory Trust (DST) instead. Why? Let’s take a look.

The Series DST

DSTs are not new. A DST is considered to be a statutory entity. As such, it is created through filing a Certificate of Trust with the Delaware Division of Corporations in addition to paying any regulatory fees required by the law. However, Delaware does not require the actual trust agreement to be filed. This means the trust’s owners, duties and responsibilities remain confidential and do not appear on any official state documents.

The Benefits of a DST

For California real estate investors in particular, the DST is highly beneficial.

Avoid Unnecessary State Penalty Taxes:

California has been notoriously uncooperative with attempts to bring outside LLCs and Series LLC into the state. In fact, while most state permit outside Series LLCs, California will charge you $800 for each series, every year. Depending on the amount of properties you invest in, or the profits or losses you incur, this sum can add up quickly.

Disregarded Entity:

The Internal Revenue Service (IRS) recognizes certain businesses as “disregarded entities”. To qualify, your business must abide by three rules. First, the DST must have only one owner. This is because the IRS only recognizes “sole-proprietorships” as a disregarded entity. Second, the business itself must be separate from the individual. This if for liability purposes. (We’ll talk about how this applies to a DST below.) Third, the business is taxed through your personal taxes (Schedule C). The DST abides by all three rules and, therefore, is considered to be a disregarded entity by the IRS.

Unlimited Compartmentalization:

For many investors, the Series LLC offers a seemingly unique opportunity to protect investments. However, a DST can offer this same protection. A series DST allows you to establish one, “parent” trust. Beneath it, you can create an unlimited number of “child” trusts as well. Most experts will recommend that you put each investment property into a separate “child” trust to ensure all liabilities are self-contained.

Anonymity Assured:

As stated above, with a DST, your identity is not published when the trust is filed with the Delaware Division of Corporations. (To do this with a Series LLC, you first need to establish an Anonymous Land Trust.)

Asset Protection with DST

You may wonder how a DST helps to protect your real estate investments from lawsuits. This is where the DST really stands out. In addition to complying with California and federal tax laws, the DST provides you with an innovative legal barrier that can prevent a lawsuit before it even makes it into court.

Above, we talked about how the DST provides you with unlimited compartmentalization and anonymity. These two features inherently discourage lawsuits. When you invest in each property through separate “child” DSTs, you restrict the finances available for a court settlement. Like a Series LLC, the DST wraps each property in a liability barricade. Any lawsuit brought against one property can only take into account the value of that investment. Your personal assets, and those that are contained within other “child” DSTs, are untouchable. (As a general rule of thumb, most lawyers will not accept a real estate lawsuit that will not settle for $50,000 or more. In this sense, the DST discourages lawyers from accepting a case against you.) However, because of the blanket of anonymity created through the private nature of a DST itself, a lawyer may refuse a case against you outright. After all, to build a legal case against you, the lawyer would first need to identify who you are. The legal anonymity established with the DST makes this incredibly hard, and often, not worth the time for a lawyer to pursue.

When you combine the reduced net worth of an investment owned by a “child” DST and the difficulties of an anonymous owner – the majority of lawsuits end before you ever have to step foot in a courtroom.

Help When You Need It

We understand how important asset protection is for real estate investors in any state. We pride ourselves in our in-depth knowledge regarding asset protection, as well as our ability to help our clients find the most cost-efficient, streamlined way to keep their investments safe.

For real estate investors in California, we can help you establish a DST. We do so in a cost-effective manner, with no hidden fees. Because of our experience with tax regulations, we can help to minimize any penalties or fees and ensure the IRS treats your DST as a “disregarded entity”.

If you are a real estate investor in California, contact us today to find out how we can protect your properties together.

Series Limited Liability Company: Understanding The Basics

Perhaps you are considering what entity will do the best job protecting your real estate assets. Look no further than the series limited liability company (LLC). The series LLC for real estate investors offers a host of benefits that corporations and other types of entities do not. Read on to learn more about how series LLCs are set up, the basics of how they work, the benefits of the series LLC for real estate investors, and more below.

How The Series Limited Liability Company Works

The series LLC is a unique kind of limited liability company that allows you to grow your business indefinitely at no additional cost. The entity is able to scale up indefinitely thanks to a parent-child structure. The series LLC makes use of one “parent” entity. Beneath that parent entity are “child” entities, which function like mini-LLCs.

This infinitely scalable design makes it possible to create as many series as you have assets. Creating new series is a simple process you can complete at home, without having to restart the LLC formation process. Moreover, each Series receives complete liability protections while you avoid the cost of creating an entirely new company. Similarly, a properly formed series LLC may only require a single bank account. For these reasons, investors get the same protections as they would with multiple LLCs without the impractical and costly drawbacks.

Why The Series LLC is Perfect for Real Estate Investors

Some of the benefits of the series LLC that investors love the most include the following:

Ability to grow indefinitely. Incorporating new assets into the series LLC structure is easy.
Separation of assets. With one asset per child series, even if a series is sued successfully, it will not affect your other assets. We tend to recommend that investors hold only one asset per LLC. While this could get very costly with traditional LLCs, executing this method with a Series LLC is quick and simple.
Simple bookkeeping. The Series LLC generally allows you to continue using the same LLC bookkeeping measures you likely already have in place. Managing multiple series can be done easily with traditional methods, even those as simple as an Excel spreadsheet.
Tax treatment flexibility. When you use a series LLC, you have your choice of how series entities are taxed. Perhaps one of your deals will work best taxed as an S-Corporation, while the remainder work better with pass-through treatment. As long as you have your assets separated, this type of arrangement is possible. You can choose the tax treatment that makes the most sense for your deal.
Ability to pair with Anonymous Land Trusts for greater anonymity. Learn more about the power of the Series LLC and Anonymous Trust combo.
Available to investors in every state. You need not have a local series LLC option to take advantage of the Series LLC.
Ability to pair with a shell company or use alone. See the example in the next section for more information.

The Series LLC Basics For Real Estate Investments

Let’s look at the series LLC in action. This example will show both how the series LLC is used in normal practice and how it prevents lawsuits.

Sam is a real estate investor who mainly uses buy-and-holds. He keeps each of his four rental properties in series A-D of his existing Texas series LLC. On the advice of his lawyer, Sam uses his Series LLC solely to hold assets, while he manages his properties and collects rents with a Traditional LLC shell company. One day his realtor calls about a promising multi-family unit. After reviewing the numbers, Sam agrees that it is a good deal. He closes on the property and creates a Series document on his computer, being sure to collect the proper signatures and make a copy for his lawyer. The new property becomes Series E of Sam’s existing series LLC.

Now let’s imagine a problem with Sam’s new property. After a rainy and humid month, the wood begins rotting beneath an exterior staircase. The structure gives out just as Sam’s tenant is standing on the staircase. The tenant is badly hurt and threatens to sue. First, the series LLC and shell corporation structure removes Sam of personal liability. Even if suit is successful, the very most he can collect upon judgment is the property in series E. Sam’s original four properties in Series A-D are safe!

Get Help With Your Series LLC From Royal Legal Solutions

My name is Scott Smith. In addition to being an attorney, I’m a real estate investor who can help you set up a no-hassle series LLC entity that will offer you the strongest protection possible. Contact us to ask any additional questions you may have or schedule your personalized consultation today.

Series LLC For Investors in Alaska

The Series LLC confers so many benefits to real estate investors that many immediately want to know if their state permits this type of entity. After all, it is an infinitely scaleable option that allows you to grow your business indefinitely without you having to pay multiple filing fees or taxes on each new series entity. Read on to learn more about what the best options are for Alaskan real estate investors hoping to take advantage of the Series LLC.

Is There Such a Thing as an Alaska Series LLC?

At the time of this writing, Alaska does not offer a Series LLC. Alaska, like all other 49 states, does offer a Traditional LLC, but we do not recommend that owners of multiple properties rely on the Traditional LLC alone for asset protection. Those who do are risking all of their properties in the event of a lawsuit--a problem the Series LLC can help you avoid. Learn more about the benefits of a Series LLC over Traditional LLCs from our previous article on the subject.

However, just because you reside in Alaska does not mean that you are not stuck with the Alaska LLC as your only asset protection option.

How Real Estate Investors in Alaska Can Take Advantage of The Series LLC

There is some good news: real estate investors in Alaska can still have a Series LLC. In fact, an investor in any state can always form a Series LLC in a jursidiction that does allow for one. We do, however, have some preferences and recommendations about the best states for forming Series LLCs.

Both Texas and Delaware offer Series LLC options that offer some of the greatest protections of any of the Series LLC entities in the country. Both the Texas Series LLC and Delaware Series LLC are low-cost entities that an investor can take advantage of, regardless of where they live or which states they own property in. You never have to even have set foot inside the state where you form your new entity to reap the Series LLC’s many benefits. Learn more details about the specific benefits these states offer investors forming their Series LLCs.

What Royal Legal Solutions Can Do For Investors in Alaska

When Alaskan real estate investors get help from the legal professionals at Royal Legal Solutions, they can take advantage of the full array of asset protection options. If you wish to establish a Texas Series LLC or Delaware Series LLC, we can assist you today. Contact us to learn more about what Royal Legal Solutions can do to help you grow your real estate business cheaply and efficiently.

Series LLC For Investors in Alabama

Entities form the basis of asset protection plans. With all of the advantages a Series LLC offers real estate investors, it is only natural to wonder if your state offers this option. But that isn’t the only factor to consider. Read on to learn more about taking advantage of the Series LLC as an Alabama investor.

Does Alabama Offer a Series LLC?

Not every state offers its own Series LLC, nor are all Series LLCs created equally. Alabama began offering its Series LLC in 2017 with the passage of updated LLC legislation.

That said, Alabama’s Series LLC is a newer entity that is less established, which may give some investors pause. Further, Alabama investors are not confined to using the Alabama Series LLC. In fact, there is no particular advantage to doing so. Other jurisdictions, however provide Series LLC options with known benefits.

The Texas Series LLC has existed since 2009 and has proven to be a useful tool for investors across the country. Some advantages of the Texas Series LLC include a low, one-time filing fee, the lack of a state income tax affecting the LLC structure, charging order protection, and more. The Delaware Series LLC is another excellent option. Some investors opt for the Delaware Series LLC for the tendency of the state’s court systems to treat these entities favorably. Fortunately, both of these options are available to Alabama investors.

What Can The Series LLC Do For Me?

Regardless of where it is formed, the Series LLC offers some clear benefits for the real estate investor.

Streamline business. A Series LLC can allow you to control multiple properties from a single account.
Scale up indefinitely. Creating a new child series is as simple as creating a Series Document on your personal computer, signing it, and making copies for yourself, any business partners, and your attorney.
Pass through taxes for simple filing. Profits and losses are reported on Schedule E of your personal tax return.
Allow for taxation flexibility between child series. Since you do not have to tax all Series entities the same way, you can elect for S-Corporation taxation Status, Limited Partnership, or disregarded entity status according to what makes the most sense for your business.
Separate assets to limit liability and exposure to lawsuits. Stop lawsuits before they start by compartmentalizing your assets.

How Royal Legal Solutions Can Help Alabama Investors

Royal Legal Solutions offers the Alabama investor the opportunity to take advantage of the Texas Series LLC or Delaware Series LLC for an ideal asset protection strategy. Work with the experts at Royal Legal Solutions, you get the best asset protection plan for you. Contact us to schedule your personalized consultation today.

Series LLC Rules: What to Know About Eligibility and Regulations

As part of our series of articles explaining the Series LLC in greater detail, we will now take a closer look at eligibility requirements for forming this entity and which rules and regulations apply to it. Let's learn more about the finer points of series LLC rules, eligibility, how they are formed, and what regulations apply to this entity.

Series LLC Eligibility

Almost any investor is eligible to form a Series LLC. Laws governing the Series LLC are dictated at the state level, just like the laws for other types of limited liability companies. The major eligibility criterion that is consistent across all of them is that one must be 18 years of age or older to create the entity.

Even the documents required to form a Series LLC are fairly consistent from state to state. To create a Series LLC, you will need the following:

Articles of Incorporation.
Operating Agreement.
Membership Information.
The appropriate filing fee. Regardless of where you form, this is a one-time payment. The amount will depend on where you form your Series LLC.

The Series LLC is an incredibly versatile tool. There are no rules about what type of business you must run to take advantage of the entity. Each Series can hold any type of asset you choose. While most investors use the Series LLC as an asset-holding company for real estate, other types of assets may be safeguarded within the entity as well. Similarly, there are no eligibility restrictions based on geography. Even if you live and invest in a state which does not offer its own Series LLC, you can always form an out-of-state Series LLC in the jurisdiction of your choosing. Investors can strategically pick which state to form their Series LLC in based on the requirements and regulations of that state.

Series LLC Rules and Regulations

Internally, Series LLCs are governed by their Operating Agreements, just like Traditional LLCs. The Operating Agreement spells out important details like how profits and losses are divided, how business decisions are made for the entity, and what procedures must be followed for selling the assets within the entity.

Series LLCs must also comply with state and federal laws. The most important regulations to be aware of are the following:

State regulations for Limited Liability Companies. These state laws will determine, for instance, the cost of your Series LLC’s filing fee, which state taxes (if any) must be paid annually, and more. Your attorney is a valuable resource for learning more about these state laws. Keep in mind that one of the benefits of the Series LLC is that if you don’t like one state’s laws, you can simply choose to form the Series LLC in another state.
State laws about the status of child entities. Again, these may vary from state to state. A Delaware Series LLC, for instance, considers the parent structure the entity itself. The child series within it are not legally separate entities. While they may have many of the same powers, such as the ability to sue or be sued, child series may be limited in other ways. An example of this is that a child series may not enter into a merger.
Federal tax law. You have choices to make regarding how your Series LLC is taxed. Many investors choose to have the Series LLC classified as a disregarded entity, meaning taxes will “pass through” and be reported on your personal income tax return. Learn more about pass-through taxation from our previous article on the subject. However, you have other options for the taxation of your child series entities, including S-Corporation and Partnership status. Consult with your attorney and CPA to determine which tax structures are best for you.

Royal Legal Solutions Can Help You Set Up Your Series LLC

With the legal professionals at Royal Legal Solutions by your side, you can set up a no-hassle entity that will offer you the strongest protection possible. Our experts can not only help you form your Series LLC, but also understand how to use it to effectively manage your real estate business while also protecting your real estate assets. We are here to help you understand the entity so that you can get the most out of it. If you would like to learn more, check out some of the other articles here on the Royal Legal Solutions website, including the first article in this series, “Series LLC: The How, The Why, and The Basics.” You can also contact us directly to ask any additional questions you may have or schedule your personalized consultation today.

Can Each Series in a Series LLC be Taxed Differently?

A series LLC is a limited liability company that allows you to create multiple entities under one “master LLC”. Each new entity is called a “child series” and can have separate membership interests, assets, operations – and treatment for tax purposes.

Series LLCs are popular among real estate investors because it’s easy to add additional series and they provide excellent asset protection. They also provide flexibility in tax treatment, as you will see

Protection For Real Estate Investors

One of the primary benefits of using a series LLC is you only have the file the articles of organization one time. To add another series all you need is an operating agreement.

This cuts down on the state fees required to open and maintain separate LLCs and reduces the administrative burden of managing multiple LLCs.

For these reasons, series LLCs are popular among real estate investors and business owners who own multiple properties with different partners and structures.

Series LLC Tax Treatment: One Example

You are a real estate investor and professional property manager. And often purchase over 10 properties a year with multiple different partners.

You open up a series LLC and use one as a property management company that is taxed as an S-Corp. Whenever you purchase a property with a partner, you create another series owned by you and that partner, and it’s taxed as a partnership. When you purchase a property yourself you simply have it taxed as a disregarded entity.

Using the series LLC helps you reduce the filing and administrative fees associated with opening and maintaining a new LLC each time you by a new rental property.

Tax Risks of Series LLCs For Real Estate Investors

There is some uncertainty around the federal tax treatment of series LLCs as there are no laws or official guidance provided by the IRS.

But unofficial guidance from the IRS and a Tax Court decision are available. And they indicate that, at least in certain situations, treating each “child series” as a separate entity with different tax elections is appropriate

The Bottom Line

Generally, LLC’s are not used primarily for their tax benefits, but rather their liability protection.
However, due to the ease of adding additional series, liability protection, and flexibility in the tax treatment of each individual series - series LLCs make sense for real estate investors who operate businesses and purchase real estate with different partners under multiple structures.
And since there is no official laws or guidance from the IRS, it is important to work with a qualified CPA and attorney to ensure you’re following all the rules and regulations to maintain the liability protection of each series.

Author: Thomas Castelli, CPA is a Tax Strategist and member of The Real Estate CPA, an accounting firm that helps real estate investors keep more of their hard-earned dollars in their pockets, and out of the government’s, by using creative tax strategies and planning.

Understanding Land Trusts and Foreclosures

We’ve all known someone who has gone through the complicated foreclosure process. Over the past year the amount of monthly foreclosures has hovered between 60,000 and 80,000. Holding property in a land trust can add an extra layer of complexity to the already confusing foreclosure process. We are one of the only firms in the nation to regularly manage land trusts. As a result, we’ve developed a wealth of expertise in dealing with the complex nature of land trust and foreclosures. In this article, we’ll help you understand land trust and foreclosures and provide examples of how a land trust can impact the foreclosure process.

Land Trusts and Foreclosure Misconceptions

One of the most important steps in understanding either a legal process or financial product is clearing up common misconceptions. A major misconception is that holding land in a land trust won’t affect the foreclosure process. The laws that govern land trusts vary from state to state. Thus, blanket statements about land trusts and foreclosures can be misleading. Also, this is a dangerous misconception in that it limits one’s openness to the potential benefits of a land trust when going through foreclosure.

Benefits of a Land Trust in Foreclosure

One of the biggest potential benefits of using a land trust is that in case of foreclosure it can slow down the process. In the case of both personal property or real estate investment property, the land trust structure throws lenders out of their usual operating procedure. There have been cases where lenders need extra time to serve all parties in the foreclosure case. Not being able to serve one party in the case, such as one of the trustees, can stall the foreclosure process. While stalling the foreclosure process is a potential benefit in that in can keep one from making payments, stalling is far from the ideal strategy. For real estate investors, a total asset protection plan is the best strategy.

Asset Protection for Real Estate Investors

Asset protection involves isolating the risk away from yourself and the assets you own. Asset protection isn’t about defeating a lawsuit already in progress or strengthening one’s defense in the case of a lawsuit. It also isn’t about relying on insurance. Insurance isn’t enough because most companies will go to great lengths to deny a claim, especially a large one. We believe in an extremely proactive and effective asset protection strategy that involves preventing lawsuits before they even begin. Anonymity stops a lawsuit before it ever starts. This anonymity is achieved through a trust structure. The trust owns title to investment property. For government records, the trust is listed as the title of the trust, rather than an investor’s personal name. A public search won’t reveal an investor’s name. This is extremely important in preventing lawsuits before they even begin. If an opposing lawyer can’t connect your name to assets and those asset’s associated value, then pursuing a lawsuit will no longer seem like a sure profit. In fact, a lawsuit may seem like more trouble than it’s worth. Keep in mind lawyers, like any other profession have a bottom line to look after.

Combining a Trust With a Series LLC

In case a lawsuit does continue, limiting liability is very important. This is achieved through a business structure we specialize in called a series LLC. A series LLC consists of one head or “parent” LLC which holds a number of individual or “child” LLCs. In this structure, assets are spread out into multiple independent entities. This is key in limiting liability because if one child LLC is hit with a lawsuit, the other child LLCs aren’t exposed to that lawsuit. Potential loss is stopped or contained within each child LLC. For instance, Randy has already taken our advice in using an anonymous trust to hold his assets. However, a lawsuit still progressed against one of his assets. Randy can enjoy an extra layer of protection knowing that a lawsuit against one of his assets won’t impact his properties. Alternatively, if all these assets weren’t compartmentalized, then a single lawsuit related to one asset can put them all in jeopardy. For litigators, this would be considered a jackpot scenario. For real estate investors, failing to compartmentalize assets with a series LLC can wipeout their entire portfolio of investments.

Get Help From a Fellow Real Estate Investor

As you can see, a basic land trust does provide the benefits of potentially stalling foreclosure proceedings, but an ideal asset protection plan involves a more advanced approach. Whether you are dealing with foreclosure on one of your properties or are an investor looking to strengthen your asset protection plan, our legal team of experts can help. Besides being legal experts, we are also real estate investors. Thus, we know all the nuances of managing multiple properties, while also being proactive in preventing lawsuits.

How Does a Series LLC Work?

The Series LLC will work it's much like a parent/child structure. At the very top, you'll have your parent, the series LLC. The state assigns an EIN number and an official formation document for the state (Delaware, Nevada, Texas, etc).

Below the series LLC, you have the actual individual series. You'll have series A, series B, etc. Therefore, these are what I refer to as the "children."

A parent Series LLC can have as many children series it wants. Each one of these series is going to be treated as if it were its own LLC, for liability purposes. So, we hold an individual property or asset in each given series. In the case there is a lawsuit resulting in action against a house in series A, it won't affect the house in series B, C, etc.

Now you may have the need to be able to do joint ventures as your real estate business grows. These function just like LLCs. Due to that Series C could be a joint venture agreement with as many people as you would like. It'll have its own EIN number, tax return and its own operating agreement to conduct the business of that JV agreement.

With a series LLC, what it will allow you to do is to expand your business in a very professional way, protect your assets. So with all of these companies and all of these assets that you own individually, this will pass straight up through the series to have one tax return. Which means thousands of dollars a year in tax preparation savings for you.

My name is Scott Royal Smith, I'm an asset protection attorney focused on real estate asset protection and I'd like to help you.

Why Lawsuits Against a Series LLC Go Nowhere

If you’ve got money, people want it. Lawsuits are one of the easiest, yet still legal, ways for people to take your money. The more money you have the more likely it is someone will try to take it from you in a lawsuit. The same applies to your LLC if you have one.

The more money you have located inside of any individual LLC, the more attractive it's going to be for someone to sue you. Lawsuits against a series LLC, on the other hand, are a dead-end for money-hungry lawyers and litigants.

Lawsuits are all about how much money can I get out of somebody, and if there's a million dollars sitting inside of an LLC in equity or cash, well, that might be something that I really wanna go after.

That's why you should limit the equity of any individual LLC to $200,000.

Note: This is not the case if you're using a series LLC for real estate, because series LLCs allow you to compartmentalize those assets. So, you don't have the same worries there that we do inside of a traditional LLC.

However, I think that usually a few million dollars inside a series LLC makes it reasonable to be able to create a new entity just in case. Why not? Expenses that you're being able to incur by having to create a new series LLC,are far less than the amount of risk that you pose when you're risking millions of dollars in equity.

You can read about what the IRS thinks about an LLC here. But know this: The more money or equity you have inside your individual LLC, the more attractive it’s going to be for someone to sue you. And when they do, all of your assets will be caught under one legal net.

That’s why, compared to an LLC, a series LLC offers far more protection for you and your assets when it comes to lawsuits. Compartmentalizing assets means you can spread your assets out so in case someone does sue you, only one of your assets will be at risk.

The Basics of Creating a Series LLC

When it comes to creating your own business or even forming one that already exists and putting it under your name, there are a few things you need to know.

You may want to form your business under an LLC or a Series LLC. An LLC stands for Limited Liability Corporation and it is slightly different from a Series LLC. The only difference between the two LLCs is that a Series LLC is protection for multiple LLCs. (Note: A Series LLC is sometimes called an SLLC.)

When forming a series LLC, the first thing you need to do in most states is to register with the Secretary of the State you are in. This filing will cost you a fee. However, there is much more to it than that. Read on!

Things You Need to Get Your Series LLC Started

Although not all states accept Series LLCs, those that do accept them require a few things before you get started:

You need a name for your LLC
You need the address of the LLC you are creating
You need the resident name and address of the agent who is creating the Series LLC
You need to designate the member or manager who is managing the LLC
You need the name or names of the manager or managers of the Series LLC
You need to know how long the LLC will be in operation. If you don't know the exact date of the Series LLC ending, or if it will go on as long as possible, state that it will be ongoing or in most states, you can use the term 'perpetual'
You need to know what the business is that is going to operate under the LLC. In many states, a general business can say something along the lines of "all legal business activities"
You will need to file separate forms for each cell associated with the Series LLC and each manager who you are using. This is a requirement in Illinois.

One other thing you must do when forming a Series LLC is to make it clear that you are creating a Series LLC. However, it does differ from each state when registering and whether or not you have to notify them that you are filing for a Series LLC. In certain states like Utah, Texas, Delaware, Tennessee, and Oklahoma, it is a requirement that you notify officials that you are creating a Series LLC with seperate rights on each one. However, how much detail you do have to provide for it will depend on the state you are filing for one in.

Once all of your documents are filed on your LLC, you are officially in business.

Series LLC Record Keeping Rules

Everything should be kept on record when doing business. It is always a smart idea to have everything in writing to ensure it is all done right.

The same goes for a series LLC and a regular LLC business. Whether you have a one owner business or multiple owners in your business, you need to keep records. Here are a few different record-keeping rules to remember.

Keep Everything Separate

This means you need to keep records of each LLC within the series. A series LLC is several, individual LLCs. Each one needs to be separated and each one needs to have their own records kept. This is because each LLC in a series is distinct from the other one. The reason for a series LLC structure is to be able to manage different businesses. It keeps the management process straightforward and simple.

One thing you need to always remember about a series LLC business is to keep everything separated when record keeping. You don't want to combine them all into one. The reason is because it can leave you unprotected in the business.

Name a Registered Agent

Naming a registered agent for your series LLC is a requirement in most states. A registered agent is a physical address within the state you are located in. If this is a requirement in your state, failing to do so could leave your series LLC business without protection.

Make Sure to be Licensed to Run a Series LLC Business

Many states require business owners to have a license to run properties if they are owned by other people too or if you are managing a property management company. Not only can not being licensed to run a series LLC business put your business at risk, but you can run the risk of a lawsuit too.

Have Separate Bank Accounts

This should be something that everyone already knows since a series LLC is several, individual LLC businesses. Since you are already keeping the records separate for each cell in a series LLC, you should probably also have a separate bank account for each individual LLC in the series. By doing this, you will ensure you are being as careful as possible with everything in each LLC that is under a series.

Make sure you understand each of these series LLC record keeping rules for your series LLC. Also, make sure to abide by all of them and other rules there may be beside these main ones above.

Funding Your Series LLC

When you are ready to start your own business and place it under a Series LLC, you do need to put money into it to make it a profitable one. When funding your Series LLC, you will be better off putting the money into a bank account for your business. There is more than one way to fund a Series LLC. Here is more information on how funding your Series LLC works.

Open a Bank Account

When funding your Series LLC, the first and most important thing to do is to open a bank account for it. Your very first deposit will be to pay for your equipment you need for your business. Such equipment includes office equipment and supplies, office furniture, and whatever else you will need for your business. There are two ways you can do this. Keep reading to learn how to fund your Series LLC with your bank account.

Invest in Your Company

The first funding option for your business is to invest in it. However, if it is a Series LLC, you will not be the only person investing in the company. Although there will be more than one owner if more than one person invests in it, make sure to bring them into the company at the same time. You don't want to bring in other investors and owners at different times. Also, don't forget that investing in a business has to go under both federal and state laws. Another thing to remember is to not bring in other business owners without proper legal advice first.

Loan Yourself Money for Your Series LLC

The other way to fund your Series LLC is to loan yourself money for your business. You should do this for startup and operating expenses. You can always put the money back in after you start making a profit. Or, you can make payments back into the business to pay it back. Because the Series LLC doesn't think of this as income, you will not have to report this to the IRS for tax purposes. However, if this is the option you choose to fund your Series LLC, you will have to keep records about it. The best way to record the loan and the payment back is to write out a Promissory Note as well as a resolution statement from the other members of the LLC saying that they approve of your loan.

Another thing about using the second option to fund it is that you will have to add interest to your own loan. The reason for this is because if you don't, the IRS can do it themselves. This could mean that it will end up being taxable income for the lender, but without an offsetting expense on it.

Using a Series LLC for Real Estate Investment Protection

One of the best asset protection companies for real estate investors is the Series LLC. It's been around since 1996, originally started in Delaware but it spread through a number of states now. This allows you to form a Series LLC in their state and use the company in any state.

First, learn about the Series LLC vs LLC you probably know about. Then you'll start to understand that the Series LLC (unlike its more traditional counterpart) operates much like a parent-child type of relationship. You have one series LLC, this is the company named something like "Worldwide Investments LLC," for example. It will actually be filed in the state of Texas and that will have its certification of formation and all of those formal documents. Documents which certify that is a legitimate LLC inside of that state.

Series LLC Formation

Series LLC has special provisions inside of a formation as well as operating agreement which gives it the ability to have children, as many children as it would like in fact. Each child is known as its series. So we'll have series A. Later you can form series B, which is separate legally from the first. You can have unlimited series within a Series LLC. That's advantageous, because each series is treated individually for liability purposes, just as if it were its own limited liability company.

This means that if you have a property, a single property that's held by series A, which is what I'd recommend. We should be compartmentalizing our assets as investors. Because what we want is if there's a lawsuit regarding series A, it doesn't affect series B, C, D,etc. for every asset that we have. A incident works much like a single purpose LLC.

Series LLC Taxes

Series LLCs is also advantageous because they allow one EIN number that's filed underneath this company name. That allows us to streamline our tax preparation so that we're not having to do individual company filing.

Legal Considerations

Now, there's some apprehension in the industry regarding whether a series LLC would be recognized in a state that doesn't formally have a law both in Washington and created there. I personally believe that there's good reasons to think that due to the growing trends nationally these companies will be recognized if ever challenged. There's not a lot of case law on that fact though, but there's a lot of good reasons and precedent that we typically do recognize a company formed in Texas that would be operating, say, in Idaho. Idaho will recognize a Texas company.

These are LLCs. Just like any other LLC. Just with one small caveat, that it can create tiers. But, for the more conservative investor that has any apprehensions about that, I would recommend using a traditional single purpose, limited liability company for each property.

Costs Of Operating An LLC Vs. a Series LLC for Real Estate

You have to pay for the series LLC tax preparation for each one of those companies at the end of the year, you're gonna have to pay for the formation of those companies, operations, management, and registered agent of those companies which can be hundreds of dollars per year. And you're gonna have to pay what the overall complications and operations of those companies.

So you have to weigh your odds and how you feel about the Series LLC versus the single purpose limited liability company. My opinion is that the Series LLC is the way to go.

My name is Scott Royal Smith, with Royal legal solutions, I'm an asset protection attorney focused in real estate, and I'd like to help you. Set up a consultation to see how the Series LLC can streamline your asset protection protection today!

How to Protect Your IRA in Two Steps

People will tell you that your IRA is safe and they're wrong. Your IRA is only safe from a lawsuit against you and somebody coming after your IRA. If your IRA is invested in an asset class such as real estate where it can be sued, the IRA itself is exposed. Your IRA is exposed in the sense that it can be disqualified. If any of the transactions of the IRA are exposed.

There's two things that we do. The first thing that we do is, we can split up multiple IRA accounts. That way if any one type of investment is disqualified or has some type of issue that the IRS would look at? This limits your exposure, because it's only that one account that we have to worry about.

The second thing that you could do is set up a self-directed IRA with an LLC. I like to do it with a Series LLC. What that allows us to do is if you look at our videos regarding the Series LLC structure, we can take each different asset belonging to the IRA and put it into its own series.

That way if there's an issue with asset A, it doesn't affect asset B, C, D, etc. And this way, if you have one property that has a lawsuit against it, somebody can't take your entire IRA amount. They could only take a very limited amount of that structure. Be sure that your IRA is properly structured with asset protection, because it's not by default the safest way to do it.

My name is Scott Smith, I'm an asset protection attorney with real estate. I'm a real estate investor myself, and I want to help you. Click here to set up a consultation today!

What is the Difference Between a "Member" and a "Manager" of a Series LLC?

A limited liability company (LLC) is a great way to protect personal property while simultaneously saving on taxes. A series LLC is a multi-tier business structure, which creates a parent-child hierarchy. Typically, the parent series LLC is filed with the state. Once that has been done and the Internal Revenue Service (IRS) has provided a tax-identification number, individual “child” series LLC companies can created without additional filings or startup fees.

The Benefits of a Series LLC

A series LLC allows a business owner to protect their assets and investments separately. What does this mean? Each LLC’s assets are protected from lawsuits that may be brought against the others. Imagine you invest in four separate rental properties, each under a distinct series LLC. If a personal injury occurs on Property A and a lawsuit if unfortunately brought against you, the other three properties and any earnings and returns that correspond to them in your other series LLCs cannot be subjected to losses you may suffer. Only the series LLC attached to Property A can be subjected to the punitive damages you may be liable for.

“Member” vs “Manager”

There are two ways to structure the management of your series LLC. For a member-managed series LLC, the owner(s) run the business. For a manager-managed LLC, a designated member or non-member is responsible for the running of the business. Let us take a closer look at the differences below.

Member: Series LLCs can have one or more members. In its most simple form, the word member, when used in relation to a series LLC, means owner. Most often, series LLCs are formed by small businesses that do not need extensive management structures. Because of this, member-managed LLCs are the most common type of management structure used.
Manager: Manager-based structures are used typically when there are members who only want to act as passive investors in the business. It is also used when a business is too large or diverse for members to co-manage. Manager-managed structures are also often used when members themselves lack managerial skills and want expert outside help to ensure their business remains profitable.

Series LLCs at Royal Legal Solutions

At Royal Legal Solutions, we do our best to ensure you have the greatest possibility for success. We understand how important it is to protect your investments and limit your liabilities. If you have questions about how a series LLCs works and if they are right for you, the experts at Royal Legal Solutions can help.

Advantages of Having an LLC Over Insurance For Asset Protection

Insurance will not protect you from most lawsuits that will happen regarding the transaction of your buying and selling of real estate. Every time that you're entering into a contract. Every time you actually sell a piece of property, every time you lease to a new tenant. These are all things insurance doesn't cover. Because of that, the only way for you to save your hard earned dollars is an asset protection strategy. That is the proper LLC and company structure.

Set up an asset protection consultation today!

Does a Series LLC Have to Hold Meetings?

Establishing a formal business entity is a great way for entrepreneurs or investors to protect their assets and earnings. Depending on the type of business you establish, there are various requirements that must be fulfilled in order to maintain liability protection. The series LLC operating agreement is where these details are contained.

A corporation, for example, was once the favorite business entity choice for those who wanted to limit their liability. Today, however, the limited liability company (LLC) is becoming an increasingly popular entity choice. A LLC offers the same limited liabilities as a corporation, but with much less formality. For those looking to invest in multiple ventures, a series LLC has become even more enticing. For series LLCs, not only is the parent company protected, but also each of the “child” LLCs and their assets maintain separate protections.

Series LLC Protection

When you have a series LLCs, you have the unique ability to protect your assets and investment returns from lawsuits. How? Series LLCs are commonly formed in an effort to “box” a single, or small chunk, of your investments.

The Series LLC “Box”

If you have three series LLCs (A, B, and C), each with their own rental property investment, you have set up a protective barrier around each. In fact, let us imagine your series LLCs are as follows:

Series LLC A: Set up to run Rental Property A and has a total value equating to $100M.
Series LLC B: Owns and operates Rental Property B with a total value of $500,000.
Series LLC C: Invests in and managed Rental Property C, equaling a total value of $250,000.

Accidents happen all too often and can leave owners with serious financial problems. If a renter’s elderly mother slips and falls on Property C, breaking a hip – you may be subject to a lawsuit. With a series LLC, however, the lawsuit can only take into account those properties and assets associated directly with Property C. Therefore, the assets under series LLC A and B are both exempt from the financial impacts of a lawsuit against series LLC C. This is one of the inherent protections you are afforded under a LLC.

Operating Agreements

For a series LLC, the operating agreement is a vital document. While some business types do require meetings and their frequency, a series LLC only needs to hold them should their operating agreement dictate it. Violating regulations or your operating agreement can have serious consequences and cost you your liability protections. If your series LLC operating agreement does not require meetings, which many do not, you have less paperwork and less chance of violating laws.

Fewer Requirements, More Freedoms

Most series LLC agreements do not require meetings. While meetings are a good idea and can ensure all members and employees are on the same page, they are not a legal requirement and, therefore, only needed when you deem them so. Ultimately, with a series LLC, you have the freedom to run your company as you see fit while still maintaining asset protections. If you would like to know, contact Royal Legal Solutions today. Our experts are standing by to help you find the best way to avoid the devastating impacts of a lawsuit and maximize your earnings.

Series LLCs and S Corporations: Which Is Best For Your Business?

Limiting your liability is an important factor when you start a business. Because of this, many entrepreneurs start with a limited liability company (LLC) or an S corporation. But which one is right for you?

Similarities Between A Series LLC and an S Corporation

There are many similarities between an LLC and an S Corp.

Pass-Through. Both the LLC and S corporation are typically used because they are pass-through tax entities. For pass-through entities, income taxes are not typically filed at a business level. Any profits or losses felt by the company, however, are “passed-through” and filed with their owners’ personal returns. In other words, if taxes are owed, they are paid by the individual, not the business. (Note, however, that S corporations are required to file business tax returns. LLCs only need to do so if they are owned by multiple individuals.)
Protection. Both types of businesses protect their owners. Through their limited liability protection, both types render their owners not personally responsible for any debts or liabilities related to the businesses.
Separate Entities. LLCs and S corporations establish separate entities for their owners. This is what creates the legal barrier that prevents owners from being personally responsible for debts and liabilities. Once the business is filed with the state, the inherent laws and regulations become viable. For LLCs, this same separation of entities applies to series LLC versions as well. Series LLCs enable a company to divide its assets between different, sub-companies. Legally, under a series LLC, each sub-company’s assets are protected as if they were the only entity.
State Requirements. Both a LLC and an S corporation are subject to state requirements. This can include filing requirements, related fees, and other state-mandated regulations.

Differences Between A Series LLC and an S Corporation

There are some significant differences between LLCs and S corporations.

Formalities. S corporations have several internal formalities that must be fulfilled in order to maintain their limited liability. Bylaws, stock issuance, meetings and meeting minutes are all required on the part of an S corporation. This is not so for a LLC or any of its series. (The Internal Revenue Service (IRS), however, does recommend that LLCs have an operating agreement, member shares, and annual meetings. They also recommend LLCs document all major decisions.)
Management. An S corporation is required to have a board of directors and officers. For an LLC, however, owners can choose to manage their business or they can elect to hire an outside person to act as manager.
Ownership. The IRS has several restrictions for S corporation ownership. For example, an S corporation cannot have more than 100 owners or shareholders. In addition to this, all shareholders or owners must be US citizens or residents. None of this is true for LLCs. In fact, not only can LLCs have an unlimited number of owners, they are also allowed to have unlimited subsidiaries or series.

Do I Need an Attorney to Form a Series LLC?

Entering the business world through the establishing your own company can be a scary, but exciting time. There are papers to file, fees to pay, and regulations to abide by. For small business owners, a limited liability company (LLC) is often an ideal option. A Series LLC can be even more appealing. These LLCs allow owners to file separate assets under different business entities, protecting each from any debts or lawsuits that may be brought against the others. In other words, assets assigned to each sub-LLC are shielded from each other’s liabilities. Nevertheless, what are the legal requirements of a series LLC? Keep reading to find out.

What States Allow The Use Of Series LLCs

State laws permit, limit, or restrict the formation of series LLCs. Some states, including Delaware, Illinois, Nevada, Texas, and Utah, allow owners to establish series LLCs. Other states, such as California, to not allow series LLCs to be formed within their borders but do permit those formed legally in other states to register and conduct business. Still, a few do not recognize series LLCs at all.

Legal and Professional Help On Your LLC

If permitted by the laws of their state, anyone can establish an LLC. A lawyer is not needed to do this. However, it is highly advisable that anyone considering establishing a business consult with a lawyer and a tax professional. A series LLC comes with a lot of freedoms other business models do not. However, as with most things in life, laws and regulations still apply.

Articles of Formation. For example, filing a series LLC is quite similar to filing a more traditional LLC. Both require owner(s) to file articles of formation with specific government entities.
Operating Agreement. With these articles of formation, an operating agreement is either required or highly recommended. (Check your state laws or consult with a lawyer to find out what your state explicitly requires!) For a series LLC, your operating agreement most likely will need to expressly authorize the primary LLC to form subsidiary-like LLCs.
Fees. Fees to set up your LLC or series LLC will vary by state. Some may require a fee for each series, some may not. Your local laws dictate the requirements for the state, or even county, you file your series LLC in.

With all the paperwork, fees and state requirements – it is likely in your best interest to consult with a lawyer in the very least.

Royal Legal Has Worked With Many Series LLC's

While a lawyer is not a requirement when forming a series LLC, it is highly advisable. A consultation can help ensure you start your business on the right foot. Maintaining a working relationship with a lawyer can help ensure you remain in compliance with all laws that may affect your business. Even if you have a series LLC and have owned it for some time, talking with a professional can keep you up to date on any state law changes that may have occurred since forming your company.

What are the Main Differences Between a Series LLC and a Traditional LLC?

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!

The Similarities

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.

The Differences

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.

Professional Guidance

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.

The Biggest Benefits of Series LLCs

There are a host of benefits to using a Series LLC. It truly is the entity that offers something for everyone. Whether you're looking for tax perks, operational or administrative benefits, easy ways to grow your business, or asset protection, the Series LLC has you covered. Read on to learn more about these and some other benefits you can reap from using a Series LLC.

Series LLCs Let You Grow Your Business Forever

Take a look at the picture below to understand the Series LLC structure. You'll notice there's an operating company on top, and multiple companies beneath. We use the metaphor of father to make the point that this structure lets you have as many kids, or Series, as you like.

Although our example has three Series, you can literally grow your business until the end of time. Each Series is its own LLC, and you can create new ones easily as you acquire more investments or other assets. As a bonus, you save money by using a Series LLC rather than the same amount of Traditional LLCs. You pay the costs of establishing the LLC once, and only once.

Series LLCs Protect Your Valuable Assets

The Series LLC's structure isolates your assets, allowing you to have full liability protection for each one. Each asset is secured in its own Series, which functions as its own LLC.

In practice, using a Series LLC makes you very difficult, or at least highly impractical, to sue. Even if someone has a good reason and the resources to sue you, their attorney may not want to. Why? The reasons are pretty simple:

Anonymity protects you as an individual, and keeps your name off of the assets. Without a name, it's impossible to sue you personally. Suing the assets is possible, but more difficult.
Isolated assets mean only one asset is ever vulnerable at a time--the rest of the structure is immune to litigation.
Asset protection strategies in general make that sole asset someone wants to sue you over not that worthwhile. Attorneys don't like to take cases if there's not a prize (in the form of cold, hard cash or a valuable asset) worth fighting for.

This is just the quick and dirty version. See our previous article on how the Series LLC prevents lawsuits to learn more.

Series LLCs Offer Great Tax Benefits

That's right, even Uncle Sam is kind to the Series LLC. We could write a whole article on tax benefits alone, but here are our top two.

Save on Business Taxes

The Series LLC is represented only in its "home state." This means, if your Series LLC is formed in a state with no sales tax, you get to skate on sales tax. For real estate investors, this means rental payments between Series aren't subject to sales tax.

The beautiful part is, you don't even have to reside in the state you form the Series LLC in. If you're itching to save on taxes, consider the Texas Series LLC. This entity will also help you save money via pass-through taxation.

Simplify Your Tax Returns

Even though you can have as many Series and assets as you want, you'll still only file one tax return for the whole shebang. The operating company, or parent company, is the only one that you're required to put on the form. Of course, you're still paying taxes on the "children" (Series), but it's all reported as a single entity.

All these benefits and more can be yours. Contact us today to schedule your Series LLC consultation.

Can My Series LLC Have an Unlimited Lifespan?

Regular readers know our firm absolutely loves the Series LLC. It's among the most versatile and powerful entities for real estate investors, or anyone with a growing business in need of asset protection. Today, we're addressing how the Series LLC holds up over time. So, can your Series LLC live on forever? Why would you want a company that could achieve such longevity? We'll answer these questions and more below.

Can The Series LLC Have an Unlimited Lifespan?

The short answer is yes, it absolutely can. Traditional LLCs can also have unlimited lifespans under some circumstances. What does this mean in practice?

Some types of companies have laws that require them to re-file with the state to continue existing beyond a certain point. Otherwise, these companies will be required to dissolve within a specified timeframe. By contrast, the Series LLC has an unlimited lifespan, also referred to as a perpetual lifespan, automatically. When you use this structure, you won't have to worry about re-filing, or other paperwork hassles. Read on to learn more about the specific benefits of this feature.

Why Should I Care About My Company's Lifespan?

There are several advantages to having a company with an unlimited lifespan. The most obvious of these is that you'll save money. Re-filing with the state isn't free. You have to pay fees when you re-file to prevent the dissolution of a company with a concrete lifespan. The Series LLC, however, is immortal. You pay once, when you establish it, and you're done. Some other perks of perpetual lifespans include the following:

Freedom to run your company and assemble your board/members as you see fit. Other types of companies will require annual board meetings or specify different aspects of management. You're free of these obligations when you use a Series LLC.
Ability to add members without interference from the state. Since company's with a measurable lifespan have board requirements, they don't enjoy this luxury.
Separation between you as an individual and the assets within your Series LLC. In theory, the company could outlive you. That said, if it does, you'll have to anticipate changing membership.
Tax savings, both because you're only filing with the state once, and also because the Series LLC receives pass-through tax treatment.

Of course, there are many more benefits to the Series LLC as a whole. You can read much, much more in our previous posts about advantages of using a Series LLC.

How Do I Form My Series LLC?

Forming a Series LLC still requires filing paperwork with the state. You'll also need an Operating Agreement for the parent company, banking and bookkeeping preparation, and enough Series for each of the assets you intend to protect. Funding the Series LLC is another issue to deal with. Getting this done correctly is important to make the most of your new entity.

That's why it's important to get help from a qualified attorney with specific experience in Series LLCs and their management. At Royal Legal Solutions, we offer a full-service Series LLC package that gets you in business as soon as possible. If you're ready to get started, schedule your Series LLC consultation today.

Some Drawbacks of Series LLCs

The Series LLC is a remarkably powerful tool, but it isn't a panacea. Few things in life are perfect, and the Series LLC is no exception. No entity, legal tool, or strategy is one-size-fits-all. Today, we're going to discuss some of the drawbacks of using a Series LLC. This post should help you determine if the Series LLC is right for you.

Series LLCs Aren't Cheap

Forming a Series LLC costs money--usually several hundred dollars. Those costs can go up depending on if you need additional features for asset protection purposes. The Series LLC isn't unique in this regard. In reality, forming any company is going to cost you money. But forming a company correctly is difficult to do on your own, unless you're an attorney. If you aren't an attorney, you'll almost certainly need the guidance of one.

Lawyers aren't cheap, but if you want a correctly-formed entity you can rely on, this is an expense worth paying for. The alternative is doing it yourself, which means you risk making mistakes that your business will end up paying for in the end. You could lose liability protections, or even fail to register properly. The consequences of these mistakes are generally more costly than employing an attorney to oversee your company formation in the first place.

That said, Series LLCs do save immensely on start-up costs. This is because you're only going to file and pay fees once. If it comes down to using multiple Traditional LLCs or the Series LLC, the Series LLC actually is cheaper. How much you will pay is going to depend largely on what type of business you're running.

Series LLCs are Newer Business Structures

The Series LLC is a young entity compared to other corporation options. This means there hasn't been as much law made specific to the Series LLC. Courts operate on precedent, or previous rulings from other courts and prior changes in law.

When a legal concept or structure is as new as the Series LLC, it becomes difficult to predict what outcomes you'll face in certain situations. This is simply because you're entering barely-charted territory.

Bankruptcy

Bankruptcy is one example of where the Series LLC's newness can become problematic. If you're unfortunate enough to end up in bankruptcy court, your Series LLC may protect the items in your series. But it isn't certain.

Because there is little precedent on how the courts treat the Series LLC, it's impossible to say whether each Series would be treated as a unique entity. Similarly, we just don't know how the entity as a whole will be regarded by these courts. It's literally going to be up to the judge, and some business owners don't like this unpredictability.

The law is ever-changing, and the future is uncertain. For now, however, Series LLC protections have been able to withstand legal scrutiny and many attempts to breach its protections.

Ultimately, understanding how a Series LLC works and whether the Series LLC is right for you is going to depend on your business needs. If you're unsure whether this structure is the right fit for you, feel free to ask questions in the comments section below. You can also contact us for help forming the best entity for your business.