The Series LLC is an excellent legal structure. Assuming you're doing your part, you don't have anything to worry about. If you don't know about the Series LLC, read this Series LLC Primer now. Then come back for the rest.
Everyone else, keep reading.
Protecting the series structure of an LLC is much like protecting multiple LLCs. Each series of a Series LLC is treated just like an individual LLC.
This is something you need to remember when you're running your LLC business. Let's imagine you hae a Series LLC with five different series underneath it. You have to treat each series as if they were five different LLC's.
There's a few things you need to do to protect your series LLC.
One is you must track the money for each different series separately. You must keep those records as if the series are their own LLC.
You should also consider having separate bank accounts for each series. While this isn't a requirement, having separate bank accounts will make the accounting process so much easier.
What happens is that all your series will be merged together by the court as if they were all one company. This completely defeats the purpose of the series.
It's not that your LLC will completely go away and then you end up with no protection. It's just now all of your money is in one pool. This cripples your asset protection strategy. Remember, the reason you have a Series LLC is to minimize the amount of money anybody can come after at any one time.
Let's say you find yourself in a lawsuit and the court decides to treat all the series you've made as one company. If all of your series get treated as one company you better believe the attorney for the other side is going to do everything in his or her power to win that lawsuit.
After all, the more assets you have for the taking, the more money an attorney can earn from suing you. Then let's say you actually lose the lawsuit. That's the equivalent of someone winning the power-ball, with the prize pool being all of your assets!
On the other hand, if your series hadn't all been merged together, the majority of your wealth and assets would have been untouched.
So remember: keep separate bank accounts, keep adequate records, and make sure you're doing your part!
If you have any questions about what we just went over don't hesitate to ask me in the comments! I'd be glad to help you by answering any questions you have below. If you want to discuss your unique situation, schedule your personal consultation 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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