Don't turn back if you own a traditional LLC--the information about LLC bookkeeping below applies to both the traditional and series LLCs.
The series LLC is a powerful tool for real estate investors. It helps spread your assets across multiple legal entities, which protects your assets during a lawsuit.
Remember that old saying, "never put all your eggs in one basket"? A series LLC is the best way to spread your "eggs".
As great as this structure is, it's no substitute for sloppy bookkeeping. If you as a business owner fail to abide by State requirements regarding their LLC essentially violate their agreement with that State. This leave you vulnerable to lawsuits.
LLC bookkeeping can be complex since the rules and regulations vary between States. We strongly recommend hiring a seasoned professional to help in this area. Today we’ll cover three of the most common mistakes business owners make with Series LLCs.
A series LLC is multiple, individual LLCs. Each LLC within the series is distinct and needs to maintain its own records. Once you know how to start an LLC, you know that a series isn't that much more complicated (and often brings you added protections).
The purpose of the series structure is to make it easier to manage multiple businesses. It streamlines the management process. However, you should not try to combine the different accounting records of your LLCs. Doing so can invalidate the series structure, leaving you unprotected, among other things.
Most states require your company to name an LLC registered agent, which is a physical address within the state. If this is one of the requirements in the state you filed your business, then foregoing that responsibility will invalidate your LLC and leave you unprotected.
Some states require you to have a special license in order to manage properties held by another entity or to run a property management company. Violating that specific state’s laws can put your series LLC in jeopardy and result in a costly lawsuit.
That's it for the requirements. But If you're interested in learning more about how to protect yourself and your assets from lawsuits, check out this article on the power of the series LLC with Anonymous Trusts.
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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