Whether you're a veteran investor, or a new investor just beginning to build your real estate empire, the series LLC for real estate investors has many features and benefits you should know about.
If you've been using a traditional LLC for asset protection and have never heard of the series version, prepare to have your investing world changed forever.
The series LLC is one of the most effective entities a real estate investor can form. When you take advantage of this structure, you'll not only be able to streamline and grow your business, but you'll also receive the benefits of lawsuit prevention and asset protection.
As both an investor and an attorney, I believe that the series LLC is the best structure for real estate investors who want asset protection while they build their real estate empire.
What is the Series LLC?
The Series LLC is very similar to a traditional LLC (see our Series LLC vs LLC article). The only difference is, instead of being one big company, the series LLC is a network of LLCs. It uses a parent-child structure. Your parent company is its own LLC, and it can have as many "children," or Series, as you have assets to place within them. Each asset will have its own LLC, complete with liability protections and many more benefits we'll discuss below. Take a look at the following diagram for an example of what this looks like in practice.
The set-up is elegant in its simplicity. The operating company, dubbed "Big Daddy" above, is in charge of the kids. Each kid is its own asset. Of course, you could have any combination of properties or property types.
Biggest Benefits of the Series LLC For Real Estate Investments
The benefits of a Series LLC are numerous. Here are the top reasons you should consider this structure.
Scalability: One Structure, Infinite Real Estate Investments Assets
With the Series LLC, incorporating new assets is easy. Suppose you spot a cute little fixer-upper property at a great price. When you buy it, all you need to do is a little bit of paperwork and have your attorney sign off on it to add it into the structure. If your Series looked like the one above, your new asset would be "Series 4."
And you aren't restricted to just real estate, either. Any asset can go into its own series - cash, gold, cryptocurrency caches, your midlife crisis Jaguar, etc. If you can think of it, you can stick it in the Series LLC.
Tax Benefits and Cost Savings On Real Estate Investments
The Series LLC allows for pass-through taxation and its benefits. This means you'll dodge hefty corporate taxes and get to file any profits on your personal return. For most people, this is infinitely cheaper. With the help of a competent CPA, you could save thousands.
Other cost savings are relevant for Series LLC owners as well. The clearest of these is evident when you consider how much it would cost to have each asset in its own Traditional LLC. The annual fees would add up. With the Series version, you're getting an infinite amount of LLCs for the price of just one.
Asset Protection Made Simple For Real Estate
A Series LLC is the foundation of a superior asset protection plan. Real estate investors especially need this structure as a starting point. It offers the single most powerful liability protection of any entity one could possibly form. The reason for this is simple: each "Series" holding its own asset keeps it isolated from everything else you own.
How the Series LLC Prevents Real Estate Investment Lawsuits
You may think that you don't need any additional protection from lawsuits because you run an ethical business, have insurance, and try to treat your tenants and customers well. Sadly, if you believe this, you are mistaken. Did you know that one-fourth of Americans fall prey to a lawsuit at some point in their lives? This figure is even higher for real estate investors, up to one-third according to some sources. Why? Because we tend to have more assets for litigious people to want to pursue in court.
The cold truth is that lawsuits are a ruthless, cut-throat business. And like all businesses, they're after one thing: cash. That means, the more wealthy you become from your real estate ventures, the more likely someone is to try to come after your cold hard cash and any assets. Since success makes you an attractive potential payday for unscrupulous and greedy people. Insurance won't bail you out of this situation, and neither will your good reputation or even the best business practices in the world. Lawsuits don't even have to be valid or logical to cost you everything you've worked so hard for.
To avoid this fate, you will want as much protection as you can get. Fortunately, the Series LLC can have your back. In addition to being a less attractive target, the Series LLC's isolation of assets means that if you are sued, only that individual asset is on the line. When implemented properly along with other precautions, Series LLCs are the core of an asset protection plan that is powerful enough to stop lawsuits before your name is even typed out on filing papers.
How Do I Set Up My Series LLC?
Setting up the Series LLC is very simple, but it must be done correctly. Investing in an asset protection plan is one of the wisest moves you can make as an investor, but if you don't do it correctly, you won't get the full benefits of asset protection. One mistake with your anonymity or Operating Agreement, and the plan you've so cleverly devised could be rendered completely ineffective. That's why we offer a full-service product where we complete all of the steps for you, and guarantee your anonymity.
Maybe you already have an LLC for your property. This is great, but the Series version is far superior to the LLC alone. Fortunately, you can incorporate your existing LLC into a Series LLC easily. Even better: it won't cost you any more than you're already paying for your Traditional LLC.
It's never too early to establish or beef up your asset protection plan. But you can certainly wait too late, and the consequences will be dire. If you haven't set up anything yet, you are completely vulnerable. Take care of this before you consider buying any more properties. If you have property in your own name, this is even more urgent.
Our experts are here to advise you on what methods will work best for your individual situation. We're here to help you set up your Series LLC and everything else you need for a bulletproof asset protection plan. Keep the predators and money-hungry attorneys at bay: take action and set up your Series LLC consultation today.