What Makes a Series LLC Different from an LLC?
Have you heard about the Series LLC? It’s basically a newer and better version of the normal LLC. Now you might be wondering, what makes the Series LLC different from a normal LLC? Hint: if you have children, you’ll catch on fast.
The Series LLC works as if it’s a parent-child structure. At the top you have the parent, the Series LLC. It’ll have an EIN number and an official formation document stating what state you formed the Series LLC in.
Below the Series LLC you have the series themselves. You’ll have series A, series B, etc. The series are what I refer to as the children because they all come from the original Series LLC parent. In this way the Series LLC looks like a family tree.
A Series LLC Can Grow Forever
A Series LLC is just like a parent, it can have as many children as it wants, unlike a normal LLC. And this might surprise you, but just like in real life, these children don’t cost any extra money to create. That’s true before AND after they’re born.
Whereas, if you want to put 10 properties in 10 normal LLCs, you’d have to pay state filing fees for each LLC you form.
Each series in a Series LLC is going to be treated for liability purposes as if it were its own LLC. You can take advantage of this by putting one property in each series/child.
This means if you ever have a lawsuit resulting in some type of action against a house belonging to series A, it won’t affect the houses held in series B or C, etc.
I forgot to mention, do you like doing joint ventures? The Series LLC is perfect for doing joint ventures!
For example, series C could be a joint venture agreement with as many people as you would like without involving the other series. It’ll have its own EIN number, tax return and its own operating agreement to conduct the business of your JV agreement.
The Series LLC Is More Efficient Than a Traditional LLC
The Series LLC is the next evolution of the normal LLC. Compared to a normal LLC, A Series LLC is:
- More tax efficient
- More cost effective
- Better at protecting your assets
And best of all, you’ll be able to file each one of your series (no matter how many you have) on the same tax return. This means thousands of dollars a year in tax preparation savings for you.
If you have any questions about forming a Series LLC I’d be happy to answer them in the comments below.