Tax Blog

Business Entities at the State Level: Series LLCs

This week our blog is going to discuss a relatively new business entity in series limited liability companies (series LLCs). We will discuss how a series LLC is organized, how it works, and who would benefit most from filing their business as a series LLC. Be advised, however, that a series LLC is only an option in a handful of states.

For all intents and purposes, there is only one main difference between an LLC and a series LLC in that the series LLC allows for individual series to be formed from one LLC. A series LLC can best be explained by imagining a tree. There is a main LLC, often referred to as a parent LLC, as the trunk of the tree. But the tree also has branches that are separate and unconnected to the other branches. Each individual branch is best described as a series. Depending on the state, each series may have its own bank account, FEIN, operating agreement, ownership structure, etc. For tax purposes, a series LLC may file taxes as one entity or if each series has its own FEIN, then each series may file as its own entity.

In the event of a lawsuit, only the assets of the responsible series are able to be reached; the remaining assets in their respected series remain untouched and unharmed. Therefore, a series LLC grants its members and managers the utmost protection with regards to the ability to separate their assets. However, there are drawbacks to series LLCs. The most apparent drawback being that most states do not recognize a series. Another drawback is that due to their recent inception, most banks and financial institutions do not want to lend to a series since it limits their ability to recoup funds in the event of a default.

A series LLC and its respective series can be filed with the Secretary of State. If you have any other questions about whether filing a series LLC is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.

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