Series LLC – A Primer

There’s been growing interest in the Series LLC.  The Series LLC provides the type of flexibility that real estate investors and angel investors might find particularly attractive.

Although there are some risks and uncertainties relating to the Series LLC, the Series LLC is a powerful tool to create a series of limited liability companies in a single vehicle.

“Series” LLC v. Traditional LLC

Just like a traditional LLC, e.g.:

  • Can be owned by multiple individuals or by separate business entities
  • No geographical restrictions on ownership; owners may be located anywhere in the world, so long as they comply with the entity’s tax classification.

Advantages of Series Structure

IF the series LLC is organized properly you can take advantage of a centralized management structure and have an extra layer of liability protection.

  •   Each series (cell) may have discrete assets or investment objectives that are separate from the assets or investment objectives of the Umbrella LLC and of each other series.
  • Separate duties with respect to specified property or obligations of the limited liability company
  • Operating Agreement may establish one
  • No need to pay lawyers to file for subsequent series with the government
    [1] Series LLC Basics: Owners and Managers, Smart Business Incorporation (2013),  http://smartbusinessincorporation.com/blog/series-llc-basics-owners-and-managers/ (last visited  ).

This layer is created when the larger entity is set up (“umbrella”) and comprised of a series of subsidiary membership interest (“cell”), each with distinct names and separate books.

The subsidiary members function as separate and distinct member-managed cells within the larger LLC entity.  Done correctly, a “series” structure provides an extra layer of liability protection:

  • Any debts, obligations, and other liabilities of a series of a limited liability company are “solely the debts, obligations, and liabilities of the series and not of the limited liability company generally [the “Parent”] or any other series [the cell]”

Where to Form the Series LLC

Delaware, Washington, D.C. and roughly fourteen other states have enacted state statutes that enable an LLC to be created via a discrete series of membership interests.

Here’s a visual for good measure.

 


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