If you’re looking for a way to organize your business that not only gives you the benefits of a traditional LLC but also has some added benefits, then you might consider looking into a series LLC. This is a relatively new option that has been gaining popularity in the past few years, and it could be a great choice when it comes to reducing administrative costs and further isolation of your liabilities.
What is a Series LLC?
Before deciding if this type of LLC is right for your business, it’s helpful to know precisely what it is. In essence, it’s a collection of mini LLCs under a master LLC. In concept, it’s similar to having a parent company with subsidiaries beneath it. Each LLC is independent of the others, and each has its members, is liable for its debts and obligations, and can have its own assets. The master LLC is the holding company that controls the entire mini LLCs in the series (hence the term “series LLC”).
For whom is This LLC Right?
If you’re planning on forming multiple LLCs under a large conglomerate and aren’t going to change the function or business operations of each mini LLC, then this might be the right LLC option for you. Generally, property management companies or real estate investors who own a lot of properties use this.
It could also be used if you have a business that has various product lines or divisions. Each product or division could become its own mini LLC. Using this type of LLC would separate and limit the liability of each product or division. Since it is considered as its own legal entity, you’ll have to maintain separate formalities for each mini LLC you create. This means that each mini LLC will need its own bank accounts and financial records.
Benefits of Creating This Type of LLC
There are benefits to creating a series LLC, including the fact that it can reduce startup and administration costs. If you are looking for a way to expand your business but don’t have the capital to create a whole new company, then forming divisions is a cost-effective alternative. Some of the other benefits that come with creating this type of LLC include the following:
- Your assets in one mini LLC are protected from judgments against the assets in the other mini LLCs.
- You’ll only have to file one tax return for the master LLC.
Setting up a Series
When it comes to setting up this type of LLC, there are some things you’ll need to understand. The first is that not all states recognize this type of LLC, and setting it up will vary from those states that do allow them. Thus, it’s in your best interest to work with a professional who has experience with this type of business structure. They’ll be able to explain the pros and cons of this option so that you can make an informed decision.
Setting up a series doesn’t have to be overly complicated, but it’s important to know what you’re getting into. When you work with a professional who has the experience, they’ll be able to answer any questions you might have, as well as inform you of the risks that come with this LLC.
Don’t let this stress you out, as any business venture has risks. However, knowing them beforehand gives you a chance to prepare for what might happen, as well as allows you to develop a plan to help you succeed.