A Series LLC is a Limited Liability Company
This LLC has more than one series of members, or managers. Its LLC interests have separate rights, powers, or duties with respect to specified property or obligations of the LLC (or profits and losses associated with specified property or obligations). Any such series may have a separate business purpose or investment objective. For years, Delaware law has permitted an LLC to register separate series, but use of this structure remains uncommon due to uncertainty over federal income tax consequences. States With LLC Series
Seven states: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee and Utah have enacted statutes permitting formation and qualification of the Series LLC. Overall Delaware Definition
According to Statute 6 Del. C. Section 18-215: The Delaware Series LLC is a unique Delaware LLC with unlimited asset segregation potential. Within the Delaware LLC Act, a special provision provides for one entity to act like many entities. Under one Series LLC you can set up numerous "series," with each owning separate assets. Series Definition
The Series LLC permits separate liability-insulated divisions within a single entity. Within the single LLC, there are separate and isolated divisions, or LLCs, known as a "series", "basket", "container" or "cell" Initial Leeway
In general, the separate series are not required to be named in the formation document filed with the state, but the formation document must contain a notice of limitation of liabilities of series. Why Choose a Series LLC?
Suppose you wanted to conduct more than one type of business, and you didn’t want to create a separate corporation or limited liability company for each. The Series (or Serial) LLC allows different lines of business to be treated separately from each other from a liability standpoint. So, for example, an LLC that owns several apartment buildings may insulate the LLC from liability for each individual building, if the operating agreement allows for it, and the operating agreement is followed. The Most Cutting Edge Entity
The Delaware Series LLC is the most cutting-edge entity on the market. The Series LLC is a product of the Delaware legislature, the most highly regarded body for drafting corporate laws. When forming a company, business promoters have a choice of jurisdictions, and many knowledgeable entrepreneurs and real estate investors have chosen Delaware because of its low costs, privacy protection, business-friendly courts, innovative laws and dependable liability protection. Separate Books and Records for Each Series
As long as these separate records are kept, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the company generally or any other series. Unlimited Baskets (Series) Under One Organization
Unlike a conventional LLC in any other state, a Delaware Series LLC has the advantage of having multiple, even unlimited, liability baskets under one organizational company umbrella. The Series LLC is tantamount to a number of separately filed LLCs. The protection is often called “ring fencing.” The protection afforded by this one entity, coupled with unlimited liability and asset segregation potential, makes the series LLC a very powerful and cost effective asset protection tool. Registered Agent and Annual Report Bargain
In Delaware the Series LLC only requires one registered agent and one annual report fee of $200 per year regardless of the number of series within a Series LLC. Privacy of the Series LLC
Privacy is another benefit of the Delaware Series LLC. Only the name of the LLC and the Registered Agent's name are listed with the State of Delaware. No member's name is listed. Only the Registered Agent’s information will be filed with the Secretary of State. This provides owners and managers with a large degree of anonymity and privacy. Important Information on the Series LLC
• You can convert an existing conventional LLC into a Series LLC
• You do not need a separate EIN for each of the series; only one EIN for the entire Series LLC
• Only one overall Operating Agreement is required; however, separate agreements may be beneficial
• No new Series LLC is needed when increasing or decreasing an existing Series LLC
• No case law yet exists on the Series LLC, but that will change
• Only Delaware recognizes Series LLCs at this time, but that should eventually change (other states do, however, recognize an entity that is properly formed in its original state of formation) Operating Agreement
Usually the Series LLC is set up with a much longer and customized Operating Agreement for the Series LLC. This Operating Agreement is typically more than fifty pages. Separate Series Agreements
In addition to the Operating Agreement for the Company, each series under the umbrella typically has its own Separate Series Agreement, which can be agreed upon subsequent to the Company’s Operating Agreement. Each basket or series holds assets in its own name, (i.e., Comstock LLC, Series 1). Separate Series may be terminated at a different time than the Company by using a Separate Series Agreement. While a separate EIN is not required, some owners obtain separate EIN numbers for each series and open separate bank accounts for each series. The Certificate of Formation does not need to be amended as series are added. Taxes
The Series LLC is taxed like a traditional LLC - either as a sole proprietorship for a one-member LLC or as a partnership for a multiple-member LLC. There is one tax payer ID number required for the entity, although some accountants request separate EINs for each cell. (Note: The IRS has yet to issue any guidance on how they intend to treat the series LLC for tax purposes.) Federal Tax Consequence Still Uncertain
Since the federal tax consequences of Series LLC are uncertain, a tax professional familiar with this type of entity should be consulted. It is possible that a Series LLC may be taxed either as a single entity or as multiple organizations. Because the state of Delaware considers a Series LLC only one entity for tax purposes, only one annual franchise tax of $200.00 is required prior to June 1 of each year. The California Franchise Tax Board, on the other hand, taxes each series as a separate entity if the Series LLC is registered or doing business in California. Multiple Parcels of Real Estate
For Real Estate investors with multiple properties, the Series LLC isolates each of the properties in separate cells. In states such as California, Texas and New York that require high fees to maintain separate companies, the Series LLC may be registered as a single foreign entity, saving on annual filing fees. The Delaware Series LLC needs to qualify only once as a foreign company doing business in the state where the property is located. A Delaware Certificate of Good Standing can be obtained and may be required by the Secretary of State in your home state. Creditors
The Delaware LLC Act empowers one or more members to build “fire-walls” between assets and liabilities within a single entity. One principle is to prevent a creditor of one cell within the LLC from collecting against other unrelated cells within the same LLC. Multiple Product or Service Lines
Entrepreneurs and small businesses with different product or service lines can similarly incubate new products or services in separate cells. Properties and businesses may later be "spun-off" into separately filed LLC's. Cells may be terminated at any time with the consent of the members. Adding Additional Series
The Series LLC members may add additional series within the LLC by simply signing a three page addendum to the Operating Agreement. While it is typical to set-up two series as part of the original LLC creation, additional series may be added at any time. This simple procedure, along with the requirement of maintaining separate books and records, makes the Series LLC an attractive alternative for the sophisticated investor or ambitious entrepreneur. High-Liability and Low-Liability Assets
Sometimes the Series LLC may be used to "group" businesses or properties. An individual may therefore have two or more separate Series LLC to protect high-liability assets, such as active businesses, from low-liability, but high-value assets such as real estate. It is usually not a good idea for high-liability and low-liability assets to be kept within the same Series LLC even if they are designated to separate cells. Who Would Benefit from a Series LLC?
The series LLC is mainly for people who cannot afford, or do not want to pay and maintain multiple entities, such as several LLCs. However, it should be noted that it is typically advisable to form separate entities as an alternative to a series and not to over-fund the series with more assets than could be justified if all are subject to one judgment if a large judgment is rendered. Even with the disclaimers and warnings, the series LLC simply suits some people better. The Series LLC is not for everyone. More predictable asset segregation comes from multiple entity filings. Additional Uses of the Series LLC
• Mutual funds avoiding the need to file more than one application with the SEC for separate classes of funds.
• Owning containers to be shipped overseas,
• An incubator for entrepreneurs with many business ideas (which may later be spun-off into separate LLCs if ideas start to take flight),
• To own trailer park lots
• To franchise businesses
• As a holding company owning intangible assets, or tangible assets such as real estate
• As an operating company conducting different lines of business
• Incentive compensation for employees
• To own intellectual property
• To own a cluster of real estate investments
• To own a series of building lots that are to be developed one at a time
• For family gifting. Caution
Because the Series LLC is a relatively new entity, its benefits are still largely theoretical. Protecting assets by separating them into LLC series is an approach that has not yet been tested and proven by case law. Because case law on the Series LLC is uncertain, this entity type should be established under the guidance of a legal professional familiar with its requirements. | 
