A Series Limited Liability Company is a special form of business structure that provides limited liability protection to each individual constituent of an LLC. To elaborate, in a series LLC, each of the (multiple) series of companies is protected from the liabilities of the others. It is something akin to a corporation with subsidiaries. Generally series LLCs are formed to protect real estate investments. Each separate investment is constituted as an LLC and brought under a single entity. By doing this the specific LLC in the series is liable only to claims arising out of its own business. In this manner each investment is protected from the liabilities of other LLC’s in the series, essentially liability of one LLC does not cross over to the other series. The advantage of a series LLC form is that the legal and statutory obligations and administrative procedures can be performed as a single entity. There are limitations to this single entity filing though. If any of the series constituents has a member who is not a member of the founding LLC, it has to file returns and pay fees as a separate LLC. There are some tax benefits also in forming a series LLC. One among them is that if one of the series is using property of another for business purposes and paying rent, sales tax on the rent may not be applicable.
How to form a LLC series depend on the state statute where you wish to register your series LLC. Basically the requirements are almost the same as forming a normal LLC. An Articles or Certificate of Organization has to be filed and due fees paid. Series LLC should have a Limited Liability Company Agreement like that of the Operating Agreement in a normal LLC. Addition of new series or deletion of an existing series is uncomplicated. An amendment to the agreement would suffice. Each constituent of the series LLC should have a distinguishing mark that separates it from others. For example, XYZ LLC Series A or XYZ LLC Series B. Keeping the business of each LLC seperate in the series is imperative. You must maintain separate books of accounts, bank accounts and other legal documents and transactions to get the limited liability protection for each LLC. Ensure that all assets and contracts distinctively state the name of the series it belongs to. The transactions between the series must be in a comparable uncontrolled price method or a fair market price method and should be properly recorded.
