Since the concept of a Limited Liability Company (LLC) is still relatively new in the US, there are quite a few LLC variations that we have witnessed in recent times. One of those variations is the series LLC.
Traditional or regular LLCs have become popular among new business owners and entrepreneurs due to the fact that they provide flexibility and a better asset and liability protection cover as compared to other business entities.
In this read, we will discuss the various benefits that you can get from a series LLC.
So, what is a series LLC all about?
As quite evident by its name, a series LLC is a concept of multiple ‘child’ LLCs that function under one parent or master LLC. This concept started back in 1996 in Delaware and has gained noticeable popularity ever since.
Although LLCs are connected to one another, the major highlight of a series LLC is that all companies or LLCs are financially independent from one another. This means that if a lawsuit is filed against one of the LLCs, it will have no legal effect on the rest of the LLC in the series.
Additionally, series LLCs enjoy the same asset protection and limited liability protection that a traditional or standard LLC does. So if one of the LLCs is sued, creditors can not come after your personal assets (car, bank account, home, etc.).
Also read: Top 10 Trending Technologies You should know about it for Future Days
Let us have a look at some of the key similarities and differences between a regular LLC and a series LLC.
Both the series and a standard LLC have pretty much the same formation process. Articles of organization need to be submitted with the relevant state’s secretary of state along with a filing fee.
Both types of LLCs provide asset and liability protection to its member(s). Moreover, there is no limitation in terms of the number of members or owners for both of these LLC types.
Assets and liabilities are managed under a single entity in a standard LLC, while a series LLC gives you the option to split them.
Also, there is a key difference of streamlining multiple LLCs in both these types. If you own multiple regular LLCs, it will not be a walk in the park to manage each one of them. On the other side, series LLCs give you better administrative control that results in streamlined administration.
Let us now talk about the positive elements of a series LLC:
Series LLCs offer compartmentalized liabilities – which means that every single LLC in the series is legally separate from the other. If one LLC is sued, other LLCs will be protected from any claims or liabilities of that specific lawsuit.
Comparing series LLCs with multiple standalone LLCs or even a corporation with multiple subsidiaries, the setup cost is lower for this type of LLC. Additionally, series LLCs require relatively less effort from your side in maintaining the companies once they have been formed and approved.
Also read: The Five Best Free Cattle Record Keeping Apps & Software For Farmers/Ranchers/Cattle Owners
Series LLCs can give you even better asset protection as compared to a standard LLC. In a standard LLC, all your business assets will be registered under a single entity. However, with a series LLC, you have the option to split your assets as per your own terms.
Series LLCs can be more beneficial in terms of taxes, as you’re allowed to file multiple LLCs on the same tax return. This can save you a huge amount of tax money.
Additionally, you get a single EIN for all series LLCs which makes the tax preparation process a whole lot easier for your accountants.
Here are some of the drawbacks:
A major problem with series LLCs is that they are only accepted in 16 US states. This can become a huge obstacle for your business expansion in other states over the years.
Since the concept of series LLCs is still new, there might be some uncertainty in the event one of your LLCs in the series is sued.
So far, there haven’t been too many cases in US courts involving series LLCs, so it is too early to tell what sort of legal treatment your business might get, even if your business is registered in one of the states that recognize series LLCs.
Similarly, in the case of a bankruptcy, there isn’t much clarity whether you will be allowed to file bankruptcy for just one specific LLC, or for all the LLCs in a series.
In order to keep series LLCs legally separate from each other, you will need to designate registered agents for each of them, and also open individual bank accounts. This can become a hassle and at some point, you might want to hire a professional to manage them.
Also read: Top 10 Best Software Companies in India
Even though the full extent of benefits is yet to be seen for this LLC type, there are some industries or sectors where such business entities can help the owners.
For example, if you have a property management organization, series LLCs might give you a lot of benefit. Each individual property will have its own liability and will be legally separate from the rest of the properties under the parent LLC.
Similarly, if you plan on having joint ventures or mergers in future, but you do not want to risk your entire business, registering multiple series LLCs can give you a protective cover as only one segment of your business will be exposed to new risks from the venture.
Tuesday March 7, 2023
Thursday February 2, 2023
Thursday January 12, 2023
Friday December 23, 2022
Tuesday December 13, 2022
Thursday December 8, 2022
Friday December 2, 2022
Friday November 11, 2022
Wednesday October 12, 2022
Saturday July 2, 2022
Copyright © 2018 – The Next Tech. All Rights Reserved.