3 Reasons a Series LLC Should be a Real Estate Investor’s Best Friend


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I’ve been working with the Series LLC for a few years now. During that time I’ve gone from being a skeptic to being an enthusiast.

For those of you wondering, a Series LLC is a regular LLC with a twist – it can have an unlimited number of subsidiaries (called Cells), and each subsidiary is treated as a separate structure where liability is concerned – if you set the structure up and run it properly. So far eight states have Series LLC legislation on the books (Delaware, Illinois, Iowa, Oklahoma, Nevada, Tennessee, Texas and Utah). But even if you don’t live or own property in one of those states, you can still use a Series LLC by qualifying it to do business in the state(s) where you want to operate.

I think this is perhaps the ideal structure for real estate investors (and anyone else) who wants to keep their assets safe without spending all the profit on legal structures.

Here are my 3 favorite reasons to use a Series LLC with real estate:

5-11-21. Protection. It’s written into the legislation in each of the 8 Series LLC states. Do it right, and you have liability protection between each cell. So – if you’ve got a big portfolio, you can drop one or more properties into each cell and receive protection. Creditors on Cell 1 can’t come after the property in Cell 3, and so on. Under each state’s legislation, “doing it right” means properly documenting the creation of each cell. That means Resolutions at the main LLC level, establishing the Series Cell. It also means each Cell needs to have its own Operating Agreement, designating its own Managers and Members. Each cell needs to keep separate accounting records, get its own Tax ID number from the IRS, and maintain a separate bank account.

Something I’ve had a lot of people ask me is if they can establish 1 bank account for the main LLC, and then just show the transfers to the various accounts on the books. My feeling is no – that will be treated as comingling and will likely cause your liability protection to collapse. I tell my clients that operating a Series LLC is the same amount of work as operating a multitude of separate LLCs … with one big exception.

5-11-32. Cost. Your reward for all that extra bookkeeping is a single structure fee, and a single resident agent fee. If your LLC is located in Nevada, you pay the state fees of $325 + one resident agent fee, no matter how many subsidiaries you have.

If you are operating in another state, the same would apply. Yes, you’d have two sets of fees (resident agent + annual filing fees), but contrast that to the costs of operating multiple LLCs. In a state like Massachusetts, for example, each LLC will cost you $500 + resident agent fees per year.

3. Ease and Speed of Creation. Once you have the main LLC set up, creating subsidiaries is simple. It’s an internal process. No lawyers, no formation agents … just some documentation and 5 minutes on the IRS website to get a Tax ID number. Your cost = $0 if you do it yourself, and you’re done in less than an hour. If you want 1-hour service for a new LLC in Nevada or Delaware, you’ll pay $1,000 on top of all other fees … plus attorney or service-provider fees, which you can bet will be increased for such a fast turnaround.

These 3 reasons really just scratch the surface of the Series LLC’s possibilities. Diane and I will go through some more in our Coaching session later this month. There’s still time to get involved and join the program. If you act now, you’ll even get access to our May 11th session on legal and tax saving opportunities for your primary residence.



17 Comments

  1. Sanjay says:

    Hi Megan,
    I recently opened a Series LLC in Nevada and want to buy rental properties in the State of New York. When I visited the Niagara county clerks website to set up a DBA it said that I would have to provide a “street address” & PO Boxes were not accepted. As I am an overseas investor and do not live in US, what’s my best option?
    Thanks.

  2. Megan Hughes says:

    Hi Joe,

    Illinois is one of the few states that makes you register the Series with the Secretary of State. There’s a form called a Certificate of Designation (LLC Form 37.40). If you want to then apply for a DBA for the Series you can, or you can just use the Certificate of Designation to open up a bank account and do business. It functions as a mini set of Articles in that instance.

  3. Joe says:

    Great post. In Illinois, is it possible to have a d/b/a for an individual series? If so, is there a separate form for a series d/b/a? I only see a form for filing a d/b/a for a normal LLC (Form 1.20). Thanks!

  4. Alice says:

    Thanks Megan for responding so quickly. It sounds like you are saying that you file a dba application for your LLC? Texas does not allow DBAs in the name of LLCs. I just wondered how I could register my new series LLC since the company’s name must be unique. If someone else register the same name that I have selected internally, it could cause branding issues. This is the part about Series LlC that is puzzling, but maybe I shouldn’t worry about that – it is the “way” of the monster. Thank you.

    • Megan Hughes says:

      Hi Alice,

      Yeah, there’s definitely the potential for brand confusion. I think that lawmakers, outside of Illinois, have had a tough time thinking their way through something that works all the way. For example, without something with a file number on it, I’ve had trouble getting bank accounts opened for subsidiaries. That’s why I’ve begun recommending the use of a d/b/a – it gives the banks a number to associate with the company. And we’ve had Series law in Nevada since 2003!

      I also don’t see, in most states, that the tax/license boards have caught up – there’s nothing on TX site about updating the personal information report each year, etc.

      Illinois is the only state that has law around the registration of subsidiaries. They keep it low, and don’t require the subsidiaries to file anything annually. They file 1 form to register and 1 to notify of cancellation of a subsidiary, and that’s it.

  5. Megan Hughes says:

    Hi Alice,

    The privacy aspect of the Series LLC is definitely a double-edged sword. How do you let the world know this is your name?

    I like to file d/b/a applications for the subsidiaries. That gets something out there. Many states list d/b/a filings alongside the formal Secretary of State incorporations.

  6. Alice Monroe says:

    Under the new Texas Series LLC, how do I register my newly created subsidiary under the main LLC? I have a unique name for sub, but how do I keep someone from using my company name since the cells or subsidiaries are all done internally?

  7. Bob Lewis says:

    I have residential rental houses. A few years ago set up LLC’s and deeded properties one each to an LLC. Then I got my property insurance bill…..about 5 times as much since they were then insured as “commercial” properties. Needless to say I undid the whole thing and bought umbrella liability coverage…..much cheaper.

  8. Megan Hughes says:

    Hi there,

    I’d definitely recommend using an LLC for your new business. You get better asset protection from the LLC than you do with a straight S Corporation. I also agree that you should make the S Corporation election with the IRS. The reason is lower taxes. If you are taxed as an S Corporation you can take part of your income as salary and part as a profit distribution. You’ll pay fed/state income taxes on all the income, but you’ll only have payroll taxes on the salary side. Depending on how much you’re making, this can add up – fast! Plus you will have a lower audit risk as an LLC making the S Corporation election. Even the IRS admits that it audits sole proprietorships (which is what your LLC will effectively be for taxes without making that election) 10 times more than corporations.

    Don’t set it up outside the state where you live/work though. You won’t save any money and you will actually spend more money, because you’ll have your set-up and maintenance fees in the state where you start the LLC and your home state.

    Hope this helps!

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