California Takes Stance Against Series LLC


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One Comment

6-17-11

We’ve talked a lot about Series LLCs and what works and what might need to change in the future.

There is one more provision in the new Proposed Treasury Regulations that might make Series LLCs next to impossible in California.

The Proposed Regs call for a statement to be filed that gives information on the entire Series LLC and the individual series within the Series. So, all of the detail is available in public record.

If you have a Series LLC with one piece of business or nexus in California, California is right now trying to claim that all series within the Series will be subject to the $800 California franchise tax. So, if you live in Arizona, have real estate in Texas, Nevada, Arizona and California and want to use individual series for each, California might see this and the one little nexus hook and attempt to collect Franchise tax on all of the individual series.

Instead of paying just one $800 fee, you could end up paying $800 times 4 or 5. Remember California is broke, just like most states, and so they’re looking for everything they can do to pull you in.

A Series LLC might still work for you if you have multiple businesses, investments and different nexus, but you have to be strategic with how you set them up. You’ll want to make sure you get some good professional advice on this first.

For more information on Series LLCs and the new Proposed Treasury Regulations for Series LLC, check out our featured product The Series LLC: The Ultimate in Business Structure Flexibility.



One Comment

  1. Maria T says:

    So for California rental real estate properties,
    I am considering the following options for Asset Protection:

    1) create a Wyoming LLC for each rental property in CA (single member LLCs with disregarded tax status), owned by a Master LLC (Wyoming), (the Master LLC is like the Series LLC.)

    OR

    2) use a California LLC for all Rentals with another LLC/C-Corp (as the 2% member of the RE LLC (CA); this makes the RE LLC multi-members (with charging order protection). Then do equity stripping for every properties that RE LLC (CA)owns.

    Appreciate your comment on the above options! Which would you recommend? Tx! Maria.

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