Is a Series LLC the Best Business Structure For You?


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SeriesLLCNever heard of a Series LLC? Well, you’re not alone. It’s been around 12 years and yet most attorneys that I talk to have never heard of it!

The Series LLC is now in 8 states, but authorized to do business in almost all of the rest. Of course, there is one exception and that is California. If you’re in California, or have nexus there, make sure you talk to someone very experienced in the Series LLC first before you jump into the structure.

The Series LLC is basically an LLC (limited liability company) that has a main structure with little cells off of it. Picture a mother ship with little pods off of it. The pods are all separate for asset protection purposes and can either roll up into the mother ship when it comes to tax time, or they can be completely standalone operating entities.

One the best parts about LLC law is that the LLC gets to elect how it is taxed, so it’s possible to have different cells operating as partnerships, S Corporations AND C Corporations. But, they’re all part of the same Series LLC.

This flexibility and ease of use give you three main benefits:

(1) Ultimate in privacy. In most cases, you don’t have to record a Series LLC cell ANYWHERE

(2) Exceptional flexibility. If you have a bunch of real estate investments and don’t want the cost and hassle of multiple LLCs, then a Series LLC is perfect for you. Set up one Series LLC and have multiple cells. Each cell owns a property, giving you great asset protection, but they all collapse into one return come tax time. Or you may be a serial entrepreneur with multiple businesses. You can open up a Series cell, by yourself, in 2 hours or less. No filing. No hassle. No cost.

(3) Absolute asset protection. Each cell of the Series gives you the superior asset protection of an LLC. The assets are separately protected from judgments and from each other.

(4) Speed! If you ever find yourself wishing you had a corporation or LLC laying around, now you can. A Series LLC in your hip pocket gives you the ability to open up an entity anytime you want.

Megan Hughes is an expert at setting up the Series LLC for advanced tax planning. Megan and I will be talking about the amazing benefits of these great structures in our next coaching call at http://www.USTaxAid.com/coaching. The call is February 9, 2010. When you sign up you’ll be able to get access to the materials right away for the past C Corporation Tricks & Traps session, plus the Series LLC for February 9, 2010 and the Nexus coaching course on February 23, 2010.



6 Comments

  1. Just a short hi and also to say thanks for discussing your thinkings in this post. I somehow ended up here after following up on loads of celeb exercise stuff over on Yahoo… guess I lost track of what precisely I was initially doing! Regardless I’ll be back in the future to look at your blogposts down the road. Appreciate it!

  2. Megan Hughes says:

    Hi Charlie,

    it’s being used in MA, but there is no MA law on the books yet. It doesn’t mean that MA won’t uphold the Series LLC structure and inter-cell liability protection. However, if I was on the other side of a dispute with a Series LLC owner, it would certainly be an argument to try — that the laws of Delaware, Nevada, etc., don’t matter in MA.

    However … I’m not so sure that will happen either. It’s a tough position for a state to take, especially when you think that if things were going the other way, that state would want reciprocity.

  3. Charlie Way says:

    Is the Series LLC available in MA?

  4. Megan Hughes says:

    Hi Roxanne,

    California is a contradictory kinda place! There’s no Series LLC legislation on the books. That’s not unusual — lots of states don’t have it on the books. However, it means that you can’t count on California upholding the liability protections between cells. The issue hasn’t been been tested in court one way or another. Again, that’s not unusual — most states are in the same boat.

    But, the ever-aggressive Franchise Tax Board wasted no time in requiring Series LLC owners who want to come into CA to voluntarily register each cell with the Franchise Tax Board and pay $800 per year per cell, in addition to the $800/year for the LLC itself.

    Furthermore, California enacted new nexus legislation last year (which kicks in next year), that basically says that if the owners live in California, then the business should be registered in California, regardless of where the business is actually operating.

    For all these reasons, it’s hard to recommend a Series LLC to people in California. It will work, but it’s going to be more expensive than in other states. And, if you’ve got multiple businesses, yet only 1 subsidiary cell is operating in CA you wind up with a tax issue, as CA tries to drag everything else into the state.

    From my perspective, CA residents are better served by using other entity structures, except in very special cases.

  5. Roxanne Kumagai says:

    I’m in California but like the sound of the Series LLC for my business. What are the restrictions found only in California that you mentioned in your article?

    Thank you

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