When the Series LLC Doesn’t Work

This post is in: Business, Real Estate
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redcircleAll this week, I’ve been writing about the virtues of Series LLCs. Now let’s talk about a couple of the downsides.

There are only 8 states that have fully accepted the Series LLC. Those are Delaware, Illinois, Iowa, Oklahoma, Nevada, Tennessee, Texas and Utah. We hope to see more states adding them soon. Meanwhile, though, if you’re in a state that doesn’t have the Series law, you have to hope that your state fully accepts them.

In most cases, that’s true. One notable exception is California. California is fine with you getting your call authorized in California, but it then insists on making you pay an $800 fee for each cell.

So let’s take an example and say you have one real estate property in California. You have other properties in Texas and Arizona. You may decide to use a Texas Series LLC and use individual cells for each of your investments in Texas and Arizona. So far so good. But don’t try to use a cell to hold that CA property. If you do, California is going to want to make you pay $800 for each of your Texas and Arizona cells.

If you’re in this spot, you may want to consider using a Series LLC for your properties and business outside of California. Then form a separate California entity to hold the CA investment.

The Series LLC is a great asset protection and tax savings strategy, but go into it as informed as possible!

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