A Series LLC is a form of a limited liability corporation, or LLC, where each series operates like a separate entity with individual names, bank accounts, and liability. Series LLCs, when filed properly, can be a fantastic tool for real estate investors with large rental portfolios. However, like most investment decisions there are pros and cons. We’ve broken down the pros and cons of Series LLCs for you:
Series LLCs Pros:
-Reduced costs including:
- Reduced startup costs at formation because you typically only file articles of formation once
- Reduced ongoing administrative costs if your state requires annual LLC filings, since you likely only have to make one filing
- Only one registered agent fee
-Segregation of assets adds an extra layer of liability protection
-Ability to have different members by series allows you to raise capital at the series level
Series LLCs Cons:
-Series LLC regulations vary by state, which can cause discrepancies:
- When a state does NOT have a Series LLC statute, there is some grey space of whether or not the state will honor the segregation of liability for claims arising in their jurisdiction
- States treat Series LLCs differently for tax purposes
-It can be difficult to get EINs or bank accounts by series
-Many attorneys, accountants, lenders, and title companies are unfamiliar with them
For more information on Series LLCs, see this NOLO post "What is a Series LLC?", and for more benefits on holding rental properties through LLCs see our blog post, How Landlords Can Form LLCs. Before forming any legal entity, we always recommend consulting your counsel.
