As a landlord, one of the key benefits of holding title for your rental properties through an LLC is to protect your personal assets. If someone is seriously injured or there is another unfortunate incident at one of your rental properties, and you get sued, without the protection of an LLC, your personal assets are at risk. This concept gets more complicated for landlords who own multiple rental properties. For instance, if you own 50 rental properties through one LLC and an incident happens at one property, all 50 properties are at risk. If you own 50 properties through 50 LLCs, you may have quite the administrative headache. This is where the concept of Series LCCs comes in.
A Series LCC is a form of an LCC where each series operates like a separate entity with individual names, bank accounts, and most importantly, liability. All the assets in one series of a Series LLC are protected from the risks of other series within the Series LLC. What’s really unique about a Series LLC is you only have to file articles of formation once, making Series LLCs an ideal solution for landlords with multiple rental properties.
However, Series LLCs get a little complicated when it comes to filing and registering them properly, as it varies by state. Most states require that the articles of formation specify that the LLC is authorized to have separate series, and some states require you to make another filing each time you designate a new series within your Series LLC.
Series LLCs can present some unique challenges when trying to obtain a loan. This is because lenders may struggle to verify through independent legal records that your LLC is a Series LLC and that the series seeking a loan was properly formed. If you want to use a Series LLC and hope to obtain loans at the series level, we strongly recommend you make sure to work with a qualified professional in organizing your Series LLC and take the necessary steps to publicly establish your Series LLC and each series therein. Otherwise, if you want to get a loan for, say Series A, of your Series LLC, but the lender cannot identify from public information your LLC as a Series LLC, or the existence of Series A of your Series LLC, they most likely will not be able to fund the loan.
Essentially, Series LLCs are a fantastic solution for landlords looking to grow their rental portfolios, as long as they are registered and documented properly. We always recommend consulting your legal counsel to help in the formation of any kind of legal entity. For more information on Series LLCs, visit NOLO. For more benefits of holding rental properties through LLCs, see our blog post on the tax benefits of holding properties through LLCs or visit our Resources Page.
Related: How Landlords can Form LLCs and Reap Tax Benefits, 5 Ways to Hold Title as a Real Estate Investor