Series LLCs for Real Estate Investments

Protection of personal assets. Flexibility in ownership. Professional organizational structure. There are a number of reasons why so many people form LLCs for real estate investments. However, creating a separate LLC for every property you own can be tedious and expensive — unless you utilize the Series LLC, a new business structure that’s ideally suited for real estate ownership. It also works well for anyone who owns a large number of businesses, and wants to insulate the assets of each. Sound good? Keep reading.

What’s a Series LLC?

A Series LLC is a special type of LLC that provides the ability to create multiple sub-LLCs (called “series,” with a lowercase “s”) under the umbrella of a single parent LLC (referred to as the “Series,” with a capital “S”). Each series operates as an autonomous LLC, with its own distinctive assets, ownership and management structures, and business objectives. It can borrow money (or be sued) independently of the other series and the parent Series, and it functions just like a standard LLC.

What makes a Series LLC better than a traditional LLC for real estate investment?

In a nutshell, it’s cheaper. The State will charge a filing fee for every LLC you form in that state. However, with a Series LLC, you only pay the fee once, for the initial Series. So, you get the benefit of protecting and separating each series’ assets from one another, without the cost of creating multiple LLCs. It can also be more efficient in terms of filing forms and paperwork, since all the LLCs are connected to the Series. In order to keep each LLC separate, you will need to maintain separate bank accounts, names, books and records for each series. This will ensure that debts, liabilities, obligations, and expenses of a particular series are enforceable only against that series’ assets, and are not enforceable against the assets of the Series LLC or any other series.

How do I form an LLC?

To form a series LLC, you must include specific language in the Certificate of Formation and Company Agreement of the initial Series, allowing you to form additional series in the future as needed. This language will also specify rules for operating the Series. Only certain states allow Series LLCs, and the fees and rules differ by state, so check your local Secretary of State website to find out more. At the time of this writing, states that allow Series LLCs include Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Puerto Rico. While a Series LLC is simple to run, you may wish to contact an attorney to assist you in establishing it.

We hope this article has been helpful in answering your Series LLC questions. By following the right series of steps, you can be on your way to creating a savvy business structure for your real estate investments, or any line of businesses.

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