What Is a Series LLC?
A Series LLC is a special type of limited liability company that allows multiple separate divisions, called series, to exist under a single parent company. Each series can hold its own assets and operate independently while maintaining liability protection separate from the other series within the same structure.
Real estate investors often use this structure to organize multiple rental properties under a single umbrella entity while keeping the assets segregated.
A Series LLC is a unique LLC structure that creates one overarching LLC with separate series for different properties.
How Does a Series LLC Work?
A Series LLC operates through a single parent company that contains multiple internal divisions known as series. Each series can own its own assets, assume its own liabilities, and operate independently of the others while still existing under the umbrella of the main LLC.
For real estate investors, this often means placing each rental property into a separate series. The intent is to confine liability to a single series if a legal issue arises with one property, rather than affecting the assets held in other series.
Even though the structure operates under a single parent entity, each series must maintain separate records, bank accounts, and documentation to preserve liability separation.
When Should You Use an LLC vs. a Series LLC?
Both a traditional LLC and a Series LLC can provide liability protection for real estate investors, but they serve different purposes depending on the size and structure of the investment portfolio.
A traditional LLC is often the simplest option for investors with one or only a few properties. Many investors choose to create a separate LLC for each rental property to keep liabilities isolated. While this approach can provide strong asset protection, it may require forming and maintaining multiple entities.
A Series LLC is often preferred by investors who own several rental properties and want a structure that separates liability while reducing the need to form multiple standalone companies. Instead of creating a new LLC for each property, investors can place each property into its own series under a single parent LLC.
The right structure depends on factors such as the number of properties you own, the states where the properties are located, and how you want to manage liability separation within your portfolio.
Do All States Allow Series LLCs?
Not every state allows the formation of a Series LLC. While the structure has become more common in recent years, only a few states have laws specifically authorizing this type of entity.
Because the legal framework for Series LLCs varies from state to state, investors should carefully review the laws where their business operates or their rental properties are located. A business law attorney can help determine whether a Series LLC is recognized and whether the structure will provide the liability protection you expect.
The following states allow Series LLCs:
- Alabama
- Arkansas
- Delaware
- District of Columbia
- Illinois
- Indiana
- Iowa
- Kansas
- Missouri
- Montana
- Nevada
- North Dakota
- Ohio
- Oklahoma
- Puerto Rico
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- Wisconsin
- Wyoming
What If Your State Does Not Allow Series LLCs?
If you live in a state that does not allow Series LLCs, it may still be possible to form one in a state that does and register it as a foreign entity in your state. However, this approach carries some risk. Courts in states that do not recognize Series LLC laws may not fully enforce the liability separation between the series, potentially exposing multiple assets to a single lawsuit.
How to Form a Series LLC for Rental Properties
Forming a Series LLC begins with creating the parent LLC and authorizing the use of separate internal series in the company’s formation documents. Because the structure involves multiple internal divisions with separate assets and liabilities, the planning and paperwork are typically more detailed than forming a traditional LLC.
The process generally includes the following steps:
- Create the parent LLC: File formation documents, usually called a Certificate of Formation or Articles of Organization, with the Secretary of State that authorize the creation of a series.
- Appoint a registered agent: Like any LLC, the business must designate an agent to receive legal and government correspondence.
- Draft a detailed operating agreement: The operating agreement should explain how new series are to be created, how assets are to be assigned to each series, and how liability separation will be maintained.
Completing these steps helps ensure you properly establish the Series LLC structure and organize each series to preserve liability protection.
Want to Set Up a Series LLC for Your Rental Properties?
A Series LLC can be a powerful way to organize and protect multiple rental properties while maintaining asset separation. At Evans & Davis, our attorneys help real estate investors structure Series LLCs and organize their properties to provide liability protection and support future growth.
Call 866-708-2335 or contact us online to speak with an Evans & Davis attorney about setting up a Series LLC for your rental properties.
