The series LLC is a specific kind of limited liability company that can be formed in a few states in the United States.
A series LLC is an LLC that can have separate divisions to run different businesses. Each division will be considered separate and apart from the other divisions in the LLC when it comes to asset and liability protection.
For example, a series LLC can operate a real estate landlord business under one series (division) and a real estate development business under another series (division).
If a tenant were to sue the landlord business and obtain an expensive judgment, all the assets owned and used for the development business would not be at risk to satisfy the liabilities of the other series.
In concept, the series LLC is a wonderful mechanism because it rids an entrepreneur of the need to create multiple LLCs to run multiple business ventures if that entrepreneur wants to shield liabilities of each venture from the other.
In reality, a series LLC currently has some major limitations.
UNCERTAINTY OF ENFORCEMENT IN ALL STATES
First, it is only recognized in a handful of states so it is uncertain whether the liability protections should apply if the LLC conducts business in other states which do not have a series LLC component to their LLC statute.
If each business were operated under a separate LLC, there would be no risk of separation of assets and liabilities for each business.
SERIES LLC GOVERNANCE IS COMPLEX
Also, a series LLC is organizing multiple businesses under one legal entity and this requires the drafting of a complex operating agreement and operational procedures to ensure that each business is run as if it is a separate independent entity business.
It is a lot easier to separate each business into independent limited liability company entities and as a result you have an extra precaution for keeping them separate from each other.
SUMMARY OF SERIES LLC TREND
In time, the series LLC could become a major element of every LLC entity and when it does, the uncertainty surrounding its enforcement will be addressed.
Furthermore, series LLC forms, operating and governance procedures will have evolved and be established and these will make it easier for any series LLC business to be more easily set up and maintained.
Until then, if you choose to create a series LLC, make sure you understand the requirements and limitations in your state’s laws and consult with a competent and experienced LLC lawyer who can be sure you set up the proper paperwork to structure your businesses based on your particular circumstances.
