Most business owners understand the concept and importance of isolating assets or ventures that may expose them to personal liability. As a result, business owners have historically had to pay to create separate Limited Liability Companies (“LLCs”) for each property, asset or business venture.
Various states have tried to resolve the problem of having multiple entities and the administrative cost it creates, by enacting statutes to create “Series LLC” laws.
When structured properly and respected, a Series LLC gives its members limited personal liability from claims arising from within the entity, and charging order protection from claims arising outside of the entity, just like a normal LLC.
What makes a Series LLC different is its ability to provide for the establishment of designated “series” or “mini-LLCs” within the original LLC (“Parent LLC”). Each series of the Parent LLC can have its own specified property, assets, investment objective, or business purpose; such that the debts, obligations and liabilities of each series are only enforceable against the assets of that Series; not against the assets of the Parent LLC or any of the other series.
In addition, if properly created, separate tax returns for each series can be avoided. For the Client with multiple investment properties or business ventures, the Series LLC may be an extremely useful tool.
There are currently Twelve states, including Washington D.C. that have enacted statutory provisions for a Series LLC. They are Delaware, North Dakota, Illinois, Nevada, Iowa, Oklahoma, Tennessee, Texas, Kansas, Washington D.C., Minnesota, Wisconsin and Utah.
Mark J. Kohler is a CPA, Attorney, Radio Show host and author of the new book “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions” and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.