What Is a Series LLC?

A series limited liability company (LLC) is an LLC that is operating under a parent LLC in a manner that protects the parent company from liability for its debts. This means that if the larger LLC is like a tree, then a series LLC is like a branch. Series LLCs are a relatively new type of business entity and it is still unclear whether they will be treated as separate from their parent for tax purposes.

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Key Takeaways

• A parent LLC’s operating agreement will list a series LLC.
• Not every state allows a traditional LLC to form a series LLC.
• A series LLC has separate bank accounts, members and managers, and books and records than the parent LLC.

A Series LLC’s Structure

A series LLC is a branch of a traditional LLC. A traditional LLC’s operating agreement should state that a series LLC is a part of the parent LLC, but most states allow the creation of many separate series at any time — based on the needs of the parent LLC.

How a Series LLC Operates

A series LLC provides a parent LLC with protection from liability for the activities of the series LLC.

A series LLC operates as a separate entity from its parent LLC. So, a series LLC can enter into separate contracts from the parent. A series LLC may also have its own group of members. Since a series LLC is has a separate group running the show, the series LLC also has a separate bank account.

A series LLC can enter into contracts separate from the master LLC. Because the series LLC is a separate group within the bigger LLC, the members of a series LLC can be vulnerable to lawsuits because a series LLC can be sued separately from the parent LLC.

A series LLC is not a separate entity from the parent LLC even though it operates almost like it is a separate entity. It is normal for a state to want a parent LLC to claim it has a series LLC in the operating agreement.

States and territories that allow a series LLC:

• Wisconsin
• Nevada
• Minnesota
• Missouri
• Oklahoma
• Kansas
• Iowa
• Tennessee
• Texas
• Utah
• North Dakota
• Indiana
• Illinois
• Delaware
• Alabama
• Montana
• Wyoming
• District of Columbia
• Puerto Rico

California state law does not recognize a series LLC, but it allows a series LLC formed in another state to operate in California.

Taxes for Series LLCs

What it is still unclear how the IRS will treat series LLCs, proposed regulations treat a series LLC and the parent LLC as a seperate business entity for tax purposes.

Internal Links

• LLC Member Tax FAQs