There is a little-known method of limiting liability between different business operations or assets within the same LLC entity. Only available in certain jurisdictions, series LLC’s are a more recent invention started by Delaware in 1996 which allows a liability wall between different companies.
The actual procedure of adding – or deleting – series is relatively straightforward once it is setup without additional state filings in most jurisdictions. Each series unit has its own owners and may be managed separately from the master LLC and other units. Accordingly, each series is usually required to maintain separate records. This allows each series to have completely separate and unrelated businesses.
The tax consequences of a series LLC vary depending on the state of incorporation but as of the date this article was written, the IRS does not consider each LLC series as a separate entity; some states who allow foreign series LLC’s still may consider them separate for state franchise taxes as it is in the state of California.
CAUTION: Although series LLC’s are used often, do not attempt to create this kind of multiple entity before getting expert legal counsel. The method in which the IRS might deal with the minutia and technicalities which might arise from this new form is unknown and should be heavily considered.
Series LLC in Real Estate
Series LLC’s are particularly good for certain industries. For example, real estate is often placed in LLC holdings and it may be costly and burdensome to place each property into a separate LLC. In a series LLC, each property is placed in a different unit while maintaining limited liability between each unit.
Series LLC in Other Businesses
Another example is having a business which is susceptible to tort liability. It may make quite a bit of sense to put each business operation into different units. For example, you could have a family business of restaurants and you may want each restaurant location in separate units because it is owned and operated by different family members. You wouldn’t want the liability of a slip and fall of one restaurant effecting the others.