Series LLC Benefits
A Series LLC is a form of a Limited Liability Company (LLC) that combines a corporation’s and a partnership’s features to form a separate business entity. This combination of features protects an LLC from personal liability for business debts of a corporation and the pass-through tax structure of a partnership or sole proprietorship.
LLC and Owners Limited Liability
The owners of an LLC enjoy the benefits of limited liability. Like owners of stock in a corporation, owners of an LLC cannot be held personally liable for business debts and claims against the LLC. Because of this, a properly formed and maintained LLC will prevent creditors from coming after any LLC owner’s personal property or possessions. Consequently, only the LLC is liable, and the owners only stand to lose what they have invested into the LLC.
LLC and Owners Taxes
An LLC is a pass-through entity like a partnership or a sole proprietorship for tax purposes. Pass-through means that an LLC is not considered separate from its owners. All LLC income passes through the LLC to the owners of the company. Accordingly, these owners then report all profits or losses individually, thus avoiding double taxation within the corporate business form.
The Series LLC
Illinois is one of the few states to permit “series” in LLCs. Series allow for different members, liabilities, and assets in each series and permit segregation of liabilities in separate series. Series are especially useful for investment real estate, and it helps manage additional investors in different series.
The benefits of a Series LLC are significant if you own multiple business interests and numerous investment properties. If you separate each into its own series, only the assets of that series are subject to claims or lawsuits for liability, and the umbrella LLC is protected, as well as all other individual series.
You can also have different owners for each series and, therefore, attract investors and not subject the parent company to diluted ownership.
Series LLC Corporate Requirements
There are strict requirements to follow to preserve your liability protection.
The first requirement is the basic requirement of all corporations – keep detailed records. Maintaining an updated corporate record book containing your bylaws, annual minutes, annual reports, and ownership certificates is essential. Far too many owners neglect this basic requirement; without it, claimants can “pierce the corporate veil.” Piercing the corporate viel can result in the owners personal liability subjecting the owners assets to claims and lawsuits, defeating a primary purpose of incorporating.
A series LLC has further requirements that separate records, including bank accounts, must be maintained for each series. Failing to do so may subject the entire LLC and all its series to the claim.
Your LLC must have an Employer Identification Number (EIN.) Depending on how your CPA files your taxes, you may also need a separate EIN for each series.
Please contact us today for further information, or visit Tuohy Law Offices now.
Tom Tuohy
LinkedIn
TomTuohy.com
312-559-8400
17W220 22nd Street, Suite 300
Oakbrook Terrace, Illinois, 60181
This blog entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts and laws in specific jurisdictions. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country or other appropriate licensing jurisdiction.
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