What Is a Series LLC?

What is a series LLC and how does it protect separate assets? A guide to sub LLCs, the states that allow them, and when a series makes sense for your business.

The definition

What is a series LLC? It is a single LLC that contains separate sub LLCs, called series, each with its own assets, liabilities, and members. The idea is that one series can be sued or go bankrupt without dragging down the others. It is a powerful structure, but only some states allow it. This guide explains how it works and when it is worth using.

A series LLC is one legal entity with multiple internal divisions. Each division, called a series or cell, holds its own assets and has its own owners. The parent LLC files one set of formation documents, and each series is created by amending the operating agreement. The key feature is that the debts and liabilities of one series are supposed to stay with that series, not spread to the others.

How a series LLC works

Think of it as a master LLC with separate compartments. You form the parent LLC in a state that allows series, then create each series under it. Each series can own property, sign contracts, and open bank accounts in its own name. If you own three rental properties, you could put each one in its own series. A lawsuit over property one would target that series only, leaving the other two protected.

Here is a common setup. An owner buys three rental houses and puts each in its own series. One tenant sues over an injury at house one. The claim targets series one and its insurance. Houses two and three, and their series, stay out of the fight. That is the isolation a series LLC is designed to provide.

Which states allow series LLCs

Series LLCs are not available everywhere. The states that allow them include Texas, Delaware, Illinois, Nevada, Oklahoma, Tennessee, and Utah, among others. The rules differ by state, and some states only allow them for specific purposes. If your state does not recognize series LLCs, the asset protection may not hold up in court there. Check your state's laws before you rely on this structure.

The pros of a series LLC

The biggest advantage is cost. Instead of forming five separate LLCs with five filing fees and five annual reports, you form one series LLC and pay one set of fees. That can save hundreds of dollars per year. It also keeps administration simple, since you manage one entity instead of several. For owners with multiple properties or business lines, the savings add up quickly.

The cons and risks

The main risk is that series LLCs are still new, and courts in some states have not fully tested them. If you do business in a state that does not recognize series LLCs, a creditor might reach across series. You also need careful record keeping, because each series must keep its own accounts and records for the separation to hold. And not all banks and lenders understand series LLCs, which can slow down account opening and financing. That uncertainty is why many attorneys recommend separate LLCs when the assets are large.

When a series LLC makes sense

A series LLC works best when you own several similar assets that you want to keep separate, like rental properties or product lines. If each asset is worth enough to justify its own protection, a series can be the cheap way to get it. If you have one business with no separate assets to isolate, a plain LLC is simpler and safer. If a plain LLC is all you need, our what is an LLC guide covers the basics. Talk to a business attorney in your state before choosing a series, since the rules vary and the stakes are high.

Frequently Asked Questions

What is the difference between a series LLC and separate LLCs?

A series LLC is one legal entity with internal divisions, so you file once and pay one set of fees. Separate LLCs are independent entities, each with its own filing, fees, and annual reports.

Which states allow series LLCs?

Texas, Delaware, Illinois, Nevada, Oklahoma, Tennessee, and Utah are among the states that allow them. The rules vary, and some states only recognize them for certain purposes.

Does a series LLC protect each series from the others?

In states that recognize series LLCs, yes, each series is supposed to be liable only for its own debts. The protection depends on keeping separate records and accounts for each series.

How much does a series LLC cost?

You pay one formation fee and one annual report fee instead of one per series, which can save hundreds of dollars a year. The exact fees depend on your state.

Should I use a series LLC for rental properties?

Many owners do, since each property can sit in its own series. But the structure is only as strong as your state's laws and your record keeping, so get advice from a local attorney first.