Is a Series LLC the same as forming multiple LLCs?

No. A Series LLC is one legal entity with internal divisions, whereas multiple LLCs are separate legal entities.

Do all states recognize Series LLCs?

No. Only certain states authorize them, and recognition across state lines is not uniform.

Does a Series LLC protect assets between series?

Protection is intended under statute if separation requirements are followed. Court interpretation may vary by jurisdiction.

How is a Series LLC taxed?

Each series may be treated as a separate entity for federal tax purposes depending on classification and ownership.

Can I use a Series LLC for real estate in multiple states?

It depends on whether each state recognizes Series LLCs and how foreign registration rules apply.

Series LLC Explained: Parent and Child Structure

What Is a Series LLC

A Series LLC is a limited liability company structure that allows one master entity to create separate internal divisions called series. Each series can hold its own assets, incur its own liabilities, and operate independently, while remaining under a single umbrella LLC.

This structure is authorized by statute in certain states. Delaware was the first state to adopt Series LLC legislation in 1996 under Section 18 215 of the Delaware Limited Liability Company Act.

Other states have since adopted similar laws, though details vary.

The Parent and Child Structure Explained

In a Series LLC, the main LLC is often informally referred to as the parent or master. Each internal division is referred to as a child series.

The structure works as follows:

A master LLC is formed by filing Articles or a Certificate of Formation
The operating agreement authorizes the creation of one or more series
Each series can have separate members or managers
Each series can own assets independently
Each series can enter contracts in its own name
Liabilities of one series are intended to be isolated from other series

The master entity does not automatically absorb liabilities of individual series if statutory requirements are properly followed.

States That Allow Series LLCs

Series LLCs are not recognized in all states. As of current statutory law, states that authorize Series LLCs include:

Some states have adopted versions of the Uniform Protected Series Act, which attempts to standardize rules.

Because not all states recognize Series LLCs, operating across state lines requires careful analysis.

Asset Segregation Requirements

Liability protection between series is not automatic. Statutory compliance is critical.

To maintain internal liability shields, states generally require:

Separate records for each series
Separate accounting for each series
Clear identification of assets belonging to each series
Proper notice in the Certificate of Formation that the LLC may establish series
Compliance with the operating agreement provisions

Failure to maintain separation can undermine the intended asset protection.

Courts may disregard separation if records are commingled.

Real World Use Cases

Series LLCs are commonly used for asset holding strategies.

Common examples include:

Real estate investors holding each property in a separate series
Franchise operators using separate series for each location
Equipment leasing companies isolating equipment pools
Investment groups segregating portfolios

For example, a real estate investor may:

Form one master Series LLC
Create Series A for Property One
Create Series B for Property Two
Create Series C for Property Three

If Property One faces a lawsuit, the goal is to prevent exposure of assets in Series B and Series C.

Tax Treatment of Series LLCs

Federal tax treatment depends on how each series is structured and classified.

The Internal Revenue Service has issued guidance indicating that:

Each series may be treated as a separate entity for federal tax purposes
Classification depends on ownership and elections
A single member series may be treated as a disregarded entity
A multi member series may be treated as a partnership

State tax treatment may differ from federal treatment. Some states treat the entire Series LLC as one entity for tax filings, while others treat each series separately.

Because treatment varies, tax advice from a qualified professional is essential.

Risks and Limitations

Series LLCs involve complexity and legal uncertainty in some jurisdictions.

Important limitations include:

Not all states recognize internal liability shields
Foreign registration may require separate filings for each series
Some lenders do not understand or accept Series LLC structures
Title companies may require additional documentation
Litigation involving cross state recognition remains limited

If a Series LLC formed in one state operates in a state that does not recognize the structure, liability segregation may not be respected.

This uncertainty is a major consideration for businesses operating in multiple states.

Formation Process Overview

Forming a Series LLC generally involves:

Filing a Certificate of Formation that authorizes series
Drafting an operating agreement that establishes series structure
Creating written documentation for each new series
Maintaining separate accounting records
Registering foreign where required

Some states require public filings for each series, while others do not.

For example, Illinois requires a Certificate of Designation for each series, while Delaware does not require public filing for individual series.

These procedural differences significantly affect administrative burden.

Common Misunderstandings About Series LLCs

There are several frequent misconceptions:

A Series LLC is not the same as multiple separate LLCs
Asset protection is not automatic without proper record keeping
Federal tax treatment is not automatically unified
Not every state permits Series LLC formation
Operating in non series states may create legal risk

Many small businesses assume the structure is universally recognized, which is incorrect.

When a Series LLC May Be Appropriate

A Series LLC may be appropriate if:

All operations are located in a state that recognizes Series LLCs
You hold multiple high value assets
You want centralized management with internal segregation
You understand and can maintain strict accounting separation
You accept cross state legal uncertainty

It may not be appropriate if:

You operate in multiple states that do not recognize the structure
You require simple financing arrangements
You prefer widely tested legal structures