WHAT IS A SERIES LLC?
A series limited liability company is a form of business entity that differs from a traditional limited liability company. A series LLC is analogous to a parent corporation and its wholly-owned subsidiaries. Basically, a single limited liability company is formed under state law, but within the limited liability company are a number of internally created “cells” that own distinct assets, incur separate liabilities and have different managers and members. The series LLC files one tax return and operates under one operating agreement. Indiana joined the limited number of states recognizing series LLCs in 2017.
This concept is most frequently used in the real estate development world as a popular vehicle for holding related real estate holdings. For example, a series LLC might be created to own a set of apartment buildings. Each apartment building may be held in the name of one of the subsidiary LLCs and thus creditors could only reach the building owned by the particular subsidiary LLC. One of the benefits of creating a series LLC is that it eliminates the administrative responsibilities and additional expense that come from forming and maintaining multiple LLCs. However, since this concept has not been in existence as long as some other business entity types, questions remain. Few cases involving series LLCs have been in the courtroom and there is still some uncertainty regarding tax treatment and bankruptcy issues. Given the increasing popularity of this form of business entity, it is expected that more states will pass series LLC statutes in the future. As more states authorize series LLCs and the concept comes of age, it is expected that more open questions regarding this entity type will finally receive more clarity.