There is a relatively new and exciting form of limited liability company (“LLC”) that has been attracting owners who own multiple properties. This form of LLC is the series LLC (“Series LLC”).
A Series LLC is a limited liability company that has separate series under the umbrella of a parent LLC. Each series insulates the liabilities associated with that particular series from the assets held in another series. This ability to place multiple properties and assets in a single LLC yet insulate liabilities associated with one series from another series eliminates the administrative burden and expense of forming multiple LLCs.
In the past, owners that had multiple properties had to form multiple LLCs if they wanted to limit liabilities from one property to the other properties. Now owners that want the same protection as having multiple LLCs can do so by forming only one Series LLC. Just like with having multiple LLCs, each series may have its own members, rights and obligations. The profits and losses and liabilities of each series are legally separated from the other series.
A Series LLC is similar in structure to a parent company with multiple tiers of subsidiaries, insofar as the liabilities with respect to each series are insulated from the risks and liabilities of every other series. However, unlike the “affiliated company” structure, a Series LLC significantly reduces legal, accounting and other administrative expenses so it has the effect of having multiple subsidiaries without the associated costs.
While California does not offer the formation of these LLCs, it will respect a validly formed foreign series LLC formed in another state such as Delaware or Nevada. If you or someone you know is interested in forming a Series LLC, please contact Fred M. Whitaker at Cummins & White. Our initial consultation is complimentary. We have successfully formed Series LLC’s for many of our clients already and can do the same for you.