In this episode, we explain Series LLCs.
In this article...

A series LLC is a cost-effective alternative for business owners and entrepreneurs with multiple enterprises.  If you have multiple businesses that you would like to keep separate for the purposes of liability, you have two options...

A series LLC is a cost-effective alternative for business owners and entrepreneurs with multiple enterprises.  If you have multiple businesses that you would like to keep separate for the purposes of liability, you have two options:  

  1. Form multiple separate corporations or LLCs, one corporation or LLC for each enterprise; OR 
  2. Form one Series LLC, with multiple cells (or sub-LLCs), one cell for each enterprise.

A series LLC is typically the more cost-effective solution.  Here's a break down:

Secretary State Cost For Initial Set-Up

  • $250 per corporation
  • $500 per LLC
  • $750 per Series LLC plus $50 per cell 

Secretary of State Cost for Annual Fees

  • $100 per corporation
  • $250 per LLC
  • $250 per Series LLC plus $50 per cell

‍As you can see, if you have 2 businesses the Series LLC is already more cost-effective from a Secretary of State perspective than filing 2 LLCs.  It will take a few more businesses to make the Series LLC more cost-effective on Secretary of State filing fees alone.

However, the Series LLC usually turns out to be the more cost-effective option when you consider attorney fees in addition to Secretary of State costs.   This is because each cell of a series LLC does NOT need a separate operating agreement.  Instead, only the "Mother" LLC needs an operating agreement.  It takes less time for an attorney to set up and file annual reports for a series LLC with multiple cells than for two separate corporations LLC.  Therefore, when attorney fees are taken into account, the Series LLC should save you money when setting up and maintaining two businesses even as against the alternative of setting up two corporations.    

The bottom-line:  If a client is looking to set up multiple businesses, and have each protected from each other's liability, I often recommend a Series LLC.  This is especially the case when the businesses are related and can share an operating agreement.  This is why Series LLCs are an especially excellent tool for multiple real estate investments or multiple franchise locations.  

Posted 
November 16, 2020
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