What Is a Series LLC? All You Need to Know - MarketWatch (2024)

Updated:Apr 12, 2024

While researching the limited liability company formation process, you may have come across the term series limited liability company or“series LLC” and you might be wondering what that is. The quick answer is that a series LLC is an umbrella entity that can house several LLCs (or any other business entity) within it. Holding smaller companies within a larger entity is a common structure that corporations use to keep small businesses separate from one another but still under the same parent corporation.

This guide will dive into how a series LLC works, review the pros and cons of the structure, and help you learn whether it’s the right configuration for your business.

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Less than half of the states in the U.S. allow the creation of series LLC — but some states (like California) that don’t allow their creation will allow a series LLC created under a different state’s laws to register and conduct business as usual. In the states that do allow formation of a series LLC, the structure is generally the same.

States that permit creation of a series LLC:

In a series, there is a parent LLC (or a master LLC) that holds separate LLCs (also called series or subsidiaries) that are each treated as a separate entity with their own bank accounts, operating agreement, asset protection, members and name. Many business owners choose to structure as a series because there is an additional layer of liability protection between each subsidiary within the parent LLC.

Although the characteristics of a series LLC may seem great for any business, the truth is that it’s not the best option for all business owners. There are additional annual fees for each subsidiary and you can end up making more work for yourself. Additionally, your state may not allow series LLCs.

Below are some examples of businesses that will benefit as a series LLC.

Real Estate

Series LLCs are an ideal choice for real estate investors looking for a strong liability shield. There is no minimum or maximum limit on the assets an LLC can hold so investors could potentially keep each property they own in a separate LLC under the parent LLC. This would protect each property from being liable for a different property’s loss.

Unrelated Businesses Within a Company

Any company that intends to open and run several smaller, unrelated businesses may benefit from creating a series structure. Just like properties in the example above, an LLC can hold several different LLCs (or other entities) that hold separate businesses. The liability protection benefits are the same for business owners as for real estate investors.

Alternatively, the LLC would use different DBA (doing business as) or trade names to make each business distinct from one another. However, they will still be part of the same legal entity so no individual business is protected from the liability of the other businesses.

Series LLC Pros and Cons

The process for starting a series LLC is very similar to starting a non-series LLC. Before getting set on this structure, you should confirm that your state allows the creation of a series. Next, you’ll need to come up with names for your LLC parent entity and each subsidiary within the parent. Each state has requirements for naming the subsidiaries. For example, some require the parent name to be included in the subsidiary names.

After that, you’ll need to file articles of organization with the appropriate state office (usually the secretary of state). There’s usually a box on the LLC formation document to check if you’re forming a series, otherwise it may be a different document entirely.

Depending on your state, you might also be required to designate a registered agent for parent LLC and every LLC formed within it. You’ll also need to apply for an EIN from the IRS for tax purposes. You’ll need a number for the parent and each of its subsidiaries — the good news is that EIN applications are free.

Create Operating Agreements

Most importantly, you’ll need to create an LLC operating agreement for the parent and each of the LLCs within it. Even if you form in a state that doesn’t require an operating agreement, it is a best business practice to do so.

The parent LLC’s operating agreement should include:

• Name of each subsidiary
• Membership information
• Management structure
• Accounting details
• Voting protocol
• Subsidiary organization structure
• Outline of liability protection

Each subsidiary LLC’s operating agreement should include:

• Name of the parent LLC
• Membership details
• Accounting information
• Outline of liability protection
• Management structure

Legal Disclaimer: This article contains general legal information but does not constitute professional legal advice for your particular situation and should not be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed in your jurisdiction.

Authored by: Miranda Riva, J.D. Miranda earned her Juris Doctorate from William & Mary Law School and holds a Tennessee Bar License. Before transitioning to legal content creation, she taught legal research, writing and citations to first-year law students at two different law schools. In her spare time, you can find Miranda hiking through the U.S. National Parks or spending time at the beach with her two Australian Shepherds.

Reviewed by: Laura Jackson, Esq. Laura graduated from Emory University School of Law with her Juris Doctorate and is an active member of the Georgia Bar Association. After several years of appellate advocacy and regulatory experience, Laura turned to full-time freelance legal writing. She currently writes for law firms, websites and other publications on a range of issues.