By The Wyoming LLC Attorney TeamAug 14, 2023
A Series Limited Liability Corporation is a unique business structure that allows you to divide your company into multiple parts called Series. The ability to create a series within an LLC can be useful for both tax and liability reasons. Each division in a Series LLC may have its own capital accounts. Find out more about Nevada Series LLCs by reading this article.
Series LLCs were first invented in Delaware to help the mutual fund industry avoid filing multiple SEC filings for different classes of funds by keeping these filings all under one umbrella while allowing the individual funds’ activities to be conducted separately. This concept is similar to that of the segregated portfolio company or protected cell company which exists in offshore countries such as Guernsey, the British Virgin Islands, Bermuda, the Cayman Islands, Mauritius, and Belize.
A Series LLC is a type of Limited Liability Company that allows the segregation of businesses and their assets into different Series. Each Series can be treated as its own entity, which means that creditors and other claimants are limited to only recovering against assets in that particular Series, such as money, property, and even furniture. In general, this means that if one of your business ventures goes bankrupt or gets caught up in a lawsuit, it will never affect other parts of your business or the other companies owned by you in that Series.
It is a business entity that consists of several Series all under one “umbrella” or “parent” LLC. Forming a Series LLC can be an efficient and cost-cutting approach for managing complex businesses. This kind of structure allows for more limited liability, a big plus for any organization or company that deals with highly regulated industries or with customers who might be sensitive to privacy concerns. Depending on which state you choose to form your LLC, you may pay less to file the Articles of Organization for each Series under the umbrella than you would if you used a traditional holding company structure.
Each LLC in the Series operates independently but must operate under all rules and bylaws set forth by the parent LLC. Each company should keep its own records, but all financials will be consolidated into a single IRS return filed by the parent LLC at tax time.
The Series LLC structure has been recognized by some states, but not all. So, if you are interested in setting up a Series LLC and are located outside of Nevada, you should check with an attorney first to see if it is legal in your area before creating one.
While most states do not allow Series LLCs and many do not allow multiple member firms within a single legal entity, Nevada does permit this form of incorporation. It has, however, strict requirements as to how you can set up your business as well as what you must include in your articles so that it qualifies as a Series organization.
Some states allow Limited Liability Corporations with multiple partners to form Series entities within their legal structure. However, most states require these multi-partner entities to follow specific requirements when doing so, such as including an operating agreement, to qualify them as "Series" businesses governed by state law instead of federal law alone. Other types of state LLCs are available where there are no specific eligibility requirements for being considered a Series.
When you set up a Series LLC, you should also create a separate operating agreement for each subdivision of your company. This agreement should be similar to the LLC’s original operating agreement but will contain some important differences which your attorney will be able to offer you invaluable advice on.
Yes, Nevada does allow Series LLCs. Nevada is one of the few states that allows Series LLCs as an alternative to other types of legal structures like corporations or partnerships. Furthermore, the state also has specific requirements regarding how they are formed and maintained in addition to some unique benefits that are not available in other states, such as limited liability protection.
The following is a list of the states that allow the formation of Series LLCs:
Here is how you begin with the formation of a Nevada Series LLC:
1. The first step in forming a Series LLC in Nevada is to file the Articles of Organization with the Secretary of State. This document must include the following information:
2. Next up is creating an Operating Agreement which dictates how each Series operates within its parent entity. It is basically like having rules for each room in your house, everyone knows what they are supposed to do while inside those walls. Similarly, boundaries should be reinforced in a Series LLC, as there is a chance of having more managers working under the same company name.
This document can be as simple or detailed as you like, but it will need to be signed by all owners and filed with the Secretary of State at some point before your Series LLC is formed. Once completed and filed, your Nevada Series LLC is ready to operate as a legal entity.
There are multiple ways businesses can utilize and benefit from using a Series LLC in Nevada. Examples of popular ways to do so include:
Two main types of taxes may apply to your Series LLC in Nevada:
How much you will pay depends largely on where your company is formed as well as where it operates. If you are interested in forming a Series LLC in Nevada but are not sure how much tax burden would fall upon yourself versus everyone else involved, talking to a lawyer may be beneficial.
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There are several main reasons for forming a Series LLC. The most important reason is to reduce the liability of each Series and protect assets. Another reason is to provide privacy, although this is not as important as reducing liabilities or protecting assets because it can be achieved through other means. The last reason is to ensure that each Series has its own operating agreement.
You can also reduce the liability of each Series by creating different LLCs, each with its own separate assets. Owners can limit their own liability if one Series fails or is sued. If a particular Series was sued for breach of contract, the plaintiff would only be able to collect money from the assets of that subdivision. It would not be able to collect from any other Series in your LLC. This is especially useful for those eager to keep their company afloat.
In most cases, a Series LLC is a very effective way to protect your business from liability. But occasionally, things can go wrong. Before proceeding, we recommend you watch the following video Series LLCs to see if a Series LLC is right for you. If you decide that a Series LLC is right for you after watching the video, we still strongly recommend that you first speak with an attorney before setting up one in your state. If you do decide to form a Series LLC, consulting a great quality attorney who is experienced in the process, such as ourselves, can help you avoid these pitfalls.