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By The Wyoming LLC Attorney Team

Aug 14, 2023
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North Carolina Series LLC

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Summary

The article discusses the concept of a Series LLC, which offers liability protection for multiple businesses within a series. North Carolina does not allow Series LLCs, but some states like Delaware, Nevada, and Texas do. The benefits include flexibility, holding company opportunities, real estate liability protection, and privacy.

An LLC offers a lot of benefits, however, there are a few variations on this structure that can give you even more advantages. For example, anonymous LLCs or Series LLCs can give you different benefits and are better in some circumstances. To find out more about what a Series LLC is and why this option could be worth considering for you, make sure to read on.

What Is a Series LLC?

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, or series limited liability company, offers extra protection for the owner of a business. These companies are formed as a series and can include multiple businesses. The idea is that this provides liability protection for each company in the series. Each LLC is a separate company and this means that if any lawsuit or other issue befalls one of the businesses, it will not have an impact on the others in the series. Opting for a Series LLC has a lot of benefits, mainly the protection it provides companies from liabilities that become an issue for parts of its series, protecting them from any liability.

Start an LLC in North Carolina

Does North Carolina Allow Series LLC?

If you are hoping to start a Series LLC in North Carolina, you may be disappointed to find out that the state does not allow Series LLCs to be formed. However, this does not mean you have to entirely give up on having a Series LLC. Read on to find out more about the methods you can try to legally set up a Series LLC even if your state does not allow it.

Which States Allow Series LLC?

A Series LLC is a unique type of limited liability company, and it is one that you may find difficult to set up. This comes partly down to the fact that it is not actually allowed in many states. The only states that Series LLCs are allowed in are:

  • Delaware
  • Nevada
  • Illinois
  • Oklahoma
  • Tennessee
  • Texas
  • Utah

There are a few states that stand out, however, when it comes to the best states to set up a Series LLC. Some of the best include Nevada, Delaware, and Texas. Here’s why:

1. Nevada

There are multiple benefits to starting a Series LLC in Nevada. One of these is that if you choose Nevada for your LLC then you won’t need to pay any state-level taxes. This includes corporate or personal taxes. As well as this, opting for Nevada for your Series LLC means that you get an added level of privacy. This is because, in Nevada, you do not have to state who the owners of the business are. This means you don’t have to publicize your name and address as a member in the same way that you do in most states.

2. Delaware

One state that offers benefits when it comes to starting an LLC, is Delaware. There, you can enjoy operational benefits, legal protection, and favorable courts. The Chancery Court is home to judges who specialize in business law and you will be sure to receive fair rulings there. However, to benefit, you need to make sure that you have the correct legal coverage and that you keep your records accurate and up to date.

3. Texas

Texas is a good option for starting a Series LLC and one of the main benefits of the state is the minimal maintenance that is required there. There are low management fees meaning that you will save money. There are usually a lot of documents that need to be filled out and filed as part of setting up an LLC as well as reporting meeting minutes. However, if you set up your LLC in Texas, you benefit from not having to do all of this expensive and time-consuming paperwork.

How Do You Form a Series LLC?

If you are wondering how to start a Series LLC in North Carolina, look no further. Some states have a specific form that is different which you need to fill out if you want to start a Series LLC as opposed to any other kind. However, in most cases, you can simply file your articles of organization as usual. The only difference is that you need to check that these articles state you can establish the LLC as a series. If you don’t have much experience with setting up LLCs or simply want more support, the best option is to recruit the help of a professional to make sure that everything is set up correctly and that you get the best from your limited liability company.

How To Use a Series LLC?

Once you have a Series LLC set up, using it is fairly simple. The basic idea is that you can allocate your assets into various LLCs to make sure that if there is a lawsuit against one, the rest of your assets are not affected. You should be strategic about how these are set up to avoid losses. For example, you might want to avoid putting an extremely expensive property in the same LLC as one that is in a rougher area or which is more likely to attract a lawsuit.

How Do Series LLCs Pay Taxes?

As the owner of a Series LLC, you will have to file your federal taxes in the same way that any ordinary LLC does. You can file one tax return to be the main one for the LLC series as a singular entity. You should put all of the income that you gain from the whole series of LLCs under the personal tax return section, in the Schedule E section.

What Are the Main Reasons for Forming a Series LLC?

There are a whole host of benefits that you wouldn’t want to miss out on, simply from choosing to set up a Series LLC when it comes to your company. Here are just a few of the benefits you could enjoy.

1. Flexibility

When you choose an LLC, you get the benefit of having great flexibility over your choice of how to divide management as well as financial rights for yourself, with few statutory mandates in the way. With a Series LLC, this perk is only exaggerated as you have the flexibility of not only one LLC but the whole group of them.

2. Holding Company Opportunities

If you have or are planning to start a holding company, then a Series LLC could be the best choice for you. If you have a holding company that does not operate its own business, then you could benefit from a Series LLC. Its structure lends itself to a holding company with each business being held under one.

3. Real Estate Liability Protection

One of the most common benefits of a Series LLC is protection. When you keep all of your assets separate, there is much less risk even if something like a lawsuit happens. This means that only the assets under the LLC in question will be affected. Keeping your most valuable assets under various LLCs means they are well protected from liability. This is a great way to ensure real estate liability protection. Even if one of the LLCs faces serious action and you have to lose some assets, those under any of the other companies in the series cannot be used when it comes to clean-up costs. This is because although they are linked in the series, they are seen as separate entities.

4. Privacy

Another of the most beneficial elements of an LLC is that you can choose to make it anonymous. This is only possible in some states, but if you do the extra work to make sure you opt for an area that allows anonymous LLCs, you can enjoy complete privacy. You will not have to share the name or addresses of any members or owners meaning that there is little to no risk involved and you can protect yourself, your loved ones, and your assets all by simply choosing an LLC.

Risks of Series LLCs

Despite the many benefits, there are also a few risks to opting for a Series LLC. It is important to know all of the facts before you decide which business model is best for you, which is why we have also compiled some of the risks of choosing the lesser-used Series LLC model. Here are some of the things that you should be wary of before opting for one yourself.

1. Expensive

An LLC may seem appealing to begin with because they appear to be less expensive to set up, however, you could find that it actually costs you more in the end. It is much more complicated to set up a Series LLC which means you are likely to face more expenses. In a Series LLC, each individual company counts as a separate LLC when it comes to fees. This means that you will have to spend more to set up each one even if they are a series.

2. Legal Uncertainties

Another problem that you might face with trying to set up a Series LLC is some legal uncertainties. A lot of states don’t have legislation in place in terms of Series LLCs which means they can simply choose to ignore the laws in place in the state where the series was created. This is due to the fact that you have to work by the rules of the state you are doing business in. Opting for something so new means that there are risks when it comes to legal factors as these have not been tested or perfected yet.

3. Cross State Laws

In a similar vein, you cannot be sure that each state will uphold the laws of another even though they are expected to give credit to the legislation of other states. There are no guarantees that everything will go as expected when you are working across various states.

4. Not Endorsed

Another important factor to note is that the American Bar Association has reviewed Series LLCs and decided against endorsing them. This is a key factor and suggests a lack of protection. For more protection with laws that are already established, a more standard LLC is a better option.

There are a lot of benefits to choosing a limited liability company, from privacy and professionality to liability and flexibility, you can enjoy a whole host of positives when you opt for an LLC as the structure for your business. 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 ordering this product.