Wyoming recently became one of 18 states which allow the formation of Series LLCs. The law was enacted on July 11, 2018 and allows the creation of Close Series LLCs as well. Both entities are a wonderful addition to Wyoming's LLC Act and provide additional flexibility when doing business. The easiest way to conceptualize a Series LLC is to consider it as being functionally equivalent to setting up a holding company and subsidiaries.
Rather than each subsidiary, or child, LLC being a separately filed entity, they are all contained on a single filing with the Secretary of State. This structure provides asset protection and tax benefits in the same way a holding company does. There are detrimental effects when it comes to privacy, though. More on those below.
This setup can save investors considerable sums as only the parent company needs to file an annual report and pay the initial filing fee. For example, we have several clients who have formed 100 series LLCs. This represents a savings of $10,000 in filing fees the first year and $5,000 in annual report filings.
Asset Protection Benefits
One benefit of a Series Limited Liability Company is that each individual series is considered to be separate from the other series and the parent company. This means the debts, liabilities and earnings of each company are separate from another. Further each individual series can either be wholly owned by the parent company, or can have different partners.
This separation provides benefits for those in risky industries. For example, a real estate investor may place each property into its own series. This separates each property from the others in case of a lawsuit or other credit event. An E-commerce company may wish to separate brands due to liability, for example selling candles and nutritional supplements. Each product lines carries its own risks and should be separated in case of an incident.
Given each child is considered its own company, it may select its own tax election. The individual children may alternate between disregarded entities, partnerships, S-Corp and C-Corp tax elections by filing the relevant forms with the IRS. This flexibility, which is inherent to LLCs in general, provides those with disparate earnings to minimize their tax bills. Earned and unearned income can be separated, as well as earnings which should be retained. Each can flow into its own entity thereby minimizing your tax bill. Finally, each company must have its own Employer Identification Number (EIN).
Wyoming LLCs are well known for their privacy benefits. The Secretary of State does not require managers or members to be listed publicly. We also list our address, name, phone and email to keep your private details out of the public record. Generally, this would allow a holding company and its subsidiaries to appear unrelated. That is, if someone finds your holding company they cannot see what subsidiaries it has. Similarly, if someone discovers a subsidiary they cannot trace it to other subsidiaries or the holding company via public records.
Unfortunately, this same level of anonymity cannot be obtained with a Wyoming Series LLC. The parent and each series will be contained on the same filings. Thus, if one company is found, then all the related companies can be easily found as well. All the companies are separate for tax and asset protection purposes, but are not independently anonymous. Those who are privacy minded may want to think twice before forming this entity in Wyoming.
As of this writing, series have strict naming conventions. If your parent company is named "Acme, LLC" then each series must be named as follows:
- Acme, LLC Series 1
- Acme, LLC Series 2
- Acme, LLC Series 3
If you desire a specific name for the children, then you must file a Trade Name Registration (sometimes called a DBA) with the Secretary of State. Each Trade Name has a filing fee of $100 and is good for 10 years. This additional filing fee is equal to the fee paid to file Articles of Organization with the Secretary.
A Wyoming Series LLC can provide significant cost savings over time. However, the upfront cost may not necessarily be significantly lower. A WY Series LLC must only file one Articles of Organization with the Secretary. We charge $349 which includes the state filing fee, operating agreement, first year of registered agent service, business address and 10 Series and more.
Our opening example mentioned the client who formed 100 series. They saved significantly on filing fees for Articles. However, given the above naming conventions, they would require a DBA for each company if they want a more brandable name. They will also require an EIN for each company. We provide discounted DBA and EIN services for Series clients to help mitigate the costs.
Future years show more significant savings. Only the parent company must file an annual report. We also only require the parent company to pay for our agent service. This represents a savings of $50 on the annual report filing and $49 for our agent service per entity.