Due to its adaptability and affordability, a Series Limited Liability Company (LLC) has grown in popularity among business owners. A Series LLC, in contrast to a traditional LLC, can have numerous “series” or divisions that operate independently but are nonetheless included in the main company’s legal framework.
Whether the IRS recognizes Series LLC is one of the most frequent queries from business owners. Yes, the IRS does recognize series LLCs; however, for tax purposes, it sees each series as a different organization.
In fact, a Series LLC is allowed to have various owners for each of its series. One advantage of a Series LLC is that it enables business owners to establish distinct organizations for various projects or investments without having to establish a new LLC each time.
But it’s crucial to keep in mind that every series inside a Series LLC needs to have its own operating agreement, checking account, and other legal documentation. As a result, each series is recognized as a distinct entity, and the liability of one series has no bearing on the liabilities of the others.
A Series LLC can be utilized as a holding corporation, but that does not mean that they are the same. A Series LLC is a single entity with numerous divisions, as opposed to a holding company, which is a form of commercial entity that owns and controls other businesses.
How Should a Series LLC Be Written?
To start a Series LLC, you must first register as a regular LLC with the state where you intend to do business. After that, you will need to submit more papers to the state in order to create the Series LLC structure.
A Certificate of Designation for each series, outlining its rights, powers, and obligations, is often included in this form. Separate operating agreements and other legal papers will also need to be written for each series.
In a Series LLC, each series is recognized as a distinct legal entity. Accordingly, each series is able to contract, bring legal action, and be held legally liable for actions.
It’s crucial to remember that the liability of one series has no bearing on the others. This implies that the assets of the other series are safeguarded in the event that one series is sued or declares bankruptcy.
In conclusion, Series LLCs are recognized by the IRS, and each of their series may have a distinct owner. Because a Series LLC is not the same as a holding company, you must first establish a standard LLC and submit additional papers to the state in order to construct one. The liability of one series does not affect the others because each series under a Series LLC is a different legal organization.
Whether you require several LLCs depends on the particular demands and objectives of your organization. Although it might not be the ideal choice for all organizations, a Series LLC can be a handy tool for holding many assets or enterprises under one parent company. To choose the ideal structure for your company, it’s crucial to speak with an experienced lawyer or accountant.