Sutton Law Center

Our Corporation Lawyer Explains Why a Series LLC May Not Be a Fit for You

Corporation LawyerAt the Sutton Law Center, your corporation lawyer is unlikely to recommend that you establish a series LLC as your entity structure for several reasons. Many investors are attracted by the idea of setting up series LLCs when they have several different investments, because they can then have one umbrella LLC with various series of investments contained within it instead of setting up individual LLCs for each separate one.

What a Series LLC Is

Limited liability companies, or LLCs, provide solid protections for business owners. They help prevent the owner from having personal liability if the business is sued, leaving only the assets held by the business itself to potentially be at issue in a lawsuit. When a business owner has multiple assets, they may be tempted to take advantage of a newer type of entity structure called the series LLC. Nevada is one of 14 states that allow this type of structure. In a series LLC, an investor can place different investments within series of investments held under the same LLC. Each individual investment series will have its own potential liability, meaning that if the company is sued regarding an issue with that particular asset, those held in different series should not be at risk. For example, someone who owns several different real estate rental properties may want to place all of them within series held by one LLC, rather than establishing separate LLCs for each one.

Potential Problems with Series LLCs

Your corporation lawyer will explain why choosing a series LLC may not be a good idea. One problem is that the majority of states do not recognize them. This means that if you do business as a foreign registered entity in another state and you are sued there, the court there may not recognize your series structure and allow the plaintiff to go after all of the assets held in your LLC, rather than just the assets in the particular category under which they are suing. Another problem is that they simply have not been tested in court yet, even in the states in which they are allowed. This means it is unclear how they may be treated by courts even in Nevada.

Contact a Corporation Lawyer

To speak with a corporation lawyer at the Sutton Law Center about the best legal entity structure for you, call (775) 824-0300.

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