Series LLC Entity Structure

[Kumar R]

I am starting out as an investor and have done some reading on Series LLC. I searched in the forums and did not find an answer.

I have seen a setup as follows:
1. abc LLC (Parent LLC)
2. 1 Series LLC "cell" to manage properties - collect rent and pay bills (abc Series A LLC).
3. 1 Series LLC "cell" to flip properties (rehab, quick buy and sell, etc) (abc Series B LLC).
4. 1 Series LLC "cell" per for rental property (abc Series C LLC, abc Series D LLC, ...)

Do you guys know of a book that details how this system functions?

- Would the property management LLC be an C or an S corp?
- I believe the "flip" series would be an S crop. Is that correct?
- The rental property series would be plain LLCs that would roll up into the parent LLC.
- I think the parent and each cell would need separate accounting (bank acct, money tracking, etc). Is that correct?
- How does money transfer between the property management llc and the individual property cells? For example, each month the prop mgmt collects rent, pays bills, charges a mgmt fee, deposit balance into the individual prop account. would this need to be done monthly or is quarterly, semi-annual, or annual okay?

Would the tax returns work as:
There would be 1 return for the prop mgmt series
There would be 1 return for the "flip" series
There would be 1 return for the parent llc which contains individual property series and P/L get moved into my personal tax return

All of this is foreign to me as I am just starting out, so would love some advice or books that can help.

I live Chicago's west suburbs (lombard). If you can recommended an accountant or attorney who could explain this, it would be great.

Thanks all.

[Steven Hamilton II]

Kumar R,

I apologize,

I did not see your post before.

Welcome to BiggerPockets. I see we're also fairly close. I'm right by Gurnee(six flags). I have some good recommendations for you. I have a few great attorneys. I'm an accountant; however, I can also suggest others.

Kumar,

Most of the difference between entities depends upon what you want to accomplish. If any cell is going to be a separate entity you must be sure that you do separate accounting for each.

I recommend treating the individual properties as "disregarded" to be filed on Schedule E on your tax return.

The management entity would need to collect the rent retain it's portion and then deposit to the individual property's accounts From there you can feel free to transfer it to yourself. These actions would need to be done at least quarterly. Preferably monthly.

There would be a tax return filed for the management series, the flip series/ The parent LLC will not need to have a tax return filed; however, the individual properties may be included on your personal tax return. Unless you want to have the parent own them in which you would treat them as disregarded to the Parent S or C-corp.

If you're ever near the North Shore or in Lake County let me know. Let's do lunch.

-Steven the Tax Guy

Your guide to IRS laws, rules and regulations.