What lenders do/don't lend to Series LLCs.

[Bradley Clark]

I keep a list of lenders that lend to series limited liability companies. It's been nearly 2 years since I've run into a lender unwilling to lend to a series LLC. What lenders are you aware of that do or do not loan to series LLCs?

[Bradley Clark]

@CraigBullers - imagine you have an LLC that holds title to 12 properties. If a liability is incurred for which there is no insurance coverage (or insufficient insurance coverage) then all of the properties--particularly the one(s) that are owned free-and-clear--are at risk for satisfaction of that liability. That is how a typical LLC works. Before the advent of the Series LLC, if you wanted to avoid this possibility you had to form 12 LLCs. In Texas, that's at least $4,000 in filing fees with the Texas Secretary of State (and 12 company agreements, etc. to keep up with).

Now imagine you have an egg carton that has 12 eggs in it. Each "egg" represents an individual series of the Series LLC (which is the egg carton itself). Each egg holds title to its own property. In Texas (and most other states that have the series LLC structure), no series is liable for the debts and liabilities of another series (except in certain statutorily defined circumstances). In other words, it's as if you have twelve LLCs when you really only have one. The hope--and expectation--is that you avoid the formation costs and administrative burdens associated with creating multiple entities over-and-over again every time you buy and sell a property.

There are tax consequences--at least in Texas--that should carefully be considered when deciding between an LLC and a Series LLC.

I hope this helps explain the differences between the two entity types.