Why Consider The Series LLC?

The Series LLC a relatively new legal theory, yet an important one. Most legal professionals in the real estate investing world agree that it is the ideal structure for REI’s to protect their assets. Delaware was the first state to adopt the Series LLC in 1996, and many states have followed their pristine example within the last 5-10 years.

To make it easier to visualize, there is typically a Parent LLC that is formed and registered with the state. Then, the Parent LLC formation documents permit the LLC to create separate and distinguishable Child LLCs within its structure. Entity structuring for real estate investors & entrepreneurs has different nuances, concerns and business practices than medium to larger-sized entities.

Series LLCs Far and Wide

Currently, only 18 states (including the territory of Puerto Rico) have Series LLC statutes and those statutes are not in any way uniform.

Series LLCs do not receive the standard treatment when used in non-Series LLC states. Sounds great, right? Amongst the states that have permitted Series LLCs, some have decided to rebel against the typical flow. For example, Alabama does not require child LLC’s to be registered at the state level and has no specific naming rules. This is different from, let’s say Texas, which requires the filing of a “Certificate of Assumed Name” (essentially a DBA) for each Child LLC.

If a Texas series does business under a specific name an “Assumed Name Certificate” must be filed. If each or any series of the LLC conducts business under a name other than the name of the LLC, the LLC must file an assumed name certificate for the name of the series in compliance with chapter 71 of the Texas Business & Commerce Code. [See HB 1624, effective 9/01/13]

Getting Ahead of the Storm

Laws can change, which is why it’s important for investors to either take the time to continually research and keep up-to-date with case law or hire experts in this area to monitor these frequent changes.

Investors and entrepreneurs who are just starting are vulnerable to predatory individuals who know full well the challenges that these two demographics face. Despite usually being low on funds, investors & entrepreneurs are not typically low on assets to target. These ambitious & successful people will often fly by the seat of their pants before getting things perfect (if perfect is even a thing in the investing world). Most of them are skipping around and putting off the things they should be doing to protect themselves. The predators of this world know this & are well aware that big corporations have protections and layers that are very expensive for “shark” attorneys to pierce their corporate veils.

Who Wouldn’t Want A Series LLC?

Those unprotected are the most vulnerable. Fear not! It doesn’t have to be that way because getting the right structure in place from the beginning (if you pick the right experts to help you) doesn’t have to break the bank. Talk about relief!

Whether you’re already a real estate pro or just starting, you must work with companies that specialize in this very complex legal niche. The Series LLC helps protect against predatory lawsuits and is there to help you through whatever stage of investing you may be in. Although it’s not a guarantee, it help can stop lawsuits before they even begin.