A series LLC is a special form of limited liability company in which the articles of formation specifically allow for unlimited segregation of membership interests, assets, and operations into independent series. Each series operates like a separate entity with its own name, bank account, and separate books and records. A series LLC may have different members and managers in each series. The rights and obligations of differ from series to series. Each series may enter into contracts, sue or be sued, and hold title to property.
Owners save on costs because they create only one LLC. A series LLC is similar in concept to a corporation with several subsidiaries. It is designed to segregate risk within separate entities without the cost of setting up new entities. The IRS has not decided how they will be taxed.
Series LLCs are most commonly used for real estate development projects. Different investors can invest in different lots and, once a project, like a house, is completed the lot can be more easily released to a purchaser. Then investors in that particular project can receive proceeds after debt related to the project is repaid.
Series LLC is a creation of state law. It is not allowed in all states. Delaware was the first state to allow series LLCs. Currently series LLCs are available in Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Puerto Rico (maybe more). Some states like California do not allow for series LLCs to be formed law but series LLCs formed in other states can register with the state and do business in the state.