The Ultimate Guide to Series LLCs: What They Are & How They Work

A Series LLC is a unique business structure that allows multiple businesses, assets, or investments to operate under one umbrella while remaining legally and financially separate.

 

 

 

Unlike a standard LLC, a Series LLC lets you create independent "series" or divisions within the same legal entity. Each series can own assets, have its own contracts, and shield its liabilities from the other series within the LLC. 

In this guide, we’ll cover:

• What a Series LLC is and how it works
• Which states allow Series LLCs
• The pros and cons of using a Series LLC
• How a Series LLC compares to a holding company
• A step-by-step guide to forming a Series LLC
• Taxation, compliance, and banking considerations
• Common myths about Series LLCs
• Who should use a Series LLC and when it may not be the best choice

If you're managing multiple properties, businesses, or investment assets, a Series LLC could be a powerful tool to simplify operations and reduce liability risks.

1. What is a Series LLC?

A Series LLC is a limited liability company that can create separate series or divisions within the same entity. Each series operates like an independent LLC, with its own assets, liabilities, contracts, and operations, but without the need to register multiple LLCs.

How a Series LLC Works

• The parent LLC is legally formed through the state’s Secretary of State.
• Within the parent LLC, individual series can be created, each functioning as a separate entity.
• Each series has its own business activities, assets, and liabilities, which remain separate from other series within the LLC.
• A properly structured Series LLC ensures that liabilities from one series do not affect the others, similar to how separate LLCs function.

 

Key Benefits of a Series LLC

• Asset Protection – Each series shields its assets from the liabilities of other series.
• Cost Savings – Instead of paying multiple LLC filing fees, business owners pay for one LLC formation and create multiple series internally.
• Scalability – A new series can be added at any time, making it ideal for businesses that plan to grow.

The Series LLC structure is especially useful for real estate investors, e-commerce businesses, and franchises that manage multiple assets under a single brand.

2. Which States Allow Series LLCs?

Not all states recognize Series LLCs, and state regulations vary in terms of how they handle formation, taxation, and liability protections.

States That Fully Recognize Series LLCs

As of 2025, the following states allow the formation of Series LLCs:

• Alabama
• Arkansas
• Delaware
• District of Columbia
• Illinois
• Indiana
• Iowa
• Kansas
• Missouri
• Montana
• Nebraska
• Nevada
• North Dakota
• Oklahoma
• Puerto Rico
• South Dakota
• Tennessee
• Texas
• Utah
• Virginia
• Wyoming

These states provide clear laws and legal protections for Series LLCs, ensuring that each series functions independently and maintains liability separation.

States With Limited Recognition

Some states do not allow the formation of Series LLCs but recognize them if they were legally formed in another state. This means businesses can register a foreign Series LLC to do business, but liability protections may not be enforced.

• California (allows foreign Series LLCs but charges an $800 franchise tax per series)
• New York (recognizes foreign Series LLCs but provides no formal liability separation)
• Florida (permits foreign Series LLCs but does not provide clear liability protections)
• North Carolina (recognizes foreign Series LLCs but does not clarify their legal status)

States That Do Not Recognize Series LLCs

The following states do not recognize Series LLCs at all, meaning each property or business would need its own separate LLC for liability protection:

• Colorado
• South Carolina
• Alaska
• Pennsylvania
• Louisiana
• Washington

If you operate in one of these states, a traditional LLC structure or a holding company model may be a better option.

Should You Form a Series LLC in Another State?

If your home state does not allow Series LLCs, you may consider forming one in a Series LLC-friendly state such as Delaware, Texas, or Nevada. However, be aware that:

• Some states do not recognize liability separation between series formed in another jurisdiction.
• You may need to register as a foreign entity, leading to additional compliance costs.
• Franchise taxes, such as California’s $800 per series tax, can reduce cost savings.

Before forming a Series LLC in another state, consult a business attorney to ensure it aligns with your legal and financial goals.

 

 

3. Pros and Cons of a Series LLC

A Series LLC offers significant advantages, but it also comes with limitations. Understanding the pros and cons will help determine if this structure is the right fit for your business.

Pros of a Series LLC

1. Liability Protection for Each Series

One of the biggest advantages of a Series LLC is asset protection. Each series operates as an independent entity, meaning:

• If a lawsuit is filed against one series, the assets of the other series remain protected.
• Creditors cannot go after assets held by other series within the LLC.
• This structure is especially beneficial for real estate investors, e-commerce sellers, and franchise owners managing multiple properties or brands.

2. Cost Savings vs. Multiple LLCs

A Series LLC allows you to avoid the high costs of forming multiple traditional LLCs. Instead of filing separate Articles of Organization and paying state fees for each LLC, you:

• Pay one formation fee for the parent LLC.
• Add new series without having to file separate LLC formations.
• Reduce annual reporting costs and compliance fees in states that allow a single filing for all series.

 

3. Simplified Business Management

Managing multiple traditional LLCs can be time-consuming. A Series LLC helps streamline operations by:

• Allowing a single Operating Agreement to govern all series.
• Reducing paperwork—some states allow one tax filing for all series.
• Simplifying bookkeeping and business structure updates.

4. Scalability and Flexibility

A Series LLC makes it easy to add new properties, businesses, or investments. Instead of forming a new LLC each time you acquire an asset, you:

• Create a new series under the parent LLC.
• Keep legal and financial separation intact while benefiting from the parent LLC's structure.
• Expand operations without added administrative complexity.

This flexibility is ideal for businesses planning to scale, such as real estate portfolios, multiple e-commerce brands, and professional service providers.

Cons of a Series LLC

1. Not Recognized in All States

One major downside is that not all states recognize Series LLCs. This can create legal uncertainties when:

• Doing business in multiple states.
• Registering a foreign Series LLC in a state that does not recognize liability separation.
• Facing legal disputes where a court might challenge the series' independence.

2. Banking and Financing Challenges

Some banks and financial institutions are unfamiliar with Series LLCs and may:

• Require each series to have its own EIN and bank account.
• Hesitate to provide separate financing for individual series.
• Refuse to recognize liability separation between series.

Before forming a Series LLC, check with banks and lenders to ensure they support the structure.

3. Complex Tax Considerations

• The IRS does not automatically recognize each series as a separate taxpayer, leading to confusion on tax filings.
• Some states require each series to file individual tax returns, while others allow a single tax filing for the parent LLC.
• If a Series LLC operates in multiple states, tax compliance can become complex and costly.

4. Uncertain Legal Precedents

Because Series LLCs are relatively new, courts have not widely tested their liability protections. This legal uncertainty means:

• A lawsuit could challenge the independence of series.
• If financial records are not properly maintained, courts may disregard liability protection.
• Some attorneys and investors prefer the traditional LLC model due to its well-established legal precedents.

4. Series LLC vs. Holding Company: Key Differences

A Series LLC and a holding company both allow businesses to manage multiple assets under a single structure, but they serve different purposes.

 

Feature	Series LLC	Holding Company
Legal Structure	A single LLC with independent series operating under it.	A parent company owns multiple LLCs or corporations.
Liability Protection	Each series has separate liability (if properly structured).	Each subsidiary LLC has separate legal protection.
Taxation	Depends on state laws; can be pass-through, S Corp, or C Corp.	Parent company may have different tax treatment than subsidiaries.
Formation Costs	Lower—one filing for the parent LLC and multiple series.	Higher—each subsidiary requires a separate LLC formation.
State Recognition	Not all states recognize Series LLC liability separation.	Holding companies use traditional LLCs, which are widely recognized.
Banking & Financing	Some banks do not recognize Series LLCs.	More commonly used by large businesses and investors.
Best For	Real estate investors, e-commerce businesses, franchises.	Large corporations, investment firms, companies managing multiple businesses.

When to Choose a Series LLC

A Series LLC is ideal for:

• Real estate investors who want to keep properties separate but avoid multiple LLC fees.
• E-commerce businesses managing different brands or product lines.
• Franchise operators who own multiple locations.
• Small business owners looking for an affordable, flexible asset protection strategy.

When to Choose a Holding Company

A holding company structure works best for:

• Businesses that own multiple separate companies that need distinct legal identities.
• Corporations that plan to raise investor funds or go public.
• Companies with complex business operations requiring individual subsidiaries.

A Series LLC is often a simpler, more cost-effective solution for small businesses and investors, while a holding company is better suited for large-scale business operations.

 

 

5. How to Form a Series LLC (Step-by-Step Guide)

Setting up a Series LLC involves several important steps, including choosing the right state, filing formation documents, and ensuring proper compliance. Below is a step-by-step guide to forming a Series LLC correctly.

Step 1: Check If Your State Allows Series LLCs

Not all states recognize Series LLCs, so the first step is determining whether you can legally form one in your state.

• If your state allows Series LLCs, you can proceed with the registration process.
• If your state does not recognize Series LLCs, you can consider forming one in a Series LLC-friendly state such as Delaware, Texas, or Nevada, but you may need to register it as a foreign LLC in your home state.

Step 2: Choose a Name for Your Series LLC

Your Series LLC must have a unique name that complies with your state’s LLC naming requirements.

• The name must include “LLC” or “Limited Liability Company.”
• Some states require each series to have a distinguishable name (e.g., Smith Holdings LLC – Series A).
• Perform a name availability search on the Secretary of State’s website to ensure it is not already in use.

Step 3: File Articles of Organization (or Certificate of Formation)

To officially form a Series LLC, you must file Articles of Organization (or Certificate of Formation, depending on the state) with your state’s Secretary of State.

• Some states require specific language stating that the LLC has the authority to establish separate series.
• Filing fees vary by state, typically ranging from $50 to $500.
• Processing times vary; some states offer expedited filing for an additional fee.

Step 4: Draft a Strong Operating Agreement

The Operating Agreement is the most important document for a Series LLC, as it outlines how each series operates and remains legally separate. Key sections should include:

• Authority to create separate series within the LLC.
• Clear rules for asset and liability separation.
• Management structure and how each series is governed.
• Financial reporting and tax election details.
• Procedures for adding new series in the future.

Without a well-drafted Operating Agreement, courts may disregard the separation between series, putting all assets at risk in a lawsuit.

Step 5: Obtain an EIN (Employer Identification Number)

The IRS requires an Employer Identification Number (EIN) for tax reporting and banking.

• The parent LLC will need one EIN, but each series may require a separate EIN if it has employees or a unique tax election.
• You can apply for an EIN through the IRS website for free.

Step 6: Register for State Taxes and Business Licenses

Depending on the state, each series may need to:

• Register for state sales tax and business licenses.
• Pay annual franchise taxes or fees (e.g., California charges $800 per series).
• File separate state tax returns (some states require independent tax filings for each series).

Step 7: Open Separate Bank Accounts for Each Series

To maintain liability protection, each series should have:

• A separate bank account to prevent commingling of funds.
• Its own bookkeeping records to track income and expenses independently.
• Clear financial documentation to avoid legal issues in court.

Step 8: Maintain Compliance and File Annual Reports

Series LLCs must follow ongoing compliance requirements, including:

• Filing annual reports (varies by state).
• Keeping separate financial and legal records for each series.
• Renewing business licenses and permits as required.

Following these steps ensures your Series LLC remains legally compliant and properly structured for liability protection.

 

 

6. Series LLC Taxation: What You Need to Know Before Filing

Series LLCs have unique tax considerations, especially since not all states and the IRS treat them the same way. Here’s what you need to know before filing taxes.

How Does the IRS View Series LLCs?

Unlike traditional LLCs, the IRS does not have a standard tax classification for Series LLCs. Instead:

• The parent LLC and each series can elect their own tax treatment.
• If a series operates independently, it may need to file a separate tax return.
• Some states require each series to have its own EIN and pay separate taxes.

Pass-Through Taxation (Default Structure)

By default, Series LLCs are treated as pass-through entities, meaning:

• Profits and losses pass through to the owners' personal tax returns.
• Single-member Series LLCs are taxed as disregarded entities.
• Multi-member Series LLCs are taxed as partnerships unless they elect another classification.

When to Elect S Corporation or C Corporation Taxation

A Series LLC (or an individual series) can elect to be taxed as:

• S Corporation (to reduce self-employment taxes).
• C Corporation (if reinvesting profits and seeking lower corporate tax rates).

Each series can choose its own tax classification, allowing flexibility in tax planning.

State Taxation of Series LLCs

Each state handles Series LLC taxation differently:

• Some states allow a single tax return for the entire Series LLC.
• Other states require each series to file separately, increasing tax filing costs.
• Franchise taxes may apply per series, such as California’s $800 annual fee per series.

Federal Tax Filings for a Series LLC

Depending on tax classification, Series LLCs may need to file:

• Form 1040 Schedule C (if taxed as a sole proprietorship).
• Form 1065 (if taxed as a partnership).
• Form 1120S (if taxed as an S Corporation).
• Form 1120 (if taxed as a C Corporation).

Proper tax planning is essential to maximize tax savings and ensure compliance with both state and federal regulations.

7. How to Maintain and Operate a Series LLC

Once a Series LLC is formed, keeping it in good standing requires ongoing compliance, financial separation, and proper management. Failing to follow best practices can jeopardize liability protection, making it easier for courts to disregard the separation between series.

Banking and Financial Separation

Each series must operate as its own independent business to maintain its liability shield. This means:

• Separate bank accounts should be opened for each series to prevent financial commingling.
• Accounting records must be distinct, tracking income and expenses for each series separately.
• No unauthorized transfers of assets between series without proper documentation.

If a court finds that finances between series are mixed, it may disregard the separation and treat all series as one entity, putting all assets at risk.

 

 

Record-Keeping and Compliance Best Practices

• Maintain clear contracts and legal agreements for each series.
• Use separate EINs if required by state law or for tax purposes.
• File annual reports and state-required filings to keep the Series LLC in good standing.
• Keep meeting minutes and records of business decisions, even if your state does not require them.

Some states require each series to file separate reports, while others allow a single filing for the parent LLC. Business owners should check state compliance laws to avoid penalties.

Avoiding Common Pitfalls That Can Jeopardize Liability Protection

• Commingling funds between series, which could result in courts disregarding liability protection.
• Not keeping contracts and business dealings separate, weakening the independence of each series.
• Failing to follow state-specific Series LLC rules, leading to administrative dissolution or fines.

By following proper operational guidelines, a Series LLC can provide long-term asset protection and business flexibility.

8. Common Myths About Series LLCs

Because Series LLCs are still relatively new compared to traditional LLCs, many misconceptions exist about their legality, taxation, and operations. Below are some of the most common myths—debunked.

Myth 1: Series LLCs Are Recognized in Every State

Reality: While many states allow Series LLCs, some do not recognize them at all.

• States like Delaware, Texas, and Nevada fully support Series LLCs.
• States like California and New York recognize foreign Series LLCs but impose high fees and reporting requirements.
• Some states do not enforce liability separation between series, making it riskier to use in those jurisdictions.

Before forming a Series LLC, business owners should check their state’s laws to ensure proper recognition and protection.

Myth 2: A Series LLC Eliminates All Personal Liability

Reality: While a Series LLC protects assets between series, it does not automatically shield owners from personal liability in all cases.

• If an owner personally guarantees a loan or lease, they can still be held liable.
• Improper record-keeping and financial commingling can invalidate liability protection.
• Courts may still pierce the corporate veil if they determine the Series LLC was mismanaged.

Maintaining strict business practices and separate financials is key to keeping liability protection intact.

Myth 3: You Don’t Need Separate Bank Accounts for Each Series

Reality: Courts may disregard a Series LLC’s structure if separate finances are not maintained.

• Each series should have its own bank account.
• Financial transactions should be properly documented to avoid commingling.
• Each series should maintain independent bookkeeping records.

Failing to follow these rules weakens the liability separation and can put all series assets at risk.

 

 

Myth 4: A Series LLC is the Same as a Holding Company

Reality: A Series LLC and a holding company serve different purposes.

• A Series LLC operates as a single legal entity with multiple independent series.
• A holding company owns multiple separate LLCs or corporations.
• Holding companies are often used for investment portfolios and large business structures, while Series LLCs are commonly used for real estate investing and small business asset protection.

Each structure has different tax and legal implications, so business owners should choose based on their specific needs.

9. Case Studies: Who Should Use a Series LLC?

Real Estate Investors

Many real estate investors use Series LLCs to protect multiple properties under one legal structure.

 

E-Commerce Businesses Managing Multiple Brands

E-commerce businesses selling different product lines often benefit from a Series LLC by separating financial and legal risks between brands.

 

Franchise Owners Expanding to Multiple Locations

Franchise owners use Series LLCs to manage multiple locations without forming separate LLCs for each one.

 

10. Final Thoughts: Is a Series LLC Right for You?

A Series LLC is a powerful tool for business owners, real estate investors, and entrepreneurs who need asset protection, cost savings, and scalability. However, it’s not the right choice for everyone.

Checklist: Should You Use a Series LLC?

• You own multiple properties, businesses, or investment assets.
• You want separate liability protection between business ventures.
• You operate in a state that fully recognizes Series LLCs.
• You want to reduce formation and compliance costs compared to multiple LLCs.
• You understand the banking and taxation complexities of a Series LLC.

A traditional LLC or holding company may be a better choice if:

• You operate in a state that does not recognize Series LLCs.
• You need bank financing, as some lenders prefer separate LLCs.
• You want a structure with well-established legal precedents.

Next Steps

Before forming a Series LLC, consult with a business attorney or tax advisor to:

• Ensure your state laws fully support Series LLCs.
• Structure your Operating Agreement properly to protect each series.
• Understand the tax obligations and banking requirements.

If you’re ready to set up a Series LLC, check out Legal GPS for step-by-step legal guidance and customizable templates.

Do You Need a Lawyer to Form an LLC?

The biggest question now is, "Do you need a lawyer to help you form an LLC?" For most businesses and in most cases, you don't need a lawyer to start your business. Instead, many business owners rely on Legal GPS Pro to help with legal issues. Legal GPS Pro is your All-in-One Legal Toolkit for Businesses.

Developed by top startup attorneys, Pro gives you access to 100+ expertly crafted templates including operating agreements, NDAs, and service agreements, and an interactive platform. All designed to protect your company and set it up for lasting success.