Series LLC Incorporation Information
There is a relatively new legal entity called the Series LLC that is being promoted heavily by States attempting to profit off of this “money-saving-device” which effectively groups several LLC’s into one LLC.
What You need to Know About Series LLC’s
You might think that you might be saving money by using a “Series LLC” but in all likelihood you could end up paying considerably more in the event of a lawsuit – plus – at $600-800 per year, they are hardly cheap.
Lots of people think that they are saving money by starting a series LLC in a state like California.
You may be saving money until your financial safety net is ripped apart by a lawsuit, and all of the assets held in the series LLC are available for predatory creditors to steal away from you.
Don’t Set Up A Series LLC
California has some of the worst business laws surrounding LLC’s – first and foremost, you should never have a California LLC. This is because California law makes it very easy for creditors to shut down your business in the event of a lawsuit.
In other, pro business states, the sole remedy is a charging order. This means that the creditors will have to wait until profits are distributed before they can stake a claim to your company.
Without confusing the reader with complicated legal jargon, In California, your business can easily be dismantled in the event of a lawsuit. Furthermore, you may lose all of your personal assets as well – if the corporate veil is pierced – which may be relatively easy with a series LLC.
Series LLC’s are unproven in the courts of the United States, and you certainly don’t want to be the one to establish the new caselaw.
Courts rely on precedent caselaw to make judgements concerning a specific case, and therefore, you want to establish your LLC in a state with
1. Pro-business laws where the sole remedy is a charging order
2. Established, precedent caselaw
The best States for U.S. incorporation are Wyoming, Delaware and Nevada, and these States also allow you to keep your name off of the state register when you sign up the LLC.
The Series LLC is anything but proven! Does anyone even know if there will be inside protection from a series LLC? NO! And you certainly don’t want to be the first to find out.
THINGS TO REMEMBER
- You have the right to set up a corporation or LLC in any state and do business in another state.
- Series LLC’s are expensive and don’t offer any advantages over separate LLC’s.
- Never set up an LLC in a state that doesn’t have strong, established pro-business caselaw.
- Segregating your assets is very important, and you should have a different LLC, or possibly IBC for each important asset in your portfolio.