A good option for your multiple businesses?


As your business grows, you may have to make certain important business decisions. One of these decisions is likely to revolve around the legal structure of the business. This can be the result of acquiring one or more new business partners, selling part of your stake in the business, venturing into a different industry or country, and more.

When it comes to entering a new vertical business or diversifying the business, one of the things you should consider doing is registering a new business entity for this new business or product. So while you may have formed an LLC or other type of business entity such as a corporation for your current business venture, there are several reasons why you may want to keep any new business units separate from your existing one, and one common reason For this, it is to segregate the assets and liabilities of each entity.

If this is a viable option for you and your specific circumstance, then a serial LLC could be the solution for you.

What is a Serial LLC?

Sometimes when a person or company has multiple assets or wants to diversify, they often form separate legal entities for each asset or create multiple LLCs. In other words, register a separate LLC for each asset. Fortunately, some states provide a kind of asset protection known as Series LLC. This is a type of Limited Liability Company that is made up of a ‘master’ LLC and one or more LLCs or members, where each is separate from the other in the sense that it has its own rights, responsibilities, duties, and more. Perhaps one of the greatest advantages of a series LLC is the ability to save on the cost and hassle of forming multiple LLCs for each asset you own, while also insulating each of them from the risks and liabilities of other LLCs in the series, which it is equally important feature or advantage.

Essentially, a serial LLC helps you keep all of your assets under one roof, but each asset has its own veil of liability protection.

Of course, serial LLCs were not always an option for commercial companies. They were first created under Delaware state law as a way to simplify structured financial transactions or joint investments like mutual funds. Over the years, serial LLCs have found their way into other forms of business enterprises and have been accepted by more states as well. Although series LLCs cannot be registered in all states, some states will recognize those that have been registered in other states and retain their liability protection.

It is important to note that although there may be some similarities between the two, a Series LLC is not the same as a company with subsidiaries.

Reasons you might want to consider a serial LLC

In addition to the obvious benefits of saving costs and reducing the hassle of forming separate LLCs for each business asset, Series LLC also offers some flexibility that has made it quite popular in some industries such as finance and insurance. Also, this is a business structure that could be very beneficial for startups that might be preparing for an IPO. In addition to these, there are some other reasons why a business owner might want to consider a Series LLC, some of which are:

Separate business goals

In addition to enjoying limited liability status, each series is free to carry out its own business objectives and also has separate policies, which may be different from those of another entity in the series. You can keep your assets and have members separate from other companies.

This dichotomy makes it possible for a business owner to have totally divergent business activities without going through the rigors (and cost) of registering separate entities or jeopardizing all of one entity’s business operations due to the risk and responsibilities another entity has. .

Single and simpler taxation

Also, a serial LLC is not taxed differently, but is assessed as a single entity for purposes of franchise tax and registered agent fee. Because serial LLCs are not treated as separate LLCs for tax purposes, it is a path that has great appeal for business owners.

Less administration

A series LLC may technically and legally contain multiple entities, but all may be centrally managed or administered.

Asset protection

Each LLC of the series is considered a separate and individual entity, even though it is part of a ‘family’ of LLC, as mentioned above, as such, debts, liabilities or lawsuits against a member of the series will not apply . to another member, as long as there is no legal reason to pierce that corporate veil in the same way that can happen with a regular LLC.

Are Serial LLCs Too Good To Be True?

This is a really important question to consider because while serial LLCs seem like a fantastic option for multiple businesses, they are often plagued with problems.

First of all, this form of business is not recognized in every state in the US Currently, you can only form this type of business structure in approximately 16 states at the time of this article. This means that complications can easily arise for a serial LLC when conducting business in a state that does not recognize this structure.

Second, although some other states may recognize a serial LLC, it is not certain that they maintain the cell liability limitation. This could pose a great risk, especially in states that do not have guidelines for forming or operating the business in this way.

Finally, this structure is largely new and has not been tested in court. Therefore, although it could be formed in a state that recognizes this unique structure, the court of another jurisdiction could decide not to. recognize limited liability status of each cell.

There is no question that forming separate cells under an existing business record seems like a smart business decision. However, in many cases, the risks seem to outweigh the benefits, so it is a decision that a business owner should think carefully about and, if necessary, seek relevant professional advice.

So is a serial LLC a good fit for your multiple businesses?

To be honest, it’s hard to say whether forming a serial LLC might be the best fit for your multiple businesses. This is mainly because it will depend heavily on each individual case, as the industries and assets in question play a vital role. Your best bet would be talk to a business lawyer who has experience with series LLC.

Or killed

Or killed

Kanayo Okwuraiwe is the founder of a startup, an incurable entrepreneur, and a digital marketing professional. He is also the founder of Telligent Marketing LLC, a digital marketing agency that offers SEO Law Firm services to help lawyers develop their legal practices. Connect with him on Linkedln


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