Is a Series LLC a good fit for your real estate assets?

Illinois is currently one of 16 states (and the District of Columbia) that recognizes Series Limited Liability Companies (LLC) by statute. A Series LLC is a single LLC which consists of a “master” LLC and multiple series, each of which is a “mini” LLC. The structure is similar to that of a parent corporation and its subsidiaries. Each series may have its own members, managers, assets and purpose.

Series LLCs are often great cost-effective tools for real estate investors to separate personal assets from investment assets. The primary benefit of a Series LLC is that the assets of each series are shielded from the assets of the other series and the master LLC. Unlike some other state statutes, the Illinois statute contains specific language to this effect and provides that the debts and liabilities of one series are enforceable only against the assets of that individual series and not against the assets of any other series or the LLC generally. Therefore, a Series LLC avoids the need of establishing multiple LLCs to separate parcels of real estate for liability protection purposes.

Each series may conduct business in its own name and has the authority to contract with any party, hold title to property, grant security interests, sue and be sued. The Illinois statute also allows each series to elect to contract jointly, work cooperatively, consolidate operations and be treated as a single taxpayer without affecting the liability protection of each series, unless the series have specifically accepted joint liability by contract.

A Series LLC can provide the same benefits as traditional LLCs without the multiple filings, fees, annual reports and, in some cases, tax returns. For example, only one annual report is required to be filed rather than one for each series, which streamlines administration. Additionally, provided that the ownership structure of each series is the same, the IRS requires only one tax return be filed for the master LLC.

Contact one of Chuhak & Tecson’s Corporate Transactions & Business Law attorneys to find out if a Series LLC would be beneficial to your business.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Kathryn L. Kaler, Associate

This alert originally appeared in the Winter 2018 Real Estate Focus newsletter.