More Series LLC FAQs
By Kevin Vela
Here at VW, we receive legal questions from prospective clients via phone, web, and email every day, and it seems like a lot of people are asking questions about Texas Series LLCs in particular. Considering the relative infancy of the entity type and the ambiguity of the current law on Series LLCs in Texas, I’m not surprised. But I want to try to address some of the frequently asked questions, so that we can start down a path of developing this new area of law together. So here are a few of the most common questions we get about Series LLCs:
Where are Series LLCs recognized?
Currently, only a few states have statutes allowing and governing Series LLCs. Texas, of course, but also: Delaware, Illinois, Iowa, Kansas, Minnesota, Nevada, North Dakota, Oklahoma, Tennessee, Utah, Wisconsin, District of Columbia (D.C.), and Puerto Rico. This just means that these states allow Series LLCs to be formed in their states, and recognize a cell within a series as its own entity.
I’m thinking about/am in the process of buying a piece of property. When should I set up my Series LLC?
Because of the different implications of transferring ownership of a property after you purchase it (check out this blog about the potential triggering of a due on sale clause acceleration), you should, ideally, set up your Series LLC prior to purchasing any of the property you’d like to put into it.
How long does it take to set up a Series LLC?
Not very long. Once you’ve had a consultation with us and we have all of your information (just your name, address, a few substantive questions about the structure of your entity, and your preferred entity name), it typically only takes one to two days to register with the Secretary of State, and only a day or two more to get the confirmation back from the state.
How much does it cost to set up each additional cell?
The LLC formation package we offer includes instructions for setting up additional cells. As far as registration with the state goes, there is no additional charge for setting up a cell within a Series LLC once that Series LLC has been established.
Can the different cells have different ownership or ownership structures?
As of now, all of the cells in a Series LLC will have to file one single return with the state and with the IRS. While the IRS issued a Private Letter Ruling confirming that individual cells in a Series LLC could operate under different ownership structures, it’s not really practical or advisable for tax purposes.
Are Series LLCs really only usable in real estate transactions?
Not at all! It’s just a fairly simple and straightforward example that people who are curious about Series LLCs can understand.
I’m located in a different country. Will that be a problem?
Not at all. With the boom in real estate investments here in North Texas, we get calls from potential clients outside of the country on a monthly, almost weekly basis.
Now, these are just some of the more common questions we get about Series LLCs, and as the old adage goes, there’s no such thing as a dumb question. Series LLCs are an emerging entity, and there’s still a lot of confusion as to how they can best be utilized and what the actual requirements and restrictions are. If you have questions about setting up a Series LLC, please contact a legal professional or give us a call.