How Does a Nevada Series LLC Work?
And should you be using one?
As explained here, an LLC extends limit liability to all of its owners, called members, while also allowing for flow through taxation like a partnership. Or if it’s a single member LLC, it is disregarded for income tax purposes and taxed like a sole proprietorship. The default tax status can be changed with the proper IRS election.
Historically, if you invested in real estate, you would either hold multiple properties in one LLC or set up individual LLCs for each separate property. Putting more than one property in a single LLC is not recommended for liability purposes. However, having a separate LLC for each property, while ideal, can get expensive when renewing the LLCs each year with the Nevada Secretary of State.
Since 2005, Nevada has allowed for the creation of a Series LLC to solve this dilemma. A Series LLC is one business entity for Nevada filing purposes. Thus, you only have to pay one filing fee and state business license fee each year.
But the LLC is set up with a series of different “cells”. Each cell, or series, holds a separate property. And each cell is protected from the liability of the other cells.
In addition, the Nevada statute allows for each series to be managed and owned by different people if you so choose. This provides tremendous flexibility.
As you can imagine, the Nevada Series LLC has become very popular with real estate investors. It is easy to open and close new series within the LLC as you buy and sell investment properties.
If you want to know whether the Series LLC is right for you, call to schedule a consultation.