A Guide to Series LLCs

Limited liability companies (LLCs) are among the most popular structures in the US, favored by well-known companies like Google and Amazon. These entities are easy to form and have fewer compliance requirements than corporations, making them the ideal choice for small business owners.

But what if you have multiple business ideas you want to explore? Is it possible to have multiple LLCs?

Find out below.

Can You Have Multiple LLCs in the US?

No federal or state law limits the number of LLCs an individual can own, so owning multiple LLCs is possible. You can have as many LLCs as you want, but this doesn’t necessarily mean it’s a good idea.

There are pros and cons to having multiple LLCs, such as:

Asset Protection

Asset protection is LLCs’ biggest strength. These entities operate independently from their owners, meaning they can enter contracts, own property, and be sued without exposing their owners to liability.

Creating multiple LLCs will protect your assets from any liability one of your businesses incurs.

Pass-through Taxation

LLCs are treated as pass-through entities, meaning they do not have corporate income taxes. Instead, everything the LLC earns and losses is passed through to its LLC members. The LLC member must then report these amounts on their filings and pay their individual taxes.

It’s an excellent way to avoid double taxation, where companies are taxed at the corporate and individual levels.

Conflict of Interest

Every entrepreneur has a “fiduciary duty” to their businesses and the legal obligation to act in the company’s best interest, its members, and employees.

Fulfilling fiduciary duties can be difficult if you own multiple LLCs in one industry. You’ll have to find a way to balance the interests of each LLC to avoid potential conflicts of interest.

Administrative Burdens

Multiple LLCs mean more administrative burdens. You’ll have to go through the formation process multiple times and hire more than one registered agent to ensure that all your LLCs maintain good standing with the state.

Filing taxes will also be difficult and confusing since you’ll be preparing tax returns for more than one company. You need to keep track of each LLC’s income and expenses to ensure accurate tax filings.

Higher Formation Costs

Forming multiple LLCs can also be expensive. Depending on how many companies you want to form, you must pay double or triple your state’s filing fees.

Ultimately, creating multiple separate LLCs is not for everyone. It requires a lot of work and higher operating costs, which may not be suitable for an aspiring entrepreneur like you.

Fortunately, there’s an alternative solution you can try.

Series LLCs: The Alternative Solution

If you plan on opening multiple businesses, consider creating a series LLC instead.

A series LLC is a type of LLC with one “umbrella” LLC and two or more “series” LLCs. Each series operates independently, with its name, bank account, and records. More importantly, they all have liability protections. 

The liabilities of one series LLC will not be enforced on the other companies. Think of it as a corporation with several subsidiaries.

Many entrepreneurs form series LLCs instead of creating separate companies because they simplify the formation process. Once you form a series LLC, you no longer have to repeat the same procedures. All you have to do is to add a new series under your umbrella LLC.

Series LLCs provide a cost-effective way to launch multiple businesses simultaneously. The only caveat is that series LLCs are only permitted in certain states, so it’s important to consider your location when deciding on this structure.

Which States Allow Series LLCs?

Although series LLCs have been around for a while, only a handful of states allow their formation. These jurisdictions include:

• Alabama
• Arkansas
• Delaware
• District of Columbia
• Illinois
• Indiana
• Iowa
• Kansas
• Missouri
• Montana
• Nebraska
• Nevada
• North Dakota
• Oklahoma
• Puerto Rico
• South Dakota
• Tennessee
• Texas
• Utah
• Virginia
• Wyoming

It’s worth noting that while some states don’t allow the creation of series LLCs, some places recognize them. Take California, for example. The Golden State allows foreign series LLCs to do business in its jurisdiction even though it doesn’t allow series formation.

How to Form Series LLCs

The formation processes for series LLCs are similar to that of a traditional company. It involves the following steps:

Choose a unique business name.

Pick a business name that’s yet to be used in your state of formation. Ensure that your chosen name ends with “limited liability company” or one of its equivalent abbreviations.

Designate a registered agent.

Each series LLC must have a registered agent who will accept legal correspondence on their behalf. Your designated registered agent must meet the following criteria:

• Must be 18 years of age or older.
• Must have a physical street address within the formation state.
• Must be available to receive legal correspondence during regular business hours.

Write an operating agreement.

While most states don’t require series LLCs to have operating agreements, creating one is highly recommended.

Operating agreements are legally binding documents that serve as an LLC’s roadmap to success. It contains the different rules and regulations that govern a company.

Obtain an Employer Identification Number (EIN)

Once you’ve finalized your LLC’s operating agreement, you must obtain an employer identification number (EIN) from the IRS.

An EIN is a unique nine-digit code primarily used to file taxes, open bank accounts, and hire employees. You can get one for free through the IRS website or via mail.

Make the Right Choice for Your Business

Creating and maintaining multiple LLCs is not as straightforward as most people think. It requires careful planning and commitment to ensuring that each entity maintains a good standing with the state. Without a proper strategy, you may be overwhelmed by the work and fees you must pay to operate multiple businesses.

So, as an alternative solution, we recommend you form a series LLC instead. If this entity is not allowed in your state, consider forming one in Nevada.

Nevada is one of the states allowing series LLC formation and has comprehensive laws that can strengthen an LLC’s asset protection.

Make the right choice for your business, and let NCH help you form a Nevada series LLC today.

NCH specializes in Nevada LLC formation. Our team of business formation specialists will guide you as you establish your series LLC in Nevada, ensuring that your businesses are structured for long-term success.

To learn more, visit our website here or call us at 1-800-508-1729 to schedule a consultation with one of our specialists.