Series LLC for Real EstateWhy real estate investors favor Series LLCs
Most real estate investors agree that forming a separate LLC for each asset in the portfolio would be burdensome. Conversely, holding multiple properties in a single LLC is risky as well. Is a Series LLC for real estate the answer?
This article will review the Series LLC and highlight why it is well suited for real estate investors.
Before 2009 - Limited Options
Before the Texas legislature authorized Series LLCs in Texas, real estate investors had to choose between (1) forming an LLC for each property or (2) owning multiple properties within a single LLC.
Insulating multiple assets with multiple LLCs is excellent. However, the administrative headaches and cost of forming multiple LLCs make this option undesirable. On the other hand, having a single LLC own multiple properties also has drawbacks. For example, suppose someone has an unpaid judgment against an LLC that owns several properties. In that case, the judgment holder can seize all of the LLC's properties to satisfy the judgment.
The Series LLC was introduced in 2009
Series LLCs and the Benefits to Real Estate Investors
Real estate investors are ideal candidates for Series LLCs because they often own multiple properties that are both (1) valuable and (2) have the potential to generate substantial liabilities (i.e., slip and fall injuries).
When each property is owned by a separate series (within the Series LLC), a real estate investor can effectively insulate each property from the liabilities associated with the others.
How does a Series LLC work?
Each series is essentially an insulated cell or division within the Series LLC. By law, assets owned by one series are insulated from the liabilities of the LLC and the other series. A series resembles a separate LLC because each series (1) can do almost anything an LLC can do, and (2) has limited liability characteristics similar to a separate LLC.
For more, visit our page on Texas Series LLCs.
Is a Series LLC for real estate worth it?
Zachary Copp, Esq.
Mr. Copp is a graduate of the University of Texas at Austin and the founder of the Copp Law Firm. He has been licensed in Texas for 19 years and has personally formed over 3,000 Texas LLCs since 2015. He was recognized as a Rising Star by SuperLawyers® for seven straight years. See full bio →