Jun 10, 2010 how to set up an illinois series llc law office of tom sammons 502 n. If you are a current or future real estate investor who wants to understand the best way to organize and protect your assets, you should seriously consider forming a series llc for your real estate business for those unfamiliar with this term, here is a simple definition. Like a corporation or a non series limited liability company, a series llc is treated as a single legal entity. Thinking about your business structure may be the last thing on your mind, but its actually important to consider. A series llc is subject to all of the provisions of the llc law as a traditional llc except for those that specifically apply to series llcssuch as the recordkeeping and liability limitation provisions. Illinois and a few other states has adopted a series llc provision, allowing one llc to have several internal cells or series, which are separate from each other for liability purposes. Mar 29, 2018 with a series llc, each individual real estate llc under the umbrella company has the same protections that nonseries llcs have.
Series limited liability companies attorneys title. How to set up an illinois series llc linkedin slideshare. An llc limited liability company is a form of business ownership recognized by all u. Llc articles of organization illinois secretary of state. On august 16, 2005, the series llc statute 805 ilcs 1803740 was added to illinois limited liability company act, making the state the fifth in the country to allow the formation of series llcs. Under delaware law, a limited liability company llc may be composed of an individual series of membership interests. The series llc is a relatively new concept in business ownership, but the concept of multiple llcs has been around for some time. When forming a company, business formers have a choice of jurisdictions. Jan 12, 2018 for instance, a series llc can give rental property owners a way to separate their real estate investments from one another. This type of limited liability company llc can have multiple series, or groups of series, within the llc, each with its own or common members, managers or llc interests i. Each real estate property is held in a different series in order to segregate the liabilities and insulate each series from the other series and the llc in general. To learn more about setting up a series llc for your real estate business, click on your state from the list below. This is why series llcs are an especially excellent tool for multiple real estate investments or multiple franchise locations.
Using the series llc structure for holding your real estate. However, the series llc seems to have a bit of a mysterious aura that keeps it from being understood. If you are an llc, the tax return you file with illinois depends on how you have elected to be treated with the irs. The utility of a series llc may be explained by a comparison to the alternative. Real estate management and investment companies that own several different properties often use the series llc as a holding company. Each series is effectively treated as a separate entity, meaning the debts, liabilities, obligations and expenses of one series cannot be enforced against another series of. For real estate investors with many different llcs, this is a huge administrative cost savings. Anniversary means that day every year exactly one or more years after. Apr 14, 2010 illinois and a few other states has adopted a series llc provision, allowing one llc to have several internal cells or series, which are separate from each other for liability purposes. An illinois llc can be formed to run and operate a business, or an llc can be used to purchase assets, such as real estate, aircraft, boats, and vehicles. What to name a series of a series llc texas llc lawyer. A certificate of designation may only be filed after the limited liability company has been created through the filing of articles of organization. The new series must keep separate books and records, and the llc must file a designation for the new series with the illinois secretary of state for the liability limitation to. Other states with series provisions are delaware, iowa, nevada, oklahoma, tennessee, and utah.
As used in this act, unless the context otherwise requires. The series llc can be used by real estate investors who own multiple properties. Series llcs are often used by real estate companies, both management and investment, that own multiple properties throughout illinois. To form your own illinois llc, you can either follow the steps in our quick start guide below, or you can go through the detailed lessons above. A typical series llc structure for many of my real estate investor clients looks like this ill use my last name in the example. Series llcs arent bad for the businesses they were intended for structured investments but relying on liability protection holding up among the cells is of concern, especially for highliability ventures such as real estate but if youre absolutely intent on using a series llc for your assets or operating business and are willing to take the risk, this. Series llc benefits and drawbacks for your business.
A series llc allows you to form a master llc that functions as sort of an umbrella organization over. Pros and cons of forming a series llc for real estate. Im just starting out with real estate investing in illinois, and have been looking into the advantages of the series llc. Master llc clark holdings, llc, a texas series limited liability company. Companies with different profit centers can use series llcs to segregate and shield each business operation. An llc, which is recognized as a business entity in every state, provides its owners personal liability protection from business debts and judgments. Apr 09, 2018 in this video, i discuss how to use a series llc when investing in real estate. A series llc is a unique structure that combines the flexibility of a partnership with the liability limitation of an llc. Series limited liability company illinois llc attorney.
Many knowledgeable entrepreneurs and real estate investors have chosen delaware. Sep 25, 2019 advantages of a series llc for real estate investments. Each series isolates and protects its properties from the liabilities of the properties in other series. In this video, i discuss how to use a series llc when investing in real estate. For example, lets say you try to evict a problem tenant from one of your properties, but they retaliate by deciding to sue you over a manufactured grievance.
A series llc gives you all the same benefits as a regular llc, but it serves as a sort of umbrella company with additional flexibility and protections for multiple companies or lines of business within your overall operation. Most real estate investors use their series llc to place each investment property into an individual series. Series llcs arent bad for the businesses they were intended for structured investments but relying on liability protection holding up among the cells is of concern, especially for highliability ventures such as real estate. For instance, a series llc can give rental property owners a way to separate their real estate investments from. Series llcs somewhat demystified statebystate kkos lawyers. The classic use of a series llc is for a real estate holding company that holds multiple parcels of real estate. A series llc illinois is an option for new business entities in the state as of 2005, creating a limited liability company that serves as an umbrella for separate companies formed within the series llc. For example, an llc may be formed to own and manage multiple real estate assets. Illinois department of financial and professional regulation division of real estate 320 west washington street springfield, il 62786 real estate licensing 8005606420 important notice. The example of the attitude of the california franchise tax board.
How to start a series llc in illinois how to start an llc. It will take a few more businesses to make the series llc more costeffective on secretary of state filing fees alone. Some states allow what is called series llcs, which can be an effective way to keep the chaos of multiple llcs with multiple assets to a minimum if done right. Series llcs somewhat demystified statebystate kkos. Series llc not allowed to play peashell game in city of. Hedge funds, venture capital funds, and real estate investors frequently look to a series llc entity to segregate different types of assets in different series. Advantages of a series llc for real estate investments.
By setting up each property as its own series in a series llc, investors can. As you can see, if you have 2 businesses the series llc is already more costeffective from a secretary of state perspective than filing 2 llcs. Presently, only illinois makes separate entity status available for each series of an llc. One advantage of forming a real estate llc is tax savings. The most common and recommended structure of a series llc is one which has a master series llc which names certain members in its master llc agreement. Businesses who operate multiple channels of revenue or have separate teams or divisions in different states may determine that a series llc is the best fit for their company as well. But as we all know, real estate investing always requires an analysis of risk, and i like to discuss the uncertainties surrounding this form of entity before we file with the sos.
If the company is to be authorized to establish series, it must file a separate certificate of designation on form llc37. Does lower llc fees in illinois mean the end for series llcs. This type of entity is referred to as the delaware series llc. Thats because youre subject to their rules when doing business in their state. Illinois statute contains most of the provisions that are found in delawares statute, which was established in 1996. Illinois is one of only eight states where businesses can establish series under limited liability companies llcs. Browse mls listings in inverness and take real estate virtual tours at.
Special care should be taken when preparing your deed transfer property into a particular series. Feb 16, 2015 hedge funds, venture capital funds, and real estate investors frequently look to a series llc entity to segregate different types of assets in different series. Many form an llc in order to protect personal assets from a legal claim relating to their real estate investment or business liabilities. This allows each separate property to receive limited liability. An llc is not a corporation, but it does provide the same liability protection as a corporation since it is separate. In theory, an llc can use each series to hold a separate asset, like. In this video, i discuss what is a series llc and how it is set up. Most commonly, a series llc is used for real estate llcs that own multiple properties. Completion of this form is necessary to accomplish the requi rements outlined in the illinois real estate act of 2000 225 ilcs 454. Using the series llc structure for holding your real. To form your own illinois llc, you can either follow the steps in our quick start guide below, or. Zillow has 80,5 homes for sale in illinois matching. In states like illinois, where the real estate investor must complete a separate formal registration of each child llc which renders them.
Llc to start, then series llc biggerpockets real estate. The most common use of a series llc is a real estate investor or developer who desires separate liability treatment for each of their properties or projects. Like a corporation or a nonseries limited liability company, a series llc is. If the llc is a disregarded entity for federal income tax purposes, so that its income, deductions, and other items are reported on the federal income tax return of its owner, its income, deductions, and other items will be reported on the illinois return of its owner. Here are some other important benefits of choosing an llc or corporation for your real estate practice. In december of 2017, illinois passed a new law that. Incorporate a real estate company or form an llc as an independent real estate agent or real estate investor, theres no doubt you have a lot on your plate. Series llcs are widely used, especially within the real estate business sector, many business owners still do not know or understand the advantages of operating their business as a series llc. Effective august 16, 2005, a new section of the limited liability company act llc act, 805 ilcs 1803740 the series llc statute, made illinois the fifth state to allow series limited liability companies, or series llcs. The biggest problem with series llcs is that many states including california dont have series legislation and may choose to ignore the laws of the state where the series was created. Mar 17, 2020 the new series must keep separate books and records, and the llc must file a designation for the new series with the illinois secretary of state for the liability limitation to be effective. The benefit of a series llc is that each series is protected from liabilities arising from the other series and that the series llc as a whole can file one tax return. Reduce liability if one series gets sued, other series arent liable.
First series clark property management, llc, an individual series of clark holdings, llc, a texas series limited liability company. Many of our clients, especially real estate investors, have heard of the series llc. Choose your state from the list below for the exact fees for forming a series llc. Benefits of the illinois series llc enterprise esquire. The series llc is a product of the delaware legislature, the most highly regarded body for drafting corporate laws. We have created a step by step guide to help business owners with the formation of their illinois series llc. Additional liability protection may be gained by properly forming and maintaining a separate llc to hold each property or. Nov 27, 20 a typical series llc structure for many of my real estate investor clients looks like this ill use my last name in the example. The series llc in illinois is a relatively new organizational entity that allows business owners to establish companies as a series under the. That means, for example, a series llc will be required to appoint and continually maintain a registered agent and file an annual report. Like a traditional limited liability company llc, the series llc can offer its owners, known as members, protection from personal liability for. The delaware series llc is the most cuttingedge entity on the market.
A few states now permit companies to form a business structure known as a series llc. Other ventures that may benefit from a series llc are a woodworking or crafts business that serves different types of customers or a business that. Starting a real estate investment llc has risen in popularity in the past decade, namely due to the unique benefits that cannot be ignored. Real estate management and investment companies that own several. I think this comes from the fact that the series llc is relatively new delaware was the first state to adopt the series llc in 1996, and many states have. There are only a handful of states that recognize the series llc and careful attention should be given to how this entity is used. Apr 02, 2018 in this video, i discuss what is a series llc and how it is set up. Under a traditional llc, creditors of one real estate asset are able to attach liability to all real estate assets owned by the llc. This naming convention is permitted by all state acts and will help ensure that the series will be respected in other states that adopt the series act once it is. How to set up an illinois series llc law office of tom sammons 502 n.
This protects each investment property from any losses or lawsuits incurred by a particular property. The benefits of choosing to incorporate your real estate business or form a real estate llc structure extend beyond personal financial protection. The series llc structure can benefit real estate investors with multiple properties in several ways. Limited liability companies as holding companies enjoy. For example, if the series llc is arch bay holdings llc and one of its series will be identified as 2010b, the name of the series could be arch bay holdings llc series 2010b p. If the company is to be authorized to establish series, it must file a separate certificate of designation on form llc 37. When forming a company, business formers have a choice of jurisdiction. Llc illinois how to form an llc in illinois llc university. A series llc illinois is an option for new business entities in the state as of 2005. In a series llc, each real estate asset could be characterized as its own series. How does illinois tax a limited liability corporation llc. This is the llc name that is on record with the state of formation and the name listed on the certificate of formation. At this point, i dont haveim just starting out with real estate investing in illinois, and have been looking into the advantages of the series llc. This gives illinois businesses an interesting option.
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