I have a series LLC in TX (let's call it Main LLC) with a couple of protected cells (let's say A and B protected series). Each cell is on the deed for one property (e.g.: Main LLC – A protected Series). Each series has a separate bank account and also there is a bank account for Main LLC.
My management software doesn't allow me to use multiple payment accounts for expenses, but it does allow separate accounts for rent payments per-property. So the rent for each property is going to the correct series account, but all expenses for repairs, software costs, etc come out of the Main LLC account. Property specific costs are then reimbursed from the series account to the main account, e.g. for repairs. Other expenses like tax and mortgage for each property can be paid directly from the correct series account. In the operating agreement, it is stated that Main LLC may pay for expenses and then the responsible series can reimburse.
Is the best way to structure these entities and does this give me enough legal isolation between all the entities?
Another option is to treat Main LLC as the "management company" and the cells as holding companies. But then the lease agreement will have "Main LLC" on it, instead of "Main LLC – A Series", which shifts the management liability to the main company, which I assume can provide a path for breaking the isolation between the series. The deeds would still be in the series names, but not sure what protection that provides. Thoughts?
Posted by lgtmplustwo
2 Comments
I agree with the opinion of attorneys who aren’t attempting to sell overpriced and questionable “asset protection” and state that Series LLC’s have little to no value…and possibly negative value to 99.9% of the investors on the planet. They were designed to be used by huge, multinational corporations in industries such as mining.
We set our series up with trusts and land grants, moved property into them, and then created a regular LLC which acts as our property manager. Excess money is moved from the management llc account to the series llc account, which doesn’t face the outside world (no property ownership, contracts, etc). Hope that makes sense.
It also simplifies things to have only two accounts. The mgmt account intakes and pays bills, repairs, etc, the other account is the investing arm.