Delaware corporate law allows a fascinating business type: Series LLC. Each LLC within a Series LLC in Delaware is regarded as a legally independent and separate entity, which means each object is responsible for its debts, expenses, financial responsibilities and legal obligations. Each LLC may have its assets, members, activities, and purpose of business. However, it is protected against the claims of members, creditors, and complainants that claim right on another LLC.
A Series LLC is regarded as a single entity. Therefore, it is taxed accordingly. That means it is a good idea to start a Series LLC and pay only $300 franchise tax which is funded by every Delaware company and accounting fees, instead of starting different businesses and pay various charges for each of them.
Even though it seems perfect, this business type may sometimes bring about potential problems.
Some Disadvantages for Series LLCs
The fact that each LLC under a single Series LLC is regarded as a separate entity has not been tested in a legal case yet. Theoretically, each LLC is considered to be a separate entity, but if a judge decides otherwise, this will disprove the theory.
Federal tax policy for Series LLCs is still not sure. Though they are all regarded as a single company together, officials suggested that they should be taxed separately. However, the absolute decision has not been made yet.
It is still not sure how a Series LLC or its sub-entities will be taxed if they operate in other states.
We cannot say banks have been successful in opening separate bank accounts for each LLC under a Series LLC. So, they are still having problems about how to handle Series LLCs financially.
There are not many legal consultants that are expert on Series LLCs since it is a new business type.
So, we recommend you to wait until these problems are cleared up. If you still want to start a Series LLC or if you have other questions, please contact us.
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