The Series LLC for Real Estate Explained – ☕Coffee With Carl EP-4 (NEW Series)


(upbeat music) – Hello everybody and welcome
to another Coffee with Carl. Today we’re gonna talk a little
bit about the Series LLC. I get a lot of questions on Series LLCs. They are really cool tools but they need to be appropriately used otherwise you can run into some issues. So starting out, I wanted
to talk about a little bit of some of the neater
points of Series LLCs, meaning basically what
you can do with them and how they’re structured. If you imagine a Parent LLC, so we call this the Parent Series, and then you can set up
a bunch of little cells that go along with it. What’s really neat is that in Series or states that recognize Series LLCs it’s basically you get the
net effect of setting up a bunch of separate LLCs
except, here’s a good benefit especially in Texas, is that there’s not an additional filing
requirement or doesn’t require an additional registered agent in order to maintain those series cells. The biggest important,
the most important part about a Series that you want to be sure you’re keeping track of
is that the accounting on these things has to be immaculate. Meaning they’re set up to be easy to use, very flexible in the way
that you can actually use the cells. You can even have separate
EINs for each of the cells, you can have them taxed differently. You can do lots and lots of
things but if you’re not careful and you don’t know what you’re
doing, you can really cause some confusion. And the downside of that is
if you have to go to court and there’s confusion, the
judge is actually fairly likely to collapse the whole thing
and say it’s all one LLC, unless that acccounting’s perfect and unless you’re observing
all those corporate formalities which we teach in our structure
and implementation class. Very important piece there. Another thing to consider as well is that, say if I had a Texas
Series LLC, and I went to, I was going to do an
investment or try to use that Series LLC in say California. California’s gonna want to
charge that franchise tax for not only the Parent Series but for each of those cells as well. So while they’re very
interesting tools and very cool and flexible, you want to
make sure you’re talking with an experienced advisor
before you set one up. Some other common problems
I’ve run into with Series is a lot of times there’s
difficulty getting bank accounts open for them, so you
need to work with a bank that understands what they are and how they’ll get them set up. Off the top of my head I know in Texas, I work with a lot of Texas clients, I do know there’s a BBVA in Cedar Park that knows how to set up
the accounts for them. Other things you can run into
is with your title company or lenders, they may not know
how to treat them as well. They are valid LLCs, you
can use them, but with being something that’s a little
bit outside of the box, if you want to keep up all the formalities or work within them,
you need to find people who understand how they work
and title companies, banks, and services along those lines
that are familiar with them so that you don’t run into
any hiccups along the way. So that’s some of the
knocks on the Series. The coolest part, like I
mentioned, where for me I use it for a lot of Texas
clients, is the flexibility and the ease of use. Every time I set up, so
remember we have our parent, every time I set up a
cell or a child entity that’s within that parent
entity, it’s really neat. You don’t even need to file
it with the state of Texas, if you’re doing a Texas Series. It’s as simple as a couple page document to set up that cell. And you still get that asset protection in between each of those cells. Lots of different uses. They also have them in Wyoming. You can use them in conjunction with any of our other strategies. Most cases for real estate investors, I would say that if you’re
going to use a Series, the easiest and most
streamlined way to use them is to actually set up two Series. Have an active Series, say for your flips, wholesalings, things like this. And then you have a passive Series for your rental properties. So that way you’re not intermingling. You don’t have to get EINs
for every single cell. And the taxes still work the same way except you’re not maintaining
a whole bunch of entities. So if I got 50 properties, 30 of them are active investments, 20 of them are passive investments, I can set up two Series,
one active, one passive, and take care and separate the liability on all those different investments. So it’s a really interesting
tool, like I mentioned. If you’d like to know more about it, especially when we teach
classes in say Texas or other states that allow for Series, we do do a section on Series LLCs. Normally a lot of times
I’ll go over a bunch of them because I’m used to working with them. If you have any additional
questions, always feel free as always to call Anderson Advisors, have an initial consult. Otherwise come to one of our live classes where we’ll actually have a section on it and that we look forward to seeing you on our Tax Tuesdays and
our other free videos we put out there on YouTube. So until next time, my five minutes is up. It’s been a pleasure. Have a good one. (upbeat music)

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