What Is a Series LLC? How Series LLCs Work in Different States

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Running multiple businesses usually means setting up separate legal entities for each one—or does it? A relatively new business structure called the series limited liability company (or series LLC) is changing that assumption.

This innovative approach can save business owners thousands in formation costs while maintaining strong asset protection and streamlined management benefits. In this guide, we'll explore how a series LLC works and whether it might be the right choice for your business ventures.

What is a series LLC?

A series LLC is a unique variation of the limited liability company (LLC) that lets you create separate “series,” or divisions, within one master LLC. Unlike a traditional LLC that operates as a single business entity, a series LLC functions like a parent company with multiple subsidiaries. Each series operates independently with its own assets, liabilities, members, and managers.

The master LLC maintains its own membership structure, and those members decide the ownership arrangement for each series. Each individual series can have completely different ownership from the master LLC, though many operating agreements include profit-sharing mechanisms that funnel a portion of profits back to the master LLC.

Delaware pioneered the series LLC concept in 1996. These structures provide separate liability protection for each series—meaning business assets owned by one series are typically shielded from liabilities of other series and the master LLC itself.

As of 2025, series LLCs are available in 19 states and US territories:

1. Alabama

2. Arkansas

3. Delaware

4. District of Columbia

5. Illinois

6. Indiana

7. Iowa

8. Kansas

9. Missouri

10. Montana

11. Nevada

12. North Dakota

13. Oklahoma

14. Puerto Rico

15. Tennessee

16. Texas

17. Utah

18. Wisconsin

19. Wyoming

California doesn’t allow series LLC formation, but properly formed series LLCs from other states can register as foreign entities and operate in California.

Series LLC vs. standard LLC: What’s the difference?

1. Liability protection structure
2. Formation and administrative requirements
3. Tax treatment

There are three major differences that set series LLCs apart from traditional LLCs:

1. Liability protection structure

The most significant advantage of a series LLC lies in its enhanced liability protection. In a standard LLC, all business assets are pooled under one entity, meaning problems in one area of your business can threaten your entire operation. A series LLC creates separate liability shields between each series, protecting each division’s assets from claims against other series or the master LLC.

For example, let’s say you operate an online t-shirt store, a print-on-demand t-shirt business, and a white label t-shirt wholesaling operation. With a traditional LLC, a breach of contract lawsuit against your wholesaling division could put assets from your store and print-on-demand divisions at risk. Under a series LLC structure, each division operates as a protected series with its own assets, so legal claims against the wholesaling series would only affect that specific division’s assets.

However, claims directly against the master or parent LLC itself—such as discriminatory hiring practices in central HR operations—can potentially impact all series, since they stem from shared management functions.

2. Formation and administrative requirements

While traditional LLCs are available anywhere in the US, series LLCs can only be formed in 17 states plus DC and Puerto Rico. Some states require separate or additional forms for formation, while others use standard LLC forms with statements authorizing the creation of protected series.

The formation process typically requires:

• Articles of formation specifically authorizing series creation

• A comprehensive operating agreement for the master LLC

• Sometimes separate operating agreements for each series

While business owners may find that forming a series LLC involves more complex documentation and effort compared with a regular LLC, setting one up generally requires significantly less paperwork than forming multiple separate LLCs for each division. However, financial institutions may require separate business bank accounts and registered agents for each series, with requirements varying by state and bank.

3. Tax treatment

Tax treatment represents another complex difference between series and traditional LLCs. The US Internal Revenue Service (IRS) hasn’t issued definitive guidance on series LLC taxation, and tax treatment varies significantly by state.

Like standard LLCs, series LLCs are pass-through entities by default—the business doesn’t pay corporate taxes, but profits and losses pass through to members’ personal tax returns. For federal tax purposes, series LLC owners have a few options. If a series LLC has only one member, the IRS treats it as a single disregarded entity by default; this means members report income directly on Schedule C (as if they were a sole proprietor). Multi-member series LLCs are classified as partnerships by default.

However, each series may elect its own federal tax treatment if state law recognizes individual series as separate entities. For example, you could structure Series A (product fulfillment) as a pass-through entity while Series B (consulting services) elects S-corporation status. This requires detailed accounting analysis to prove that the entities meet IRS requirements for separate entity treatment, and it may require assistance from a tax professional.

Separate tax treatment might be especially applicable to a series LLC when different series have different ownership structures—for example, if Series A has members Peter and Sarah, while Series B has members Peter and Laura. Without separate tax treatment, all members would receive IRS Schedule K-1 forms reflecting income from all series in the series LLC, even those in which they have no ownership interest.

Some other benefits of separate tax treatment include:

• Audit protection. If the IRS audits once series, it might not affect the others.

• Loss isolation. Losses from one series won’t automatically offset gains from another.

• Performance tracking. Separate tax returns provide clearer financial pictures for each series or line of business.

• Investment flexibility and data confidentiality. You can attract investors to specific series without sharing financial data from all divisions within the series LLC.

State tax treatment of a series LLC may differ from federal elections. For example, in Texas, a series LLC is considered a single entity, and the state requires it to file one franchise tax report regardless of how many series exist within the structure. That means even if the various series within a Texas series LLC elect different tax treatment at the federal level, the Texas state government will look at all series as a single entity for state franchise tax. Another example: For series LLCs properly incorporated in other states but doing business in California, each series is treated as a separate entity and must pay its own annual LLC taxes and fees to the state of California.

Advantages of a series LLC

Series LLCs offer several compelling benefits for multi-business owners:

• Cost savings and administrative efficiency. Series LLCs cost less and are less complex than creating corporations with subsidiaries or multiple individual LLCs. You avoid multiple formation document filing fees and annual reports in many states.

• Enhanced liability shield. Each series functions as a separate entity for liability purposes, creating robust asset protection. Personal assets and business assets owned by series remain protected from claims against other series, providing superior protection compared to traditional LLCs for businesses with distinct divisions and varying risk levels.

• Operational flexibility. Series LLCs allow different members and managers for each series, enabling customized ownership structures and management approaches. Each series can enter its own contracts, hold real estate, and operate with its own business model while benefitting from unified oversight.

• Banking and financial benefits. Many business owners find series LLCs make obtaining loans easier, as financial institutions can evaluate each series individually. Weaker business segments won’t necessarily weigh down stronger divisions. 

• Scalability. Adding new series typically only requires amending the operating agreement rather than filing new formation documents, making expansion more efficient than forming separate LLCs for new lines of business.

Disadvantages of a series LLC

Several drawbacks may make series LLCs unsuitable for some businesses:

• Limited state recognition. Most states do not allow series LLC formation, and foreign series LLCs may not receive full liability protection in non-recognizing states.

• Complex tax and compliance requirements. No consistent tax guidelines exist for series LLCs. Different states impose varying tax treatments, annual fees, and reporting requirements. Some states require separate filings for each series, increasing administrative burden and costs. 

• Unproven legal framework. Since series LLCs are relatively new to the American business ecosystem, courts’ treatment of this entity remains uncertain. Limited case law creates significant uncertainty about how courts will handle disputes, bankruptcy proceedings, and complex liability issues.

• Banking and financial complexity. Some banks require series LLCs to maintain multiple bank accounts and registered agents to ensure proper series separation, significantly increasing administrative complexity. Not all financial institutions work with series LLCs due to their limited recognition and unclear legal precedents.