World Executives Digest| Is an LLC or Series LLC Best for an SPV? |Traditional entrepreneurs who opt to establish an SPV form it as an LLC (Limited Liability Company). LLC offers flexibility while safeguarding its owners from lawsuits and incurred debt. A Series LLC is a more recent concept wherein a parent LLC creates a series of child LLC’s under its umbrella.
Each of these series or sub-LLC’s operate as individual entities that are considered in isolation for liability purposes. Should a lawsuit be filed against one of your LLC’s, the assets of your remaining series are not liable to face legal consequences. In the debate- is an LLC or Series LLC best for an SPV, your assets that need protection ultimately determine the structure you choose.
Conventional LLC’s and their series counterparts have to abide by the same set of regulations to come into existence. Depending on which state you choose to establish your separate legal entity or entities, associated fees and agreements will apply to both.
There is also no limitation to the number of stakeholders each type of LLC can have as all owners are eligible for a protective liability shield.Highlighting the differences between these two LLC versions will give you clarity on where you stand to benefit as the owner:
Each of your LLC series irrespective of the total count can be filed on one tax return. This provision saves you from spending thousands of dollars annually on filing separate returns for each LLC entity.
You receive one Tax ID issued to the parent company, which further streamlines your tax preparation. Creating traditional LLC’s, on the other hand, results in you filing individual returns for every additional LLC you add to your SVP.
Establishing separate traditional LLC’s works out more expensive than paying for one master LLC and spending a nominal additional amount on each series created under it.
Even the cost to protect every individual entity from potential litigation and debt proves to be costlier in the case of traditional LLC’s created by one parent company.
Inbuilt Defence Mechanism
As an entrepreneur with valuable assets that need adequate protection, Series LLC successfully insulates individual holdings in their respective series. Since every series is treated as a separate entity, your housed assets are also isolated.
Competitors eager to target you by filing lawsuits cannot sue you until they prove ownership. The latter is a challenge as your Series LLC provides anonymity by keeping others guessing. In the case of conventional LLC’s however, all your accumulated resources become easy prey for those gunning for your corporation.
As you tussle to see is an LLC or Series LLC best for an SPV, give it due thought from a long-term perspective. Traditional LLC’s can successfully manage a single property, but what if your business grows and demands expansion tomorrow? Leaving your options open at no additional cost is what you gain by choosing the Series LLC route.
Opt for a structure that gives your parent company robust asset protection after evaluating all potential risk elements. Utilize the expert guidance provided by specialist SPV agencies familiar with state laws and equipped to assist you with establishing such legal entities.