As your business evolves, you may decide you want to convert your traditional LLC into a series LLC. Here’s what you need to know.
What is a series LLC?
A series LLC is a special type of LLC structure with a “parent” LLC (also called a “master” LLC or “umbrella” LLC) and one or more divisions—called “series” or “cells.” Each cell has its own business interests, assets, and liability protection.
Starting a series LLC is often less complicated than forming multiple separate LLCs because with a series LLC, you typically only need to register a single business entity with the state. Real estate investors sometimes choose the series LLC structure so that each of their properties is protected from the liabilities of the other properties.
Check out Northwest’s Series LLC Guide.
Can I change my LLC into a series LLC?
It depends where you live. Only certain states allow business owners to create series LLCs. As of 2022, the following states and jurisdictions in the US allow the formation of series LLCs:
- Alabama
- Arkansas
- Delaware
- District of Columbia
- Illinois
- Indiana
- Iowa
- Kansas
- Minnesota
- Missouri
- Montana
- Nevada
- North Dakota
- Ohio
- Oklahoma
- Puerto Rico
- South Dakota
- Tennessee
- Texas
- Utah
- Virginia
- Wisconsin
- Wyoming
However, each state has its own laws and quirks regarding series LLCs. It’s important to note that in Minnesota, North Dakota, and Wisconsin, even though series LLCs are technically allowed, the individual cells of a series LLC in these states do not have the same liability protections as a traditional LLC, which effectively defeats the purpose of having a series LLC.
Also, California does not allow series LLCs to be created, but it does allow series LLCs from other states to register to do business in the state.
Want to register your series LLC in a new state? Learn about Registering a Foreign Series LLC.
How do I convert my LLC into a series LLC?
If you already have an LLC that you want to convert into a series LLC, the process will vary depending on what state you live in. However, you can follow these general steps:
- Contact your Secretary of State (or equivalent state agency). If you contact the agency where you originally filed your business formation documents, they should be able to tell you the basic process and the forms you’ll need to file.
- Amend your formation document. Depending on your state, you may need to file Articles of Amendment in order to amend your formation document (called LLC Articles of Organization in most states). A few jurisdictions even require you to file separate Articles of Organization for each cell.
- Amend your operating agreement. You will also need to update your LLC operating agreement to include the rules for creating cells in your LLC.
- Create a separate bank account for each cell of your LLC. Since each cell of your LLC has its own assets and liability protection, each will need its own business bank account. You should also keep separate financial records for each cell of your series LLC. Some states require you to keep separate records for each individual series, but even if your state does not, it’s still a good idea to keep your finances organized.
Do I need a new EIN for each cell of my series LLC?
Probably. Series LLCs are still fairly new, and the laws regarding them are still evolving. At the moment, if your state treats each individual series as a separate company, the IRS will also treat each as a separate company for tax purposes. Otherwise, the IRS will treat the series LLC as one company. However, the IRS has proposed regulations that would treat all individual series as separate companies, regardless of home jurisdiction. So in the near future, you may need a separate EIN for each cell of your series LLC, no matter where you live.
Even if the IRS doesn’t require you to get separate EINs for each series, your bank may require each series to have a unique EIN to open a business bank account. We recommend contacting the IRS and a tax attorney to see how state regulations will affect how your series LLC pays taxes.