Hi, my parents, brother, and myself have now acquired 7 investment properties ranging from duplexes to five unit apartment buildings. Currently we have the properties under my parents names still which we know is unwise. We are planning to set up a business entity but after reading a bit here… i came across the “series llc” which sounded interesting (being that it separates each property from the one another). Has anyone in NJ done this or have people just used the standard LLC’s. Also, what costs should be expected in setting up a LLC (attorneys and everything)?
I don’t think NJ offers a series LLC, but it is possible to get similar benefits with a combination of trusts and LLCs. You’ll need to sit with a qualified planner to work out all the details for your situation.
AOnjinvestor,
I have looked into these series LLC’s,particulary a Delaware series LLC…There are some legal issues with these type of LLC’s…They have not been proven in a court of law to serve the purpose to shield liability away from other parts of the series…Basically exposing all parts of the series to the same liability…Look into this further for yourself but I currently have a dozen seperate corps,handful of LLC’s and make my accountant a happy man every year…This type of entity would have suited me perfectly but I wasn’t comfortable with no knowing how it would stand up in a court of law…Rather be safe than sorry…I cut and pasted this paragraph from a site that I use for information…
Given the protection possibilities and planning flexibility provided by Delaware’s Series LLC statutes, one might expect to see Florida’s business landscape covered with innumerable Delaware Series LLCs registered to do business in Florida. Yet, Delaware Series LLCs remain relatively uncommon in Florida and other states. There are two principle reasons for this incongruity. The first reason is uncertainty about how a Delaware Series LLC will be taxed for federal income tax purposes. A recent article by the prestigious and widely-followed BNA Tax Management Service, Tax Management Memorandum, Vol 45, No. 4, February 23, 2004, concluded that the lack of clear federal tax standards for a Series LLC with multiple members restricts adoption of this potentially useful business entity. The second reason is that the asset protection and planning advantages of the Series LLC are only theoretical, and unproven, in actual asset protection combat. No Florida state court and no Florida bankruptcy court has yet examined the asset protection effectiveness of a Delaware Series LLC. Therefore, business people, investors, and advisors should proceed cautiously before relying on this new device to protect their wealth from creditors pending further court interpretation.
If your property is located in NJ, then NJ law applies. A DE series LLC registered in NJ is just a regular NJ LLC. The only part of DE law that would apply is that among the members to resolve an internal dispute. NJ creditors are not a party to the operating agreement and are not subject to any of its provisions, especially the series separation.
The only ruling I know of regarding the treatment of a series LLC in a non series state is CA. Each series is subject to the minimum tax as if it were a separate LLC and there is no liability separation among them. I don’t know if other states will take the same tax standpoint, but I suspect they will treat a series LLC as a regular in-state with respect to liability.