Hi, Does anyone have a Series/Cell LLC? I would like to know how they work, what the benefits are, disadvantages are, and how they work in California, because I am from California.
In CA, you pay the annual fee on each cell. However, all the cells are treated as one LLC for liability purposes. For states that do authorize the series LLC, there is little case law, which means no one knows how they will be treated. Stick to more tested and traditional strategies if you want real protection. New and innovative is not a good idea when it comes to the law.
Series LLC’s generally make sense in states that have a series LLC statute because it is the law of that state (and NOT Delaware) that is most likely to apply. In short, foreign-state law (DE, NV, etc) does not tend to have much impact in the state where you are running an RE business BUT you pay fees in both states. This is why I generally (there are limited exceptions) recommend use of an “in state” entity for RE. CA is especially annoying, they will interpret law in whatever manner generates the most revenue for them…at $800/year/LLC, they will happily treat each “mini-series” as its own LLC! Note: If you are doing business outside of CA (very common for CA investors), you are likely better off with LLC from “that state” and not CA.
To add insult to injury, CA expects residents to pay the $800 on any LLC they own, even if it’s registered outside of CA. I believe their argument is that technically, you live in the state and so are still doing business in CA.
Equity is correct, socialism doesn’t come cheap. If an out of state LLC of a CA resident files as a “single member” entity, as opposed to partnership (possible if one member or married couple as sole members), does not tend to hit CA radar screen.