Indiana Series LLC Formation: Segregating Rental Properties
Feb 6, 2022
Indiana Series LLC: Affordable Asset Protection for Multi-Unit Investors
Indiana now recognizes series LLCs, offering a flexible and cost-effective way for real estate investors to protect their assets. With a series LLC, landlords can separate liability for each property or business venture, all under a single parent LLC. This structure can help shield one property from the risks and debts of another, reducing the need for multiple state filings and annual fees.
How Does an Indiana Series LLC Work?
Single Filing: You file one set of articles of organization with the Indiana Secretary of State to form the parent LLC. Afterward, you can create individual “protected series” by written action, such as a resolution or amendment to your operating agreement.
Separate Records: Each series should maintain its own bank account, accounting records, and contracts. This separation is essential for preserving liability protection between series.
Leases and Contracts: When leasing property or entering into agreements, use the specific series name as the landlord or contracting party. For example, “123 Main Street Series, an Indiana Series LLC.”
Benefits of a Series LLC
Cost Savings: Avoids the expense and paperwork of forming multiple LLCs for each property or business line.
Asset Protection: If properly maintained, liabilities of one series generally do not affect the assets of another series or the parent LLC.
Administrative Simplicity: One annual report and one registered agent for the entire structure.
Important Caveats and Limitations
Strict Record-Keeping Required: Failing to keep finances and records separate for each series can jeopardize liability protection.
Uncertain Treatment in Other States: Not all states recognize series LLCs. If you own property or do business outside Indiana, courts in those states may not honor the liability shield between series.
Lender and Insurance Issues: Some banks and insurers may not be familiar with series LLCs, which could complicate financing or coverage. Always confirm with your providers before structuring deals.
Taxation: The IRS does not have a uniform approach to series LLCs. Each series may be treated as a separate entity for federal tax purposes, depending on how it is structured and operated.
Series LLCs can be a powerful tool for multi-unit investors, but they require careful setup and ongoing attention to detail. If you’re considering this structure, make sure you understand the requirements and potential risks.
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This post is for general informational purposes only and does not constitute legal advice. The outcome of any legal matter can vary based on your personal circumstances and the evidence available.