What lenders do/don't lend to Series LLCs.

Question

Bradley Clark · Answer

@CraigBullers - imagine you have an LLC that holds title to 12 properties. If a liability is incurred for which there is no insurance coverage (or insufficient insurance coverage) then all of the properties--particularly the one(s) that are owned free-and-clear--are at risk for satisfaction of that liability. That is how a typical LLC works. Before the advent of the Series LLC, if you wanted to avoid this possibility you had to form 12 LLCs. In Texas, that's at least $4,000 in filing fees with the Texas Secretary of State (and 12 company agreements, etc. to keep up with).

Now imagine you have an egg carton that has 12 eggs in it. Each "egg" represents an individual series of the Series LLC (which is the egg carton itself). Each egg holds title to its own property. In Texas (and most other states that have the series LLC structure), no series is liable for the debts and liabilities of another series (except in certain statutorily defined circumstances). In other words, it's as if you have twelve LLCs when you really only have one. The hope--and expectation--is that you avoid the formation costs and administrative burdens associated with creating multiple entities over-and-over again every time you buy and sell a property.

There are tax consequences--at least in Texas--that should carefully be considered when deciding between an LLC and a Series LLC.

I hope this helps explain the differences between the two entity types.

John Lach · Answer

@Bradley Clark will you be able to share the list of lenders that are willing to lend to LLC. Im in search of a bank who can lend to LLC.

thank you.

Scott Smith · Answer

Brad, can you elaborate on the tax consequences?

Craig Bullers · Answer

What's the difference between a series LLC an a normal LLC?

Bradley Clark · Answer

Thanks Jean. I have several clients in Texas who have not had a problem with Wells Fargo opening bank accounts for series LLCs. This information is very helpful to me and I'm sure to others who are looking for lenders and banks to do business with.

Jean G. · Answer

I don't have an answer to your question, but it's interesting that your lenders don't have problems with Series LLC. I remember having problems just finding a bank that would open a checking account for a Series LLC, so I figured I would post here what I found out in that regard (for Nevada anyway):

- Wells Fargo did not want Series LLC. In fact, they opened accounts for my Series LLC (after I disclosed multiple times that this was a Series and not a normal LLC) and about a month later made me close all of them! (after I had setup all the ACH and automatic payments..)

- Washington Federal does Series but they have a monthly fee on their accounts

- US Bank does Series and has a business checking account without any monthly fee or minimum balance requirement! (which is useful if you have a lot of Series)

Just thought this could be helpful for someone.

Jean