Series LLCs for Asset Protection: A Risk You Should Avoid

The Hype vs. The Reality of Series LLCs

If you’re a real estate investor, business owner, or asset holder, you’ve likely heard of Series LLCs—a structure marketed as a cost-effective way to separate assets under one LLC umbrella.

The pitch?

✔ One LLC, multiple asset “series,” each protected separately.

✔ Lower administrative costs than forming multiple LLCs.

The reality?

❌ Courts are already rejecting their protections.

❌ Most states don’t recognize them.

❌ In bankruptcy, all assets in the Series LLC could be at risk.

If you want real asset protection, a Series LLC is a gamble you don’t want to take.

Let’s break down why Series LLCs fail and what proven legal structures you should use instead.

What Is a Series LLC?

A Series LLC is an entity that allows you to create multiple “child” LLCs (or series) under one parent LLC. The goal is to keep assets legally separate—so if one series gets sued, the others remain protected.

The Problem? Courts Are Not Buying It.

• Only a few states legally recognize Series LLCs (e.g., Delaware, Texas, Illinois).

• Most states have no laws governing them—and courts in those states are rejecting their liability protections.

• If your Series LLC holds assets or operates in a non-Series LLC state, your structure could be ignored.

💡 Bottom Line: Just because your Series LLC was created legally in one state doesn’t mean other states have to honor it.

Courts Are Already Ruling Against Series LLCs

📌 City of Urbana v. Platinum Group Properties, LLC (2020, Illinois Court Case)

What happened?

• A Series LLC failed to prove it was a separate legal entity from its parent LLC.

• Key mistakes:

✔ It didn’t properly file its designation paperwork.

✔ The parent and child LLCs shared the same manager.

✔ Even if paperwork was correct, the court was skeptical about the structure’s validity.

💡 Lesson: Even in Illinois (a state that allows Series LLCs), courts rejected their protections.

If an investor sets up a Series LLC in Texas but owns property in California, courts in California will likely ignore the structure, treating it as one big entity—leaving all assets exposed.

Public Policy Issues: Why Non-Series LLC States Will Reject Them

📌 Why does this matter?

✔ No state is required to recognize a corporate structure that conflicts with its laws.

✔ Many states treat Series LLCs as an attempt to evade liability.

✔ Courts can argue that all series are one entity, exposing all assets.

💡 Example: If your Series LLC is formed in Texas but owns rental properties in Florida, a Florida court may ignore the series separation, making all assets in the Series LLC available to creditors.

Bankruptcy Courts Have No Clear Rules on Series LLCs

📌 The U.S. Bankruptcy Code does not recognize Series LLCs.

What happens if:

✔ The parent LLC goes bankrupt? Do all child series go down with it?

✔ A single series is in financial trouble? Can creditors reach the entire structure?

💡 Since there are no federal laws governing Series LLCs, outcomes depend on how individual judges interpret them—a risk you don’t want to take.

Proven Alternatives: Real Asset Protection Strategies

If Series LLCs are legally untested and unreliable, what should you use instead?

✅ 1. Properly Structured Traditional LLCs

✔ Set up separate LLCs for each asset rather than relying on Series LLCs.

✔ Form LLCs in strong legal jurisdictions (e.g., Wyoming, Nevada) for better protection.

✔ Ensure compliance with the laws of the state where the asset is located.

💡 Example: A real estate investor with 10 properties forms 10 separate LLCs, each holding one property, instead of using a Series LLC.

✅ 2. Limited Partnerships (LPs)

✔ LPs separate ownership and control, making it harder for creditors to seize assets.

✔ LPs have well-established legal recognition in all 50 states.

✔ They offer superior lawsuit protection over LLCs.

💡 Example: An investor sets up an LP to hold multiple LLCs, adding an extra layer of security.

✅ 3. The Bridge Trust® (For Maximum Protection)

✔ Starts as a domestic trust but converts to an offshore trust if a lawsuit arises.

✔ Legally recognized in both U.S. and offshore courts.

✔ Stronger than domestic asset protection trusts (DAPTs).

💡 Example: A high-net-worth investor worried about lawsuits places assets in a Bridge Trust®, which can move offshore instantly if needed.

Proven Alternatives: Real Asset Protection Strategies

If Series LLCs are legally untested and unreliable, what should you use instead?

✅ 1. Properly Structured Traditional LLCs

✔ Set up separate LLCs for each asset rather than relying on Series LLCs.

✔ Form LLCs in strong legal jurisdictions (e.g., Wyoming, Nevada) for better protection.

✔ Ensure compliance with the laws of the state where the asset is located.

💡 Example: A real estate investor with 10 properties forms 10 separate LLCs, each holding one property, instead of using a Series LLC.

✅ 2. Limited Partnerships (LPs)

✔ LPs separate ownership and control, making it harder for creditors to seize assets.

✔ LPs have well-established legal recognition in all 50 states.

✔ They offer superior lawsuit protection over LLCs.

💡 Example: An investor sets up an LP to hold multiple LLCs, adding an extra layer of security.

✅ 3. The Bridge Trust® (For Maximum Protection)

✔ Starts as a domestic trust but converts to an offshore trust if a lawsuit arises.

✔ Legally recognized in both U.S. and offshore courts.

✔ Stronger than domestic asset protection trusts (DAPTs).

💡 Example: A high-net-worth investor worried about lawsuits places assets in a Bridge Trust®, which can move offshore instantly if needed.

Why You Should Avoid Series LLCs

❌ Only a handful of states recognize them.

❌ Even in those states, courts are rejecting their protections.

❌ Most states view them as a violation of public policy.

❌ If you own property in a non-Series LLC state, you lose liability protection.

❌ Bankruptcy courts don’t have clear rules on them.

💡 If your Series LLC is legally disregarded in a lawsuit, your entire asset protection strategy collapses.

Instead, use these proven strategies:

✔ Traditional LLCs (One per asset)

✔ Limited Partnerships (LPs) (For added legal protection)

✔ The Bridge Trust® (For ultimate lawsuit protection)

Final Verdict: Don’t Gamble with Your Asset Protection

Series LLCs are an untested, legally risky structure that courts are already rejecting.

💡 If you hold real estate, stocks, or business assets, don’t take chances—use proven legal tools instead.

✔ LLCs, LPs, and The Bridge Trust® have decades of legal precedent backing them up.

✔ Series LLCs are an experiment—you don’t want to be the test case when a lawsuit hits.

📌 By choosing tested legal structures, you ensure that your assets remain secure—no matter where you invest.