Using Series LLCs in Real Estate Development: Pros and Cons

Your attorney just finished explaining why you need to form another LLC for your latest apartment complex. Between filing fees, annual reports and registered agent costs, you’re watching thousands of dollars disappear into administrative overhead. There has to be a better way to protect your properties without building an empire of separate entities.

The Series LLC has emerged as a potential solution. This structure lets you create multiple internal divisions within a single LLC, each holding different properties while maintaining separate liability protection. Before you restructure your holdings, you need to understand both the genuine benefits and the significant compliance requirements.

Understanding the Series LLC Structure

A Series LLC functions as one legal entity that establishes multiple internal divisions called series. Each series operates with its own assets, liabilities, members and management structure. Delaware introduced this concept in 1996, originally designed to help mutual fund companies simplify their SEC filings.

As of 2025, approximately 24 jurisdictions have adopted Series LLC legislation, including Texas, Illinois, Nevada, Utah and Tennessee. Recently, Florida enacted protected series legislation in June 2025 with an effective date of July 1, 2026. This new Florida law aligns with the Uniform Protected Series Act and moves Florida into the group of states offering this flexible business structure. Each state has its own rules about formation and maintenance.

For real estate developers, the appeal centers on creating separate liability shields without the expense of forming multiple legal entities. You can place each rental property, development project or commercial building into its own series while maintaining everything under one master LLC. However, this efficiency comes with strict operational requirements.

The Reality of Separate Operations

Here’s where we need to be clear about how series actually work. While a Series LLC can reduce your initial filing costs, maintaining proper liability protection requires rigorous separation between each series. This isn’t optional, it’s the foundation of the entire structure.

Each series must have its own bank account. We see clients sometimes think they can simplify cash management by using one account, but that defeats the purpose and compromises their liability protection. Financial records must clearly distinguish between series. Contracts and leases should specify which series is the party to the agreement. Any commingling of assets or confusion about which series holds which property could compromise the entire structure.

The recordkeeping requirements under Florida’s new law emphasize this point. Each protected series must maintain contemporaneous records that clearly identify assets and liabilities associated with that series. The records need to be specific enough that a reasonable person could identify the asset, distinguish it from assets of other series or the LLC itself and determine when and how the series acquired it. If you fail to meet these recordkeeping standards, creditors may be able to pierce both the vertical and horizontal liability shields.

So yes, you save money on formation costs and annual state filing fees. But you still maintain separate books, separate bank accounts and rigorous documentation for each series, much like you would with separate LLCs. The administrative savings come from having one corporate structure, one operating agreement and one registered agent, not from combining your financial operations.

Federal Tax Treatment Has Been Clarified

For years, uncertainty surrounded how the IRS would treat series LLCs for tax purposes. That changed with Private Letter Ruling 200803004 issued in 2008, where the IRS ruled that each series of a Series LLC would be treated as a separate entity for federal income tax purposes. This treatment was later formalized in proposed regulations issued in 2010.

Under current IRS guidance, each series can make its own classification election under the check-the-box regulations. A series with one owner can elect to be treated as a corporation or, by default, as a disregarded entity. A series with multiple owners can elect corporate status or, by default, will be treated as a partnership.

What does this mean for your real estate portfolio? If you form a Series LLC with ten series, each holding a different property, you would file ten separate tax returns. Each series would need its own Employer Identification Number (EIN) from the IRS. This isn’t necessarily a disadvantage, it provides flexibility. You might choose to have some series taxed as partnerships and others as disregarded entities, depending on your ownership structure and tax planning goals.

However, state tax treatment varies significantly and remains unclear in many jurisdictions. Some states that have issued guidance follow federal treatment and treat each series as a separate taxpayer requiring separate returns. Other states treat the entire Series LLC as one entity for state tax purposes. Many states haven’t issued any guidance at all on Series LLC taxation. If your properties span multiple states, you need to work with experienced accounting professionals who understand both federal and state requirements for series taxation.

State Recognition Challenges Create Real Problems

The fact that Florida will recognize Series LLCs starting July 2026 is significant progress, but recognition remains inconsistent across states. California, New York, Pennsylvania and many other major real estate markets still don’t have domestic Series LLC laws for entities formed in those states, though some recognize foreign Series LLCs doing business there.

This creates immediate problems for developers who own properties in multiple states. For example, you might form your Series LLC in Delaware but own rental properties in states without Series LLC legislation. How courts in those states will treat your Delaware Series LLC if litigation arises remains uncertain. Some states without Series LLC laws will accept foreign Series LLCs registering to do business there, but protections vary significantly and case law remains limited.

The liability shield depends on both statutory support and judicial recognition. When you structure separate LLCs in traditional ways, you have decades of court cases supporting the liability protections. With series, you’re working with newer structures and less established precedent, particularly in states that haven’t enacted their own series statutes.

When Series LLCs Make Sense for Real Estate

Series LLCs work best for developers who own multiple similar properties in states that have enacted series LLC legislation. A developer with ten residential rental properties in Texas or Delaware might benefit from one master LLC with ten series. The structure becomes particularly attractive when you’re working within a single state that recognizes series, allows pass-through taxation at the state level and has established clear rules.

The structure becomes problematic when properties span multiple states or when you need conventional financing. Many banks remain unfamiliar with Series LLCs and hesitate to lend against series assets. Title companies sometimes struggle with Series LLC documentation. If you plan to sell properties individually, buyers and their lenders may resist dealing with a series rather than a traditional standalone LLC.

We also see challenges with property insurance. Some carriers don’t yet have clear underwriting guidelines for series structures. You’ll need to work with insurers who understand the structure and can properly insure each series separately.

Make the Right Structure Decision for Your Portfolio

Series LLCs offer real administrative savings and potential liability protection, but they come with significant compliance requirements and some uncertainty. The structure requires strict recordkeeping, separate banking for each series and careful documentation. The lack of extensive court precedent, inconsistent state recognition and varying tax complexity create genuine risks that need to be weighed carefully.

Real estate developers need more than theoretical liability shields. You need structures that banks understand, title companies can process and courts will consistently uphold. Traditional separate LLCs cost more to maintain but provide clearer legal boundaries and wider acceptance. For developers with properties in multiple states or those seeking conventional financing, separate LLCs often remain the more straightforward choice despite higher costs.

That said, with Florida’s new legislation taking effect in 2026 and growing acceptance in other states, the Series LLC structure is becoming more viable. The key is matching the structure to your specific situation. Consider your geographic footprint, financing needs, exit strategy and administrative capacity. If you’re operating entirely within one Series LLC state, working with sophisticated investors who understand the structure and maintaining rigorous compliance protocols, a Series LLC might offer real benefits.

Protect Your Real Estate Investments the Right Way

The entity structure you choose for your real estate portfolio affects everything from liability protection to tax efficiency to your ability to obtain financing. This decision deserves careful analysis based on your specific portfolio, geographic footprint and business objectives. Understanding your specific needs determines which structure truly serves your interests.

Whether you’re exploring Series LLCs for your properties or need help with business accounting and financial structuring, working with experienced professionals makes the difference. Contact a James Moore professional to evaluate your specific situation and develop a strategy that protects your properties without creating unnecessary complexity.

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