Using Series LLCs for Asset Protection in Utah

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Series limited liability companies (Series LLCs or SLLCs) are a type of business entity structure that has been adopted by eight U.S. states to date, including Utah.

Although SLLCs are essentially the same type of organizational structure as LLCs, they have some important differences. In the right circumstances, this type of entity can provide asset protection while saving the client time and money on legal and corporate filing fees.

Using a Utah series LLC for asset protection

Understanding Limited Liability Companies

Typically used by startups and smaller companies, LLCs are the organizational structure of choice for a large portion of America.

Although they are less restrictive than a corporation structure, LLCs provide many of the same asset protection advantages as S-type and C-type corporations and limit the personal liability of members and managers. At the same time, an LLC offers many of the same tax advantages as a sole proprietorship or a partnership, plus a few extra financial advantages not otherwise available.

LLCs have managers and members, rather than corporate officers and directors. Entities can be manager-managed or member-managed. Unlike a corporation, profits and losses can be allocated among members in varying amounts, based on the entity’s operating agreement.

Although not the case in all states, Utah LLCs provide excellent privacy protection, as no initial public disclosure of member or manager names is required. However, the entity must identify a “governing person” within the first year of existence.

Using LLCs for Asset Protection

LLCs are also used for another important purpose: holding and protecting assets — especially commercial real estate and investment properties.

However, in the case of a liability event, all assets within a given LLC may be at risk. For this reason, most property owners establish a separate LLC for each piece of property they own, especially if the asset has significant equity.

As you can imagine, forming and maintaining a separate LLC for every asset can quickly become cumbersome and costly if you have multiple properties.

What Is a Utah Series LLC?

Series LLCs were conceived to address the problem of needing multiple limited liability companies to hold assets.

When appropriate, asset holders can create a series of independent interests within a single LLC. Essentially, this allows for the segregation of assets, membership interests and operational structures. Each series functions as an independent entity, with its own records and identity. And perhaps most important, the assets of each series are protected from liability from the other series within the SLLC.

When you seek to protect multiple assets or segregate risk among entities, establishing an SLLC may be the most efficient approach. It is important to note that not all states recognize the SLLC structure, so it is important that you consult with a business law professional to determine the right approach in your situation.

In Salt Lake City, Franchise & Business Law Group is the leading authority in franchise and business law. Contact us today to learn more about using Utah series LLCs for asset protection and liability segregation.