Series LLCs are often marketed as an innovative asset protection strategy, allowing business owners and investors to separate their assets within a single LLC structure. However, the legal reality tells a different story. Only a handful of states allow Series LLCs, and even in those states, courts have already ruled against their liability protections. Worse yet, most states do not recognize them at all, meaning they will be disregarded in litigation due to violations of public policy.
If you’re looking for a proven asset protection strategy, Series LLCs are not the answer. Instead, a properly structured traditional LLC, Limited Partnership (LP), or The Bridge Trust® offers time-tested security against lawsuits, creditors, and financial risks.
What Is a Series LLC?
A Series LLC is a limited liability company (LLC) that allows for the creation of multiple “series” or “child” LLCs under a single “parent” LLC. The idea is that each child series operates as an independent business entity, with separate liability protections. However, this structure is fundamentally flawed due to lack of legal recognition in most states and inconsistent court rulings.
Why Series LLCs Are a Legal Risk
• Only a few states recognize them: Series LLCs are permitted in a limited number of states, including Delaware, Texas, and Illinois, but the vast majority of U.S. states have no laws recognizing them.
• Courts in Series LLC states have already rejected their protections: Even in states where they are legally allowed, case law is showing that courts do not always uphold their liability separation.
• Most states view Series LLCs as a violation of public policy: If a Series LLC operates or holds assets in a non-Series LLC state, courts will disregard the structure entirely, treating it as one single entity—effectively nullifying any liability protections.
This brings us to one of the biggest red flags for Series LLCs: courts are already ruling against them.
Case Law: Courts Are Rejecting Series LLC Protections
One of the few legal cases addressing Series LLCs, City of Urbana v. Platinum Group Properties, LLC, 2020 IL App (4th) 190248, demonstrates why Series LLCs are not a reliable asset protection strategy.
In this case, the Illinois Fourth District Appellate Court ruled that a Series LLC failed to prove it was a separate legal entity from its parent LLC. This is significant because Illinois actually has Series LLC legislation, yet the court still refused to recognize the structure.
Key takeaways from this case:
1. The Series LLC failed to properly file its certificate of designation—a crucial step under Illinois law.
2. The parent LLC and the child series had the same manager and agent for service, making them appear as a single entity in the eyes of the court.
3. Even if the filing had been correct, the court remained skeptical about the validity of Series LLC liability protections.
Public Policy Issues: Why Courts in Non-Series LLC States Will Not Recognize Them
If you establish a Series LLC in a state that allows them but hold assets or operate in a state that does not recognize them, you will lose liability protection. This is because courts in non-Series LLC states will reject them based on public policy violations.
Why does this matter?
• No state is required to recognize an entity structure that violates its corporate laws. A Series LLC formed in Texas may not be honored in Florida, California, or New York—meaning creditors can attack all assets across the series as if they were one entity.
• Public policy doctrine prohibits enforcing structures that undermine existing liability protections. If your Series LLC conflicts with a state’s laws, the court will treat it as one big LLC, exposing all assets to risk.
• Creditors will argue—and courts will likely agree—that Series LLCs are an attempt to evade liability protections. And with case law already rejecting Series LLC separations, it’s a losing battle.
The Bankruptcy Problem: Another Major Risk with Series LLCs
Series LLCs also create massive uncertainty in bankruptcy law. The U.S. Bankruptcy Code does not specifically address Series LLCs, meaning courts are left to interpret their status however they want.
This leads to serious concerns:
• If the parent LLC files for bankruptcy, do the child series go down with it?
• If a single series is in financial trouble, can creditors pierce the entire structure?
• Since federal law does not clearly define Series LLCs, outcomes depend on how individual judges choose to interpret them.
For anyone seeking bulletproof asset protection, this level of uncertainty is unacceptable.
Proven Alternatives: Don’t Be a Guinea Pig
If Series LLCs are unproven, unrecognized in most states, and legally vulnerable, what’s the better alternative? Established, court-tested asset protection structures.
1. Properly Structured Traditional LLCs
A Limited Liability Company (LLC) provides far more certainty than a Series LLC—but only if it is structured correctly.
• The LLC should be formed in the state where the asset is held. This ensures that the state’s laws fully protect the entity, eliminating the risk of public policy violations.
• Strong LLC jurisdictions like Wyoming and Nevada offer additional protections, such as charging order protection to prevent creditors from seizing ownership.
2. Limited Partnerships (LPs)
For real estate investors and business owners, Limited Partnerships (LPs) offer superior liability protection.
• LPs provide separation of ownership and control, making it harder for creditors to reach assets.
• LPs have well-established legal recognition in all 50 states, unlike Series LLCs.
3. The Bridge Trust®
For high-net-worth individuals or those facing potential lawsuits, The Bridge Trust® combines the best of domestic and offshore asset protection strategies.
• Fully recognized under U.S. and international law.
• Stronger than domestic asset protection trusts (DAPTs) while maintaining flexibility.
• Unmatched security against creditor claims.
Conclusion: Don’t Gamble with Your Asset Protection
Series LLCs are an experiment, not a proven asset protection tool.
• Only a handful of states recognize them.
• Even in those states, courts are rejecting their liability protections.
• Most states do not recognize them at all and will strike them down as a violation of public policy.
• The U.S. Bankruptcy Code has no clear answers on their treatment, creating massive uncertainty.
If you set up a Series LLC in one state but operate or hold assets in a state that doesn’t recognize them, your entire structure will be disregarded—leaving all assets vulnerable to lawsuits and creditors.
Instead of rolling the dice on an unproven structure, use real, court-tested asset protection strategies like properly structured LLCs, Limited Partnerships, and The Bridge Trust®. Don’t be a legal guinea pig.
For a legal strategy consolation with an asset protection attorney call (888) 773-9399.
By: Brian T. Bradley, Esq.
