With home prices at historic lows, and mortgage interest rates around 4%, real estate investment is on the rise. If you own (or are considering owning) multiple rental properties, consider starting a series LLC (“Series LLC”) to maximize liability protection and save costs.

Since the creation of limited liability companies (“LLCs”), an owner of multiple real estate investments could protect each distinct investment from the liabilities of other investments by organizing a separate LLC for each property. However, organizing numerous LLCs requires considerable expense in the form of Secretary of State filing fees and other legal costs.

To address these high costs, the Nevada Legislature revised the limited liability statute (Nevada Revised Statutes (“NRS”) Chapter 86) in 2005 to allow for the creation of Series LLCs. A Series LLC is a single limited liability company with multiple “series,” each of which operates like its own LLC. Accordingly, each series may have different assets, liabilities, members, managers and rights. Yet, for purposes of filing fees, there is only one LLC.

To organize a single LLC (series or non-series), an investor must file the company’s Articles of Organization ($75.00) and an Initial List of Managers or Managing Members ($125.00) with the Nevada Secretary of State. That investor would also need to pay $200.00 for a business license fee. Therefore, starting a single LLC would require payment of $400.00 in filing fees. To maintain that LLC, each year the investor would need to file an Annual List of Managers or Managing Members ($125.00) and, again, pay the $200 business license fee. Accordingly, yearly fees would cost $325.00.

Now, assume that investor owned 5 rental properties. To create separate liability protection for each investment using separate LLC structures, that investor would have to pay the above fees for each of the 5 LLCs, which would cost $2,000.00 in year one, and $1625.00 each subsequent year. However, if that investor formed a Series LLC and placed each rental property in an individual series, he or she could save $1,600 in year one, and $1,300 each subsequent year, while maintaining the same liability protection.

If an investor has already organized multiple LLCs for separate real estate investments, he or she may consolidate those LLCs into one master, Series LLC by filing Articles of Merger with the Secretary of State. Additionally, since an LLC’s Articles of Organization must indicate that the LLC has multiple series, the Articles of Organization would need to be amended (the filing fee for an Amendment to Articles of Organization is $175.00).

To ensure that each series is protected from the liability of other series, compliance with the mandates of NRS Chapter 86 is critical. First, under NRS 86.161(1), the Articles of Organization must state that the company will have one or more series of members and that the debts or liabilities of any series are enforceable against the assets of that series only. Second, the Articles of Organization should explain that the relative rights, powers and duties of each series will be set forth, or provided for, in the company’s operating agreement.

Third, under NRS 86.296(3), separate and distinct records for each series and each series’ assets, as well as separate accounting, must be maintained. And finally, to ensure separate formalities, it is also best practice that all contracts, deeds, and notes be signed in the name of the series, and that a separate bank account be maintained for each series.

Series LLCs present a unique means to obtaining separate liability protection at a lower cost. However, due to the statutory requirements and other legal ramifications (including tax consequences and treatment during bankruptcy), investors are encouraged to consult with experienced legal counsel before organizing a Series LLC.

Jonathan Tew is a business organization and corporate law attorney with Robertson & Benevento in Reno.