How to Use Series LLCs for Franchise-Based Business Expansion

 

English Alt Text: A four-panel comic shows a businessperson learning about Series LLCs. Panel 1: A consultant says Series LLCs are excellent for franchise expansion. Panel 2: The businessperson asks how they differ from regular LLCs. Panel 3: The consultant explains they separate liability across units. Panel 4: The businessperson responds, “That sounds ideal!”

How to Use Series LLCs for Franchise-Based Business Expansion

Franchise operators looking to scale across multiple units or brands often struggle with balancing asset protection, tax efficiency, and operational control.

That’s where the Series LLC can shine—offering a unique legal structure that allows for multiple “series” or sub-entities under a single umbrella LLC.

This strategy is gaining popularity among multi-unit franchisees and growth-focused operators across the U.S.

πŸ“Œ Table of Contents

πŸ—️ What Is a Series LLC?

A Series LLC is a form of limited liability company that allows for the creation of multiple “series” or sub-LLCs within a single parent LLC.

Each series can have its own:

- Assets

- Operations

- Members and managers

- Bank accounts

- Liability shield

This means one legal filing can protect multiple business units under separate liability protections.

πŸ“ˆ Why Use a Series LLC for Franchise Businesses?

Multi-unit franchise owners often operate several stores across different cities or brands.

Without a Series LLC, they would need to create a separate LLC for each one—an expensive and administratively heavy process.

Benefits of Series LLC for franchising:

- Liability segregation between locations

- Simplified tax filing (in some jurisdictions)

- Reduced formation and maintenance cost

- Easier branding and organizational hierarchy

πŸͺ Example: Franchise Expansion with Series LLCs

Case Study: Jamie owns three Smoothie King franchises and is planning to add two more fitness franchise units under different brand names.

Using a Delaware Series LLC structure:

- The master LLC is “Jamie Holdings LLC”

- Each Smoothie King location becomes a separate series: “Series A – Smoothie King #1”, “Series B – Smoothie King #2”, etc.

- New fitness brands are housed under Series D and Series E

This way, a lawsuit at one location doesn’t endanger assets in another.

πŸ›  How to Set Up and Maintain a Series LLC

Step 1: Choose a state that allows Series LLCs (e.g., Delaware, Texas, Illinois)

Step 2: File Articles of Organization for the parent LLC with series capabilities

Step 3: Create internal operating agreements for each series

Step 4: Maintain separate books, bank accounts, and EINs per series

Step 5: Ensure franchise agreements allow series structuring or assign them accordingly

⚠️ Cautions and Jurisdictional Limitations

- Not all states recognize the liability separation of Series LLCs

- Inter-state operation may require forming traditional LLCs in non-Series states

- IRS tax treatment is evolving — some series are treated as separate entities, others are disregarded

- Lenders and investors may prefer standalone LLCs

Legal counsel and CPA guidance are essential before implementation.

πŸ”— Further Resources

Explore more tools for franchise growth and entity management:

πŸ”— Further Resources

Explore more tools for franchise growth and entity management:

Important Keywords: Series LLC, franchise entity structure, multi-unit business, asset protection, scalable business formation