California does not permit the formation of Series LLCs within the state. However, foreign Series LLCs, those formed in other states, can register and operate in California. Despite this allowance, each series within the LLC is treated as a separate entity for tax purposes, leading to potential complexities and increased costs.
What Is a Series LLC?
A Series LLC is a special form of limited liability company that allows a single “parent” LLC to create multiple “series” (or cells), each with:
- Separate members or managers
- Distinct business purposes or assets
- Independent liability protection
This structure is popular in states like Delaware, Texas, and Nevada, especially for real estate portfolios and startups with multiple business lines.
California’s Position on Series LLCs
- Formation Not Allowed: California does not allow you to create a Series LLC under its own laws.
- Foreign Registration Permitted: A Series LLC formed in another state can register with the California Secretary of State using Form LLC-5.
- Separate Entity Treatment: The California Franchise Tax Board (FTB) treats each series as a separate LLC for tax purposes.
California Tax Implications
If a foreign Series LLC registers to do business in California, each series:
- Must file its own Form 568 with the FTB
- Pays the $800 annual franchise tax per series
- May also be subject to the LLC gross receipts fee if applicable
Important: If multiple series transact business in California, the total franchise tax can quickly escalate.
Compliance Requirements
If operating in California as a foreign Series LLC:
- Register each transacting series with the California Secretary of State
- Maintain separate accounting records for each series
- File separate tax returns and pay taxes per series
- Consider the administrative burden vs liability benefits
Example: Real Estate Series LLC
Structure: Delaware Series LLC owns three properties under Series A, B, and C.
Scenario:
- Series A manages a property in California
- Series B and C operate in Texas
Result:
- Only Series A must register in California
- Series A pays $800 annually and files Form 568
- Series B and C remain outside California tax reach, unless they start transacting business there
Conclusion
California does not permit you to form a Series LLC within the state, but foreign Series LLCs may operate here , subject to strict tax and filing rules. Each active series is treated as a separate LLC, triggering duplicate franchise taxes and reporting duties. Businesses should weigh the compliance cost vs liability benefits before using this structure in California.
Call to Action
Schedule a consultation with Anshul Goyal, CPA, EA, FCA to evaluate whether a Series LLC structure aligns with your business model in California and to avoid surprise penalties from the Franchise Tax Board.
Disclaimer:
This blog is for informational purposes only and should not be considered legal, accounting, or tax advice. Every tax situation is unique, and readers are advised to consult a qualified professional before making decisions.
Top 5 High-Searched FAQs
1. Can I form a Series LLC in California?
No. California does not allow formation of Series LLCs.
2. Can a Series LLC formed in another state do business in California?
Yes, but each active series must register separately and comply with California tax rules.
3. Do I pay $800 for each series in California?
Yes. Each transacting series pays a separate $800 Franchise Tax.
4. What tax forms do I file for each series?
Each series files its own Form 568 with the California FTB.
5. Does each series require its own records and books?
Yes. Separate accounting and records are necessary to preserve liability protection and maintain compliance.
About Our CPA
Anshul Goyal, CPA, EA, FCA advises U.S. businesses and foreign founders on entity structuring, state compliance, and multi-series reporting. With a focus on California tax law, he assists LLC owners in making informed decisions about Series LLC operations and liability planning.