[DSCR](/blog/what-is-dscr-ratio) Loans with Series LLCs: State-by-State Guide

Series LLCs promise the holy grail of [real estate investing](/blog/brrrr-strategy-guide): multiple properties under one umbrella entity with liability isolation between properties—all without forming separate LLCs for each property. The concept is elegant, but the reality is messy. Only some states authorize Series LLCs, and lender acceptance is inconsistent at best.

For DSCR loan financing specifically, Series LLCs introduce unique challenges. Most lenders barely understand single-member LLCs, let alone the complex liability compartmentalization of Series structures. Getting financing for a property held by a Series LLC requires careful lender selection, documentation, and realistic expectations.

This guide breaks down exactly how Series LLCs work with [DSCR loans](/blog/dscr-loan-guide), which states allow them, what lenders require, and whether the structure makes sense for your portfolio.

What Is a Series LLC?

A Series LLC is a single LLC that contains multiple internal "series," each functioning as a separate liability shield. Think of it as a master LLC with multiple mini-LLCs inside, but legally formed as one entity.

Key features:

• One formation, one EIN, one annual report (in most states)
• Each series has separate assets and liabilities
• Debts of Series A don't attach to assets of Series B (in theory)
• Each series can have different members, managers, and purposes

The promise: Buy Property 1 in Series A, Property 2 in Series B, Property 3 in Series C. A lawsuit from a tenant in Property 1 can only reach Series A's assets (Property 1), not Series B or C's properties. You get liability isolation without the cost and complexity of forming three separate LLCs.

The reality: Legal protection is still being tested in courts, lender acceptance is limited, and complexity can outweigh benefits for smaller portfolios.

States That Allow Series LLCs

As of 2026, the following states have enacted Series LLC legislation:

Full Series LLC States

Delaware – The pioneer. Enacted Series LLC law in 1996. Most established case law and lender familiarity.

Illinois – Adopted Series LLCs in 2005. Second-most popular jurisdiction for Series LLCs.

Texas – Authorized in 2009. Clear statutes and growing use.

Nevada – Enacted in 2005. Popular for asset protection but less lender acceptance.

Tennessee – Adopted in 2007. Less commonly used but available.

Utah – Authorized in 2013. Relatively new but clear legislation.

Iowa – Enacted in 2011. Limited use for real estate.

Oklahoma – Adopted in 2010. Minimal case law.

Kansas – Authorized in 2011. Rarely used.

Missouri – Enacted in 2019. Very new, limited track record.

Puerto Rico – Allows Series LLCs under Commonwealth law.

Montana, North Dakota, Alabama, Arkansas, Indiana, Wisconsin – Have some form of Series LLC legislation, though implementation and acceptance vary.

States Explicitly Recognizing Foreign Series LLCs

Some states don't allow domestic Series LLC formation but recognize Series LLCs formed in other states:

California – Recognizes foreign Series LLCs (e.g., formed in Delaware) but imposes annual franchise tax on each series, negating the cost benefit.

Connecticut, New York, Virginia – Recognize foreign Series LLCs with varying registration requirements.

States That Don't Recognize Series LLCs

The majority of states have no Series LLC legislation. If you form a Series LLC in Delaware and register it in a non-recognition state, the internal liability shields may not be respected by that state's courts.

Implication for real estate: If the property is located in a state that doesn't recognize Series LLCs, the liability protection is questionable at best. Most attorneys advise against using Series LLCs for property in non-recognition states.

How DSCR Lenders View Series LLCs

The Challenge

Series LLCs are complex legal structures that most lenders—and their underwriters—don't fully understand. When presented with a Series LLC, typical lender reactions:

1. Rejection: "We don't lend to Series LLCs." (Most common response)
2. Confusion: "What is this? Let me ask my manager..." (delays, uncertainty)
3. Acceptance with conditions: Higher rates, lower LTV, additional guarantees
4. Rare acceptance: A few specialized lenders familiar with Series LLCs will underwrite normally

Why lenders hesitate:

• Uncertainty about lien priority: If Series A pledges its property, does the lien only attach to Series A or to the entire master LLC?
• Foreclosure complexity: In default, can the lender foreclose only on Series A's assets, or might they need to involve the master LLC?
• Unclear case law: Limited court decisions on Series LLC creditor rights
• Title insurance concerns: Some title companies won't insure loans to Series LLCs
• Regulatory ambiguity: Federal banking regulations don't specifically address Series LLCs

Documentation Requirements

Lenders that do accept Series LLCs typically require:

Master LLC documentation:

• Articles of Organization showing Series LLC status
• Master Operating Agreement
• Certificate of Good Standing
• EIN letter

Individual Series documentation:

• Series Operating Agreement (if separate from master agreement)
• Certificate of Designation establishing the specific series
• Resolution authorizing the loan for that series
• Separate EIN for the series (if obtained)

Title and lien specificity:

• Deed must specify the exact series (e.g., "ABC Master LLC, Series 1")
• Mortgage must specify that only Series 1's assets secure the debt
• Title insurance must acknowledge the Series structure

Personal guarantees:

• Guarantees from the master LLC's members or managers
• Sometimes guarantees from the specific series' beneficial owners

Finding Series LLC-Friendly DSCR Lenders

Strategy 1: Target Delaware-based or Delaware-experienced lenders. Lenders in Delaware or those with Delaware portfolios have more familiarity with Series structures.

Strategy 2: Ask directly upfront. Before spending time on an application, email or call: "Do you finance DSCR loans for properties held by a Series LLC, specifically [Delaware/Texas/Illinois] Series LLC?"

Strategy 3: Work with mortgage brokers specializing in portfolio loans. Brokers with access to 20+ lenders can shop your scenario to the subset that accepts Series LLCs.

Strategy 4: Expect premium pricing. Series LLC loans typically come with 0.25%-0.50% higher rates and/or 5% lower LTV than standard LLC loans. Decide if the asset protection benefit justifies the cost.

Setting Up a Series LLC for DSCR Loan Properties

Step 1: Choose Your Jurisdiction

Factors to consider:

Property location: Is the property in a state that recognizes Series LLCs? If not, the liability protection may not work.

Formation cost vs. ongoing cost: Delaware has low formation costs but requires annual franchise tax. Nevada has higher formation costs but potentially lower ongoing fees.

Legal precedent: Delaware has the most case law supporting Series LLC liability shields.

Lender acceptance: Some lenders prefer Delaware Series LLCs due to familiarity.

Common approach for multi-state portfolios:

• Form a Delaware Series LLC (strongest legal foundation)
• Register as a foreign LLC in each state where you own property
• Accept that some states will impose taxes/fees on the registered foreign LLC

Step 2: File Formation Documents

Delaware example:

File Certificate of Formation specifying that the LLC is authorized to create series. Language typically includes:

"The Limited Liability Company Agreement may establish or provide for the establishment of one or more designated series of members, managers, or limited liability company interests having separate rights, powers, or duties with respect to specified property or obligations of the Limited Liability Company or profits and losses associated with specified property or obligations."

Cost: $90 filing fee in Delaware, plus registered agent fees ($100-$300/year).

Step 3: Draft the Master Operating Agreement

The master operating agreement must:

• Authorize the creation of series
• Define how series are established
• Specify that each series has separate assets and liabilities
• Clarify management structure (who can create new series, make decisions, etc.)
• Detail member rights and profit distribution

Critical provision for lenders:

"The debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a particular Series shall be enforceable only against the assets of that Series and not against the assets of the Company generally or any other Series."

Use an attorney experienced with Series LLCs. Generic templates often lack provisions lenders and courts expect to see.

Step 4: Establish Each Series

When you acquire a property:

1. Adopt a Certificate or Statement of Designation creating the series (e.g., "Series 1 - Main Street Property")
2. Draft a Series Operating Agreement (or amend the master agreement to include this series)
3. Obtain a separate EIN for the series from the IRS (some attorneys recommend this for clearer asset separation, though it's debated)
4. Take title specifically in the series name: "[Master LLC Name], Series 1" or "[Master LLC Name], a series of [Master LLC Name]"

Step 5: Maintain Separation

Liability protection depends on treating each series as truly separate:

• Separate bank accounts for each series (absolutely critical)
• Separate accounting records tracking income and expenses by series
• No commingling of funds between series
• Separate leases, contracts, and agreements executed in the series name
• Annual documentation showing series activities and decisions

If you comingle funds or blur the lines between series, a court may disregard the liability shield (similar to piercing the corporate veil with regular LLCs).

State-by-State Considerations

Delaware

Pros:

• Most established Series LLC law (since 1996)
• Strongest case law supporting liability separation
• Court of Chancery specialized in business law
• High lender familiarity
• Low formation cost

Cons:

• Annual franchise tax ($300 minimum)
• Must register as foreign LLC in states where properties are located
• Not ideal if all properties are in non-Delaware states

DSCR lending: Best lender acceptance among Series LLC states. Still challenging, but more lenders understand Delaware Series structures.

Best for: Multi-state portfolios or investors prioritizing legal certainty.

Illinois

Pros:

• Clear Series LLC statute
• No annual franchise tax on series (just master LLC)
• Good option if properties are in Illinois
• Growing case law

Cons:

• Less case law than Delaware
• Lower lender familiarity outside Illinois
• Some confusion around filing requirements

DSCR lending: Moderate lender acceptance. Illinois-based lenders more familiar, but national lenders often hesitate.

Best for: Illinois-based investors holding multiple Illinois properties.

Texas

Pros:

• Clear statutes enacted in 2009
• No [state income tax](/blog/states-with-no-income-tax-investing)
• Growing use for real estate
• Moderate lender familiarity

Cons:

• Less case law than Delaware
• Franchise tax (based on revenue, but exemption for smaller entities)
• Must register series separately with Secretary of State

DSCR lending: Lower acceptance than Delaware, better than Nevada or Tennessee. Texas lenders more open to it.

Best for: Texas-based investors with Texas properties.

Nevada

Pros:

• No corporate income tax
• Strong asset protection reputation
• Privacy (no public member disclosure)

Cons:

• Higher formation and annual costs
• Lower lender acceptance (perception of Nevada as asset-hiding jurisdiction)
• Less case law than Delaware
• Initial list and annual list filing fees

DSCR lending: Difficult. Many lenders view Nevada LLCs (especially Series LLCs) skeptically. Expect higher rates or outright denial.

Best for: Investors prioritizing privacy and asset protection over financing ease, with significant equity (less reliance on leverage).

Other States

Tennessee, Utah, Iowa, Oklahoma, Kansas, Missouri, Montana, North Dakota, Alabama, Arkansas, Indiana, Wisconsin:

Limited use for real estate, minimal case law, low lender familiarity. Unless you have a specific reason (e.g., property located there and local attorney recommendation), Delaware or Illinois are safer choices.

Tax Considerations

Federal Tax Treatment

The IRS addressed Series LLCs in Revenue Ruling 2008-12, but left many questions unanswered.

Key points:

Each series can be treated as a separate entity for tax purposes if it:

• Has separate books and records
• Conducts separate business activities
• Holds separate assets

Alternatively, the entire master LLC (including all series) can be taxed as one entity if the series aren't sufficiently separate.

Implications for DSCR loans:

Separate EINs: Some attorneys recommend obtaining separate EINs for each series to clearly establish separate tax treatment. Others argue it's unnecessary if you're a disregarded entity (single-member LLC) for tax purposes anyway.

Separate tax returns (if applicable): If series are taxed separately and have multiple members, each series would file its own Form 1065. If single-member series treated as disregarded entities, income flows to your Schedule E.

Depreciation and basis: Tracked separately for each series/property.

Consult a CPA experienced with Series LLCs. Tax treatment depends heavily on your specific structure and how you maintain records.

State Tax Treatment

Varies wildly by state:

California: Charges its $800 annual LLC fee per series, effectively destroying the cost benefit. A 5-series LLC pays $4,000/year in California. Most advisors recommend avoiding Series LLCs for California property.

Texas: Franchise tax calculation can be complex, but smaller entities often qualify for exemptions.

Delaware: $300 annual franchise tax for the master LLC, regardless of number of series.

Illinois: Annual report fee for the master LLC only.

Research your state's specific treatment before committing to a Series LLC.

Pros and Cons: Should You Use a Series LLC for DSCR Properties?

Pros

Cost savings (in theory): One formation instead of multiple LLCs.

Liability isolation: Protects assets in other series from liabilities of one series.

Simplified administration: One master entity to track (though series still need separate accounting).

Privacy: In some states, series aren't publicly listed individually.

Scalability: Easy to add new series as you acquire properties.

Cons

Limited lender acceptance: Many DSCR lenders won't finance Series LLC properties, limiting your options and potentially costing you better rates.

Untested legal protection: Limited case law means you're relying on statutes that courts haven't fully interpreted.

Complexity: Requires meticulous accounting and documentation to maintain liability shields.

Higher financing costs: Expect premium pricing on DSCR loans, if you can get them at all.

State-specific issues: Not all states recognize Series LLCs, and some (like California) impose per-series fees.

Title insurance challenges: Some title companies hesitate or charge extra to insure Series LLC properties.

The Verdict

Series LLCs make sense for:

• Large portfolios (10+ properties) where formation/maintenance costs justify the structure
• Investors in Series LLC-friendly states (Delaware, Illinois, Texas)
• Sophisticated investors with CPAs and attorneys experienced in Series LLCs
• Investors prioritizing asset protection over financing ease
• Those with significant equity (less reliant on maximizing leverage and rate)

Stick with separate LLCs if:

• You have fewer than 5-7 properties (separate LLCs aren't that expensive)
• You're in California or another state hostile to Series LLCs
• You want maximum financing flexibility and best rates
• You value simplicity and proven legal structures
• Your lender pool doesn't include Series LLC-friendly options

Frequently Asked Questions

Do Series LLCs really provide liability protection?

In theory, yes—if formed and maintained correctly in a state with Series LLC legislation, and if the property is located in a state that recognizes Series LLCs. In practice, there's limited case law. The few court cases that exist generally upheld the liability shield when proper separation was maintained. But it's less proven than traditional separate LLCs.

Can I convert my existing LLCs into series under a master LLC?

Technically yes, but it requires transferring property from each existing LLC to a series of a new master LLC. This may trigger due-on-sale clauses in your existing loans, require new title insurance, and create transfer tax obligations. Usually not practical unless you're refinancing anyway.

How do I title a property in a specific series?

The deed should name the specific series, not just the master LLC. Example: "ABC Real Estate Holdings LLC, a Delaware limited liability company, Series 2024-A" or "Series 2024-A of ABC Real Estate Holdings LLC." Your attorney and title company will guide the exact language for your state.

Do I need separate insurance policies for each series?

Typically yes. Each series should have its own [landlord insurance](/blog/landlord-insurance-guide) policy, [liability coverage](/blog/homeowners-insurance-complete-guide), and umbrella policy. The separation reinforces the legal liability shield and ensures proper coverage.

What happens if one series defaults on a DSCR loan?

In theory, the lender's recourse is limited to that series' assets (the pledged property). Other series' assets should be protected. However, if you personally guaranteed the loan (common with DSCR loans), the lender can pursue you personally regardless of the Series structure. The Series LLC protects the series from each other, but guarantees eliminate personal protection.

Can I get better DSCR rates by avoiding Series LLCs?

Generally yes. Standard LLC structures (single-member or multi-member LLCs) face fewer lender objections, broader lender acceptance, and more competitive pricing. If financing flexibility and rate optimization are priorities, separate LLCs for each property typically work better than a Series structure.

Should I form my Series LLC in Delaware even if my properties are in Texas?

Depends on your priorities. Delaware offers the strongest legal framework and case law, but you'll pay both Delaware franchise tax and Texas foreign registration fees/taxes. If all your properties are in Texas and you plan to stay Texas-only, a Texas Series LLC simplifies administration. If you anticipate multi-state expansion, Delaware provides a more portable structure.

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Series LLCs are powerful tools in the right circumstances but come with meaningful trade-offs for DSCR loan financing. The liability protection benefits must outweigh the reduced lender access, higher financing costs, and administrative complexity.

For most investors with fewer than 10 properties, separate LLCs remain simpler and more practical. For larger portfolios in Series LLC-friendly states, with experienced legal and tax advisors, Series structures can deliver meaningful asset protection and cost savings—if you're willing to work harder to find financing and pay a modest premium for it.

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