This article is part of a broader conversation about the risks of asking legal questions on ChatGPT or other AI tools. Many clients don’t realize they’re asking the wrong questions—or missing the critical follow-ups—and as a result, they draw inaccurate or overly simplistic conclusions that can cost them later.
The following question that was recently posed by several people—after we suggested they use a Series LLC as their syndication corporate structure—is a perfect illustration of this ever-increasing issue:
Can a Series LLC Be Used to Syndicate Property in a State That Doesn’t Recognize Series LLCs?
Take this common example: Someone types into ChatGPT, “Can I use a Series LLC in California?” The answer they get is technically correct—but practically useless. Worse, it often leads to the conclusion that a Series LLC can’t be used at all if you live in or invest in a state that doesn’t recognize them. That’s simply not true.
The real answer is more nuanced, and more useful—if you know what to ask. So let’s walk through what that looks like in practice.
The Right Way to Use a Series LLC in a Non-Series State (Like California)
- You can use a Series LLC to syndicate property in states that do not allow the formation of Series LLCs—as long as you structure it correctly.
- Form your Series LLC in a Series-friendly state like Wyoming, Delaware, or Texas. That becomes your “Master LLC.”
- Each Series should own a separate LLC formed in the state where the property is located (e.g., California). These are often referred to as Title Holding Entities.
- All states allow out-of-state entities to own local LLCs. However, states that do not recognize Series LLCs may not honor internal liability protections between Series if a dispute arises in their jurisdiction.
- To address this, each Series should own 100% of a local Title Holding LLC. This reinforces separation and respects local compliance requirements.
- If you live or work in the non-Series state (e.g., California), it’s often advisable to form a Management LLC in that state. While no state requires that the Manager be formed or registered locally, if the Manager is actively conducting business there, it may trigger a requirement to register anyway. Forming it locally can reduce compliance risk. The Management LLC should act as: – Manager of the Master LLC – Manager of each Series – Manager of each Title Holding LLC.
- The Management LLC and Title Holding LLCs should have local bank accounts. The Master and Series LLCs should bank in the Series LLC’s home state. The Series is merely a place to house your investors, and it’s where any securities offering involving passive investors will take place.
- With this setup, the Master LLC and its Series are generally not required to register in the non-Series state—so long as they don’t conduct business directly there.
- All in-state activities—contracts, property management, operations—should be run through the locally registered Title Holding LLCs and Management LLC.
- This structure supports liability isolation, investor separation, and compliance efficiency—and is widely used by experienced syndicators working across multiple states.
Conclusion
Yes, you can use a Series LLC to syndicate property in a state that does not allow the formation of Series LLCs. But it must be structured properly: by forming in a Series-friendly state, using local entities for title holding, and forming a local Management LLC to oversee in-state activity. With discipline and documentation, this model provides flexibility, separation, and compliance.
Before moving forward with any Syndicate, Fund, or Series LLC structure, it is essential to seek advice from experienced corporate securities counsel—and discuss with them any concerns so that they can help you properly address them; don’t just assume that your AI answer is correct, as you may not have a complete understanding or know the right questions to ask.
The people who get this wrong aren’t just non-attorney clients—it’s often their real estate or general business attorneys who don’t ask the right questions and guide them to the wrong conclusions. We’ve helped more than 450 clients navigate corporate securities issues. Be careful whose advice you take. When it comes to structuring offerings and protecting investors, taking guidance from someone with the wrong experience (whether it’s you or your non-securities counsel) can lead you far off course.
