Series LLCs in Tennessee: How the Liability Shield Works for Real Estate Investors

Many real estate investors hold each property in its own LLC so that a claim tied to one property cannot reach the others. A series LLC is another way to aim for that result: one LLC, with separate series inside it, each associated with its own property and obligations. Tennessee allows series, but the protection comes with conditions, and several important questions are still open.

What Tennessee's statute allows

Tennessee's Revised Limited Liability Company Act lets the LLC documents establish, or provide for establishing, one or more designated series of members, holders, managers, directors, membership interests, or financial rights with separate rights, powers, or duties for specified property or obligations of the LLC, or the profits and losses associated with them. A series may have its own business purpose or investment objective (Tenn. Code Ann. § 48-249-309(a)). Under the Act, the LLC documents are the articles of organization and, if the LLC has one, its operating agreement, whether written or oral (Tenn. Code Ann. § 48-249-102(16)).

Three conditions for the shield between series

When the conditions are met, debts and obligations of a particular series can be enforced only against that series' assets, not against the assets of the LLC generally or any other series. Unless the LLC documents provide otherwise, debts of the LLC generally or of another series cannot be enforced against that series' assets (§ 48-249-309(b)(1)). The statute lists three conditions:

1. The LLC documents establish or provide for the establishment of one or more series.
2. Separate and distinct records are kept for each series, and the assets associated with each series are held and accounted for in those records separately from the LLC's other assets and the assets of any other series.
3. The articles of the LLC give notice of the limitation on liabilities of a series.

The notice in the articles is sufficient whether or not any series has been created yet, and it does not have to name a specific series. Having articles with the notice on file with the Secretary of State constitutes notice of the limitation (§ 48-249-309(b)(2)). The records condition is the one that depends on day-to-day practice: the statute ties the shield to separate records and accounting for each series' assets.

A member can also agree, by a provision in the articles made in the manner set out in § 48-249-114(f) (which requires the member to sign the articles or an amendment), to be liable for all of the debts of one or more specified series. That agreement does not make the member liable for the debts of the other series (§ 48-249-309(c)).

What a series can do in its own name

Tennessee's statute provides that a series may, in its own name (§ 48-249-309(j)):

• Contract.
• Hold title to assets, including real, personal, and intangible property.
• Grant liens and security interests.
• Sue and be sued.

For a property investor, that means a deed, a loan, and a lease can name the series that holds the property. When those documents name the same series that the records show as holding the property, the paperwork and the records tell the same story.

Management, distributions, and ending a series

• The LLC documents can set classes of interests and voting rights for a particular series as if it were a separate LLC (§ 48-249-309(d)).
• The Act's distribution rules apply to each series as if it were a separate LLC, and so do the Act's parts on management and on admission of members, membership interests, and transferees and creditors of members (§ 48-249-309(e), (f)).
• A series can be terminated and wound up without dissolving the LLC or ending any other series, and without affecting the liability limits of the terminated series or the others. The Act's dissolution and winding-up rules apply to a series as if it were a separate LLC, and a series ends upon the same events that end an LLC (§ 48-249-309(g), (h)).

Filing with the Secretary of State

The statute places the series notice in the articles of the LLC (§ 48-249-309(b)(1)(C)). The Secretary of State's published list of business forms does not include a separate form for creating a series. The Department of Revenue's 2013 notice on series LLCs states that the law does not require notifying the Secretary of State when a series is created, though it recommends doing so to reduce administrative inconvenience when the series later terminates (Tennessee Department of Revenue Notice #13-15). The Department's Franchise and Excise Tax Manual (June 2026) likewise states that only the master LLC is required to file with the Secretary of State.

A foreign LLC whose governing documents provide for series must say so in its application for a certificate of authority to transact business in Tennessee, or in an amendment to its certificate of authority, and must state whether each series' debts are enforceable only against that series' assets (§ 48-249-309(i)).

Tennessee franchise and excise tax

The Department of Revenue's rule on series LLCs describes how Tennessee franchise and excise tax applies (Tenn. Comp. R. & Regs. 1320-06-01-.41):

• The parent LLC and each series are treated as separate entities, and each determines its classification as though it were a separate LLC, generally consistent with its federal classification.
• A parent or series that is wholly owned by a corporation and disregarded for federal income tax purposes is disregarded for franchise and excise tax. Other federally disregarded parents or series are treated as separate entities.
• A parent LLC and each series doing business in and having substantial nexus with Tennessee must separately register with the Department and set up separate tax accounts.
• Unless disregarded, each series files a separate return, and so does the parent LLC.
• The parent and each series must apply separately for any exemption, and only that series' own activities, income, and other attributes are considered.
• A series that terminates must obtain a separate tax clearance.

What this means in dollars for a given structure is a question for your CPA.

Federal tax classification remains unsettled

In 2010, the IRS and the Treasury Department proposed regulations providing that a domestic series, whether or not it is a separate legal person under state law, is treated as an entity formed under local law for federal tax purposes, with its classification determined under the usual entity classification rules (proposed Treas. Reg. § 301.7701-1(a)(5), 75 Fed. Reg. 55699 (Sept. 14, 2010)). The proposal itself notes that there was little specific guidance on whether a series is treated as separate from the other series or from the LLC. Those proposed regulations would generally apply only once final regulations are published, and the current regulation at 26 C.F.R. § 301.7701-1 contains no series provision (the paragraph now numbered (a)(5) addresses single-owner organizations). Your CPA should decide how each series will be reported.

Questions the statute does not answer

• Other states: § 48-249-309 is Tennessee law. Whether a court in a state without a series statute will respect the separation between series is unsettled.
• Bankruptcy: the Tennessee statute does not address how a bankruptcy court will treat a series, and Tennessee's appellate courts do not appear to have interpreted the series statute yet.
• Lenders and title insurers: each sets its own requirements for lending to, or insuring title held by, a series. Ask each of them before you put a property under contract or move it into a series.
• Existing properties: putting title to a property that is already owned in a series' own name generally means a new deed, and it can raise lender consent, title insurance, and tax questions to work through before any deed is signed.

Practical points for property investors

• Insurance: insurance coverage is separate from the statutory shield. Review the coverage for each property and confirm which series is the named insured.
• Sales and exchanges: because which entity holds title can matter for a 1031 exchange, talk with your CPA before selling or buying property through a series.
• Outside investors: if a series will take money from passive investors, the questions discussed in how an LLC can raise capital from private investors can arise for interests in a series too.

Whether a series LLC, separate LLCs, or another structure fits depends on the properties, the owners, the lenders, and where the properties are. If you are weighing a series LLC in Middle Tennessee, my office can review the structure and the documents.

Educational disclaimer: This article provides general Tennessee educational information only and is not legal or tax advice for any specific company or property.