The Series LLC
Limited liability companies (“LLCs”) have become recognized as a preferred vehicle for business owners who want to combine the tax advantages of a partnership with the business advantages of a corporation.
Recently, the Series LLC came along adding to the advantages of using a LLC. A Series LLC allows the entity’s members to segregate the liabilities, control, and profit sharing of one business conducted by the LLC from another business conducted by the same LLC.
A Series LLC is a special form of LLC that provides for the establishment of designated series within the LLC applicable to specified assets or operations, each with a separate business purpose or investment goal. In a Series LLC, the debts, liabilities, and obligations relating to one series are enforceable only against the assets of that series and not against the assets of the LLC generally or the assets of any other series. Each series can hold its own assets, have its own members, conduct its own operations and pursue different business objectives, but remain insulated from claims of members, creditors or litigants pursuing the assets of or asserting claims against another series.
To date, only eight states -- Delaware, Iowa, Oklahoma, Illinois, Nevada, Utah, Tennessee, and Texas -- have adopted Series LLC statutes, but several others have similar legislation under consideration. Even in those states that have adopted legislation, many questions remain unanswered concerning the new type of entity.
In sum, the Series LLC may offer the advantages of increased asset protection from creditors and the reduction of legal, accounting, and administrative costs and taxes in the jurisdictions which recognize such business entity structure. However, in those jurisdictions which have not adopted legislation allowing for the formation of the Series LLC, there exists uncertainty in the actual level of asset protection offered, as well as the amount of potential tax savings.
