Series LLCs: Financial and Operational Flexibility Under New Delaware and Other State Laws

Description

Series LLCs exist to remove the complications that come into play when a client chooses to form a new LLC for each asset the client possesses. When the series form is used, each otherwise independent entity resides in its own cell. Many commentators liken the series LLC concept to a honeycomb, and each cell within is but one "whole," but each part has its own walls.

The formation of a series LLC creates several challenges. First, it must be formed in one of the states that recognize the format of the entity. (Delaware and Nevada, two of the most common formation states, both do.) Second, counsel must take care to ensure that any state in which the series LLC operates will permit such operation (even if formation is not allowed).

Documentation and operation are not simple. Though there is but one entity, each cell can only maintain its separate liability shield if it remains independent of the other cells. Thus, corporate formalities must be observed on a cell-by-cell basis. Because each cell can have different ownership structures and rights, counsel must ensure that the documentation that exists meets the day to day realities of the businesses.

Listen as this cross-disciplinary panel provides detailed advice and guidance on not just these formation and operation issues, but also addresses related taxation issues.