Academic journal article Journal of Accountancy

Series LLCs: Pros and Cons of a Growing Trend

Academic journal article Journal of Accountancy

Series LLCs: Pros and Cons of a Growing Trend

Article excerpt

Eight states allow the formation of series LLCs (Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas and Utah). A series LLC consists of a "master" LLC with one or more series of members, managers, interests or assets. Although contained within the master LLC, each series can have separate rights, powers and duties with respect to specific property and liabilities and can have separate business purposes and investment objectives. The series may also have common members with identical ownership interests, common members with varying interests or different members with unrelated interests--one series could even own an interest in another series. This makes it possible for each series to function as the equivalent to a freestanding legal entity.


With the advent of series LLCs, businesses face more options and complexity in making choice-of-entity decisions. Series LLCs have been used infrequently in the states that allow them due largely to uncertainty about what protection they provide against liabilities and how they are treated for tax purposes. Despite these present uncertainties, series LLCs hold promise as favorable entities for business and tax planning.


The states with series LLC legislation envisioned that, with properly established and maintained series, creditors could enforce the liabilities of one series only against the assets of that series. The assets of the master LLC and any other series would remain outside the reach of such creditors. A series structure thus helps wall off assets and liabilities within a master LLC.

The use of a series LLC offers advantages over the usual practice of forming multiple legal entities to segregate assets and liabilities. The costs to organize and maintain a series LLC are often less than comparable costs for multiple entities, and a series LLC might require fewer organizational documents than multiple entities. Thus, an LLC might find it easier and quicker to add a new series than to organize an entirely new entity. …

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