Many form an LLC in order to protect personal assets from a legal claim relating to their real estate investment or business liabilities.
Additional liability protection may be gained by properly forming and maintaining a separate LLC to hold each property or business entity.
However, there are costs and administrative burdens associated with properly forming, qualifying and maintaining each separate LLC.
Although each cell of a Series LLC can own distinct assets, incur separate liabilities, and have different managers and members, a Series LLC may be able to pay a single set of annual state fees and may be able to file one income tax return each year.
Under Delaware law, any particular series may be dissolved by 2/3 approval of the ownership interests, or a simple majority if provided for in the operating agreement.
[8] Montana enacted Series LLC legislation in 2011, since becoming a popular organizational structure for captive insurance companies.
[citation needed] Until recently, Delaware did not clearly state that each series could sue, enter into contracts, etc.
Delaware clarified its legislation that a series can now enter into contracts, hold title to assets, grant liens and security interests and sue or be sued.
The Delaware Division of Corporations will not provide a separate certificate of good standing for each series, but it will provide a certificate of good standing saying that the entire company is a series LLC (and not just a traditional LLC).
[10] Wyoming's LLC statute specifically states that "[a] series ... shall have the power and capacity to, in its own name, contract, hold title to assets including real, personal and intangible property, grant liens and security interests and sue and be sued."
2013), the United States Court of Appeals for the Fifth Circuit interpreted the application of the Louisiana Unfair Trade Practices Act to alleged violations by a Delaware series LLC.
[12] The series LLC is becoming more widely used as a liability segregation technique as its tax treatment becomes clearer and its use spreads.
To date, the inter-jurisdictional efficacy of portfolio segregation has not been widely tested and the lack of precedent in federal bankruptcy court in particular is a significant source of uncertainty.
Arkansas, Virginia, Nebraska, and Iowa have passed the Uniform Protected Series Act[31] Note 1.
In the District Columbia, Illinois, Kansas, and Montana, each cell must be formed by a separate operating agreement and/or Articles of Organization or similar paperwork filed with the Secretary of State (as opposed to allowing creation of cells in the LLC's operating agreement).
In Delaware, a cell can enter into contracts, hold title to assets, grant liens and security interests and sue or be sued.