SERIES LLC CAPTIVES
Jeffrey K. Simpson
Gordon Fournaris & Mammarella, P.A.
1925 Lovering Avenue
Wilmington, DE 19801
Tel: (302) 652-2900
Fax: (302) 652-4765
Email: jsimpson@gfmlaw.com
www.gfmlaw.com
00596511
WHAT ARE SERIES LLC CAPTIVES?
Check the “Series Captive” Law
Surprise, There Isn’t One!
No Express Provision
Marriage of LLC Act and Captive Statute
LLC Act must allow for Series
Captive Statute must allow for LLCs
 Special Purpose Category really helps!
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WHAT IS A SERIES?
Cell with Superpowers!
Separate Owners
Statutory Separation of Assets and Liabilities
Ability to contract in its own name
Ability to have its own governance
Now for an abstract legal distinction:
Cells come from Insurance Law (Regulatory)
Series come from Entity Law (Corporate)
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EVOLUTION
 First Approved in 2010
 Get Around your own law
 Dozens of Series LLCs and Hundreds of SBUs
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Series LLC
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WHY SO POPULAR?
Capital Access, Preservation and Growth
Flexibility
Customizability
Regulatory intellectual capital and support
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SPONSOR
1
SPONSOR
SPONSOR
22
OWNER
A
OWNER
C
SERIES
C
C
SERIES
A
XYZ LLC
SERIES
B
OWNER
B
SERIES
D
OWNER
D
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CORE CAPITAL PROTECTED
SERIES A
MORE$
SERIES C
MORE$
CORE CAPITAL EXPOSED
SERIES A
LESS$
$250,000
$250,000
SERIES B
MORE$
SERIES C
LESS$
SERIES D
MORE$
SERIES B
LESS$
SERIES D
LESS$
THEORETICALLY, BUT NOT PRACTICALLY!
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RISK IN
NO RISK
THE CORE
IN THE CORE
POLICY HOLDERS
POLICY HOLDERS
INSURANCE
SERIES
A
REINSURANCE
SERIES
B
INSURANCE
SERIES
C
GENERAL ACCOUNT
$250,000
REINSURANCE
SERIES
D
SERIES
A
REINSURANCE
SERIES
C
GENERAL ACCOUNT
$250,000
SERIES
B
SERIES
D
ANOTHER WAY TO PROTECT CORE CAPITAL
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PREMIUM TAX
POLICY HOLDERS
Not Subject To
Premium Tax
Subject To
Premium Tax
SERIES
A
SERIES
C
CORE
SERIES
B
REINSURANCE
SERIES
D
POLICY HOLDER
NO MINIMUM TAX ON SBUs
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USES OF SERIES LLC CAPTIVE
 Sponsored Enterprise Risk (831(b)) Vehicle
- Captive Managers
- Financial Advisors
- Wealth Planners
 Multiple Owner Enterprises
 Multiple Classes of Insured
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SUCCESSES - GENERAL
 Lower Initial Capital
 Reduced Operating Costs
 Customized Design
 Ease of Entry
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CHALLENGES - GENERAL
 Evolving Regulatory Landscape
 Regulators and Participants Necessarily learning as they go
 Types of Risk
 First Party vs. Third Party
 Concern about authority to supervise single series
 Cost of Regulation
 Tax and Fee Structure not Sustainable
 Reporting
 Annual Report = Consolidated with Schedules
 Annual Audit = Consolidated with Schedules
 Actuarial Opinion = Migration Toward Individual Opinion
 Opening Accounts
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Montana Specific Highlights
Low Minimum Core Capital
 Flexibility for Special Purpose Captives
 Attractive to Sponsors
Pool as Front is OK
 Reduces number of transactions
Currently, No SBU Application Fee or Minimum Premium Tax
Investments in Special Purpose Captive are same as Pure
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Montana Specific Challenges
Public filing of name and series agreement for every
series
 May Facilitate account opening
 Likely to chill sponsors and participants seeking
confidentiality
Initial series capital at ratio of 4 to 1
 May be too high an initial number
SBU Application Fee or Minimum Premium Tax
 May have to Implement
Pre-Approval of Secretary of State Filings
 Adds time and Frictional cost
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