SERIES LLC
Allen Sparkman - The Bond Law Firm, PLLC
Melissa Stubenberg – Richards, Layton & Finger, P.A.
February 22, 2012
ABA Business Law Section
Subcommittee on Limited Partnerships and Unincorporated Associations
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What is a Series LLC?
A Series LLC is an LLC formed pursuant to a statutory provision permitted to
have separate identified series of limited liability company interests or assets,
each of which may have its own separate members, managers, business
purpose or investment objective, and each of which may be treated separately
with respect to liabilities to third parties such that the liabilities with respect to
one series can be enforced against the assets of that series only and not against
the assets of the LLC generally or of any other series.
SERIES LLC
Series A
Series B
Factors to Consider
• Administrative considerations
– Separate books
• Cost considerations
• Uncertainties
– Not tested in the courts
– Not all states have similar statutes permitting a series
structure
– Uncertain tax treatment especially for state taxes
Securitization
POOLED
ASSETS
A
POOLED
ASSETS
C
POOLED
ASSETS
B
SPONSOR
Certificates
A
Assets
A
Series A
Notes
A
INVESTOR
Assets
B
Certificates
B
ISSUER
Series B
Notes
B
INVESTOR
Assets
C
Certificates
C
Series C
Notes
C
INVESTOR
Mutual Fund
Investment Advisor
(common to all series)
Board
(common to all series)
MUTUAL FUND
Series A
Series B
Series C
investor
investor
investor
investor
investor
Real Estate Transaction
Manager to both
series
Member
A&B
Member
(B only)
Manager to both
series
SERIES LLC
Series A
Series B
SERIES L
ASSET
A
Series
A
ASSET
B
Private Equity/Hedge Fund
Investors
Investors
Investors
GP
GP
Feeder
B
Feeder
A
GP
Feeder
C
MASTER FUND
GP of Master
(all series)
Portfolio Co.
Series A
Series B
Portfolio Co.
Series C
Portfolio Co.
In what deal does a Series LLC make
sense?
• Deals that require a regulatory, tax or other
advantage of only one legal entity yet still want
to shield liabilities between series
• Deals with minimal liability concerns, Series
LLC’s may be used to lower administrative costs
and ease of operation
What should you to tell your client
about Series LLCs?
• Initial drafting of LLC Agreement may have higher costs
– Address series with specificity
• How series are created
• How members are admitted
• Dissolution and other exits
– Address how assets and liabilities are allocated between series
• More than just separate classes of interests
– If all that is wanted are different rights between different groups of
members, this may be done in a standard LLC and a Series LLC may not
be needed.
What should you to tell your client
(cont’d)
• Uncertainties with treatment
– Not tested by courts, especially bankruptcy
– Treatment in other jurisdictions
– Tax effects
• Not a separate legal entity
– Mechanics of executing contracts may be more complicated
– Obtaining financing, licenses or other approvals
• May be more difficult to obtain
– Mergers and other reorganizations
Conclusion
• The Series LLC is a relatively new type of entity
designed to allow parties the benefits of segregation of
assets without the burden of formation of multiple
entities
• Makes sense for some deals but not others