Written by: Marcus Wolter, Bianca Lindau, and Elizabeth Bestwick

What is a Series LLC?

In 1996, Delaware was the first state to introduce and permit the formation of a Series LLC. A Series LLC is an entity structure that stands as an alternative to setting up multiple individual LLCs. Within a Series LLC multiple segregated series or cells are created within a single LLC with horizontal liability shields between each series. This article provides an overview of Series LLCs, focusing on the two different types of Series LLCs in Delaware, the benefits and the risks and mitigation of risks associated with this entity type.

The Delaware Protected Series LLC and Registered Series LLC

There are two types of Delaware Series LLCs: a Protected Series LLC and a Registered Series LLC. While both offer similar rights, powers and obligations, there are minor differences in the process of setting them up. This includes naming conventions for series, appointing registered agents, drafting and adopting an amended operating agreement, including a separate operating agreement for each series, filing an amended Certificate of Formation with the Delaware Secretary of State, and obtaining adequate licenses and insurance. Protected Series can have unique and independent names, while Registered Series must start with the master LLC name. Protected Series require only one registered agent fee regardless of the number of series, but Registered Series require separate fees for each series. Additionally, for a Registered Series, a Certificate of Registered Series must be filed with the Delaware Secretary of State.


One benefit of a Series LLC is that it allows multiple separate business activities to be operated within a single legal entity. Each business activity may be associated with a particular series segregating assets and liabilities of that series from others. Further, the use of Series LLCs may reduce other administrative burdens and costs compared to the alternative of forming multiple LLCs. For example, in Delaware, the state fees to form a Protected Series LLC and the annual tax payable by a Protected Series LLC are the same as those imposed on a non-Series LLC.

Risks and Mitigation of Risks

While a Series LLC can serve as a robust shield against liabilities, it is important to understand the uncertainties and risks associated with this structure. If the Series LLC is not properly established or maintained, its series may not be treated as separate entities for liability purposes. A Series LLC must implement robust accounting systems to track assets and liabilities for each series separately, require each series to maintain their own books, records, meeting minutes, and other records of organizational decisions, stay updated on legal requirements and deadlines, and open separate bank accounts for each series.

Because this is a relatively new entity structure, there is little case law dealing with the treatment of Series LLCs, leading to uncertainty regarding recognition in other states, tax treatment, bankruptcy proceedings, and the perfection of security interests. States differ as to whether they allow the formation of Series LLCs or recognize foreign Series LLCs and the limited liability of each series. For example, a Series LLC cannot be formed in California, but California recognizes a Series LLC validly formed in another state, provided they meet specific criteria. However, currently fewer than half of all states authorize the formation of a Series LLC, so there is a risk that some states would not recognize the limited liability between members of a Series LLC when operating across state lines.

Certain states recognize Series LLCs as separate entities for state tax purposes, but federal tax treatment of Series LLCs has not been definitively decided. However, IRS guidance indicates that Series LLCs should be treated as separate entities for tax purposes and tax returns should be filed for each individual series. Additionally, it is unclear whether a Series LLC must file for bankruptcy as a single entity with the master LLC or other series, or if each series can file for bankruptcy as a separate entity, without affecting the master LLC or other series. Finally, there may be ambiguity as to who the debtor is when a series within a Series LLC is involved in secured transactions, which creates uncertainty for lenders who wish to perfect their security interests. Delaware addressed this by creating the Registered Series LLC, which allows lenders to file financing statements in Delaware and provides clarity as to how and where the security interests are perfected. In the case of a Protected Series LLC lenders may perfect their interest by filing in more than one state if necessary, namely by filing in the state where the series was formed and the state in which the series primarily operates.

While uncertainties and risks remain regarding the treatment of Series LLCs, proper establishment, maintenance, compliance with the applicable state laws governing Series LLCs, and other mitigation efforts increase the likelihood that courts treat each series as a separate entity with limited liability.

Please contact us today to learn more about forming and utilizing Series LLCs.

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