William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

LLC Series and Cell Companies

Posted by William Byrnes on March 3, 2011

Late last year the IRS published proposed regulations regarding the classification for Federal tax purposes a domestic series limited liability company (LLC), a domestic cell company, or a foreign series or cell that conducts an insurance business.

A number of States, such as Delaware, have enacted statutes providing for the creation of entities that may establish series, including limited liability companies (series LLCs).  In general, most series LLC statutes provide that a limited liability company may establish separate series.

Although the series LLC generally are not treated as separate entities for State law purposes, the treatment of rights and obligations is similar to separate entities, creating in essence “associated members”.  Members’ association with one or more particular series is comparable to direct ownership by the members in such series, in that their rights, duties, and powers with respect to the series are direct and specifically identified.   If the conditions enumerated in the relevant statute are satisfied, the debts, liabilities, and obligations of one series generally are enforceable only against the assets of that series and not against assets of other series or of the series LLC.

Read the analysis at AdvisorFYI

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