Monday, January 06, 2003

the series llc as a family business - estate restructuring tool

We are frequently asked if a Delaware Series LLC can be utilized to consolidate various closely held business enterprises, while maintaining the liability insulation from each separate enterprise.


LLC's differ from regular corporations in their ability to provide 'flow-through' taxation, skipping the double taxation of the traditional corporation, but providing the same level of asset protection. The Delaware Series LLC is a variant of an LLC, established by 6 Del.C. 18-215.

The Delaware Series LLC is a particularly attractive option in planning/restructuring family businesses for some clients. We find that the clients can save money and effort by utilizing these structures to provide a unified management scheme for their holdings. And, as long as they are structured and managed properly, the assets owned by each series are insulated from the liabilities of the other series.

The financial savings are usually to be found on the administrative side, such as annual franchise taxes, registered agent fees, accounting fees, business licenses, creation costs. The extreme permutations of this process have prompted some writers to claim Series LLC's to be the future destruction of the tax code. And yet, so few people are utilizing these structures, and it is difficult to find professionals who are up to speed on them.

Next up, tomorrow ... the Full Faith and Credit Clause of the United States Constitution, as to how Delaware Series LLC's are to be treated in other States.

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