The series limited liability company: Innovative, flexible … and complicated

Since the introduction of the limited liability company (LLC) in the United States of America, various states have recognised the need to experiment with ways of improving the limited liability this structure offers. Of particular interest in this regard is the development of the series LLC. The series LLC was intended to provide a more flexible manner for businesses to conduct their activities, while preventing the risks of liability from affecting the entire LLC enterprise. However, uptake of the series LLC has been slow. This can allegedly be ascribed to uncertainty about how this structure may be utilised for commercial purposes, as its relation to business law remains, to a large extent, unresolved. This article examines these uncertainties, including the “separateness” of the series LLC, the recognition of the limited liability it affords, the application of bankruptcy law, taxation, as well as the fiduciary duties attached to the structure. Certain recommendations are made to ease the way forward, while further legal development is awaited. First, series LLC statutes need to specifically provide for all the rights of each series as well as the rights reserved for the master LLC. Secondly, these statutes must specify a default rule for the measure of “separateness” between the master LLC and each series. Finally, series statutes ought to provide for notice of the limited liability of each series to creditors of the LLC.