Series LLCs: Nuts and Bolts, Benefits and Risks, and the Uncertainties that Remain

Because of the lack of certainty surrounding Series LLCs, there is little practical experience from which to glean concrete advice for practitioners. However, in September 2010 the Internal Revenue Service (“IRS”) issued Proposed Regulations which help resolve what was previously one of the biggest unknowns: tax treatment of Series LLCs.  We believe that the potential benefits of utilizing Series LLCs, combined with such additional guidance, will lead to more use of Series LLCs. Here, we offer an overview of the requirements for forming and maintaining Texas Series LLCs, risks and potential uses for Series LLCs, and a discussion of federal and state tax treatment and bankruptcy issues.