Challenges of Multi-State Series and Framework for Judicial Analysis

A variation of the common limited liability company (LLC) represents the newest form of entity enterprise on the business scene today. This is the Series Limited Liability Company (Series LLC). Under a Series LLC, the single LLC may establish and contain within itself separate series or cells. These cells or series are referred to by the Drafting Committee for the Limited Liability Company Protected Series Act of the National Conference of Commissioners on Uniform State Laws (NCCUSL) as “Protected Series.” Each such separate Protected Series is treated as an enterprise separate from each other and from the Series LLC itself. Each Protected Series has associated with it specified members, assets, and obligations, and — due to what have been called “internal liability shields” — per the enacting statutes, if the statutory requirements are met, the obligations of one Protected Series are neither the obligations of any other Protected Series nor of the Series LLC itself. The internal liability shield and the ability to have different associated Members among the various Protected Series are the principal unique distinguishing characteristics of the Series LLC. Although cells have existed in trusts for many years, and the concept is found in the Statutory Trust Entity Act, the internal liability protection and potentially separate owners or beneficiaries within a business entity are unique concepts for American jurisprudence and widely used forms of business entities. The result is a single legal entity with owners associated with each Protected Series, assets associated with each Protected Series, and each Protected Series functioning in a manner analogous to a separate legal entity within the Series LLC