Series LLCS: Statutory Ambiguities, Potential Litigation, and Proposed Clarifications

A series limited liability company (LLC) consists of multiple subunits—called series—within an otherwise-normal LLC. Series LLCs exist so that one LLC may do the regulatory compliance and/or asset- segregation work of many, with the possible side benefit of lower administrative costs. This article, which focuses on Delaware and Texas law, (1) describes three ambiguities that exist in many series LLC statutes that (like Texas) are based largely on the Delaware statute; (2) explains the correct resolution of those ambiguities in light of the structure and purpose of series LLCs; and (3) proposes new statutory language to clarify that these are the correct outcomes. The notion of a “series,” essentially an internal compartment of a limited liability company (LLC) . . . that . . . has some of the attributes of a legal entity, has of late caused significant confusion. —Preeminent corporate lawyer Thomas E. Rutledge