There's a new celebrity in town in the world of business legal entities and it's called the series LLC. Begun nine years ago in the great pro-capitalistic state of Delaware, these new sophisticated darlings of the business world are beginning to explode within the financial departments of many major businesses across the country. Their draw? More limited liability protection of valuable business assets and better strategic planning opportunities.

The series LLC is essentially an LLC that is allowed to have subsidiary LLCs. It is an umbrella organizational structure that allows assets and liabilities of a business to be siphoned off into subsidiary LLCs, within their parent LLC umbrella, and away from the litigious vagrants that inhabit the business environment in the United States. Think of an individual Series LLC as a division or subsidiary of the parent LLC, with profits, losses, assets and liabilities of each sub-LLC legally separate and apart from each other LLC within the same related LLC family. Each individual LLC may sue and be sued, enter into contracts and hold title to its own assets, including real estate and personal property. Each series LLC is treated as its own separate legal entity, with separate owners and managers.

The reason series LLCs have gained acceptance lately is thanks to an IRS Private Letter Ruling (PLR 200803004), which made clear that series LLCs may use the same "check-the-box" tax classification as all other entities. This PLR opened the door to permit series LLCs to elect a different tax classification for each separate LLC within the same LLC umbrella structure. Now business organizations can custom tailor each separate subsidiary LLC to meet the business planning needs of the organization, offering more advanced planning tools for hedge funds, venture capital funds, oil and gas businesses and real estate organizations.  As Borat would say, "very nice".

While series LLCs are gaining popularity, there are still many caveats. For one, there is very little case law surrounding series LLCs. With only eight states, at this writing, permitting the formation of series LLCs, this is new legal entity territory. How will series LLCs be respected outside their state or origin? Will the liabilities of individual LLCs be respected within each series (will liability protection be respected)? Do series LLCs really provide protection from creditors of other family member LLCs (can creditors pierce one LLC to attach assets of another family member LLC? Is there really a shield between the master LLC (parent LLC) and its subsidiary LLCs?

Nonetheless, we've been down this road before when LLCs first became prominent in the late 80's, early 90's, following the collapse of Leventhal, Horvath, one of the largest CPA firms in the nation. LLCs gained acceptance and have exploded onto the legal entity formation scene. No doubt, series LLC will continue to grow in spite of the limitations of case law.