SEGREGATING ASSETS AND LIABILITY JAY BUTLER
In 2008, the IRS issued Private
Letter Ruling 200803004 which
ruled that the Federal tax
classification for a Series LLC
(whether a disregarded entity,
partnership
or
association)
taxable
shall
be
determined for each subsidiary
independently. And, proposed
Treasury Regulation §301.7701
1(a)(1) states subsidiaries shall
likely be treated (for tax
purposes) as a separate entity
regardless of whether the
subsidiary is considered an
jurisdictions leave the responsibility of maintaining proper books and
entity under local law.
records of the company ownership.
There are two primary benefits
Nevada added the Series LLC in 2005 and, along with a growing
to a Series LLC and one
number of states, allows a Series LLC to enter into contracts, hold title
responsibility which remains
to assets, grant security interests and to sue or be sued just like other
unchanged. The first of two
types of entities. Although no legal cases have reached any State
benefits is the ability to form
Supreme Court to establish a precedence for the efficacy of a Series
and renew only one company,
LLC, there is nearly ten years of use to their credit.
as opposed to multiple entities.
The second benefit is that a
While many states do not recognize a Series LLC, as they have not yet
Series LLC only requires one
enacted any such Series LLC legislation in their state laws, it is possible
tax return to be filed by the
to avoid ‘foreign filing’ (registering in another state) by combining a
master
Series LLC with other structures like land trusts, ontheground
encompass a multitude of
‘processing centers’ and thirdparty management companies contracted
subsidiary LLC’s with it. The
to perform certain statespecific activities.
‘responsibility which remains
LLC
and
can
unchanged’ is that you must
The tax treatment of a Series LLC is also becoming clearer as their use
keep
continues to spread. A Series LLC can be formed with a singlemember
records for each subsidiary,
(not recommended) or with multiple members and, if not acting as a
including operating agreements,
disregarded entity for tax purposes, may choose to file either a 1065
meetings,
(partnership) or 1120 (corporate) tax election.
resolutions.
separate
books
minutes
and
and