Series LLCs: What Happens When One Series Fails? Key Considerations and Issues

Abstract

Entity choice law is constantly evolving and innovating. The series LLC form is one such example. Although the form provides governance and operational flexibility and efficiencies, the law governing the form is still developing. As such, uncertainties linger, particularly in the context of a financially distressed or insolvent series. This article explores many of the issues that arise when a master LLC or one of its series experiences financial distress and contemplates a bankruptcy filing. It also identifies strategies for parties to potentially mitigate certain of these issues in the planning stage. The article concludes by suggesting parties using the series LLC form consider its overall impact on the business plan and objectives, including potential negative consequences on the rights and remedies of owners and certain creditors and on the cost of capital