Many in the real estate development and rental real estate business favor conducting their business activity through one or more limited liability companies (LLCs). LLCs provide all of the flexibility offered by partnerships, but whereas partnerships typically require one or more partners to bear general liability for the liabilities of the partnership, LLCs can protect all of their members from the liabilities of the LLC. For tax purposes, an LLC is generally treated as a partnership (or is disregarded as an entity separate from its owner, if it has only a single owner), but can elect to be treated as a corporation if desired.
In 1996, Delaware enacted a statute providing for the establishment of a series limited liability company (series LLC), and seven other states have since enacted similar statutes.1 Under the Delaware statute, the operating agreement of a series LLC may provide for the establishment of one or more “series” of the series LLC. Although the series are not separate entities for local law purposes, they are similar to separate local law entities in many respects. For example, each series can have a separate business purpose or investment objective and can separately own property.
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