Series LLC and Bankruptcy: When the Series Finds Itself in Trouble, Will it Need its Parent to Bail it Out?

Abstract

Series Limited Liability Companies offer a unique system of internal liability protection and numerous means for cost savings. Despite having been created over a decade ago, these entities are rarely used by the business and legal community. Much of this hesitance can be attributed to the fact that there is very little legislative and judicial guidance on the series LLC, leaving many vital questions unanswered and making the series LLC a risky investment. One question that has yet to be determined is whether an individual series will be permitted to file for bankruptcy in its own name.

This issue is important in holding steady the internal liability shield of the series LLC because only by filing separately from the master LLC and its fellow series can creditors in bankruptcy be limited solely to the assets of the individual series, as was intended by the statute.

Keywords: Delaware, Journal, Corporate Law, Corporate, LLC, Series limited liability, Bankruptcy, Bail out