Treasury Department Issues Proposed Series LLC Regs
Earlier this month, the Treasury Department issued the long-awaited proposed regulations regarding the Federal tax classification of series limited liability companies.
In a nutshell, the proposed regs provide that, regardless of whether a series of an LLC is considered a "person" for local law purposes, such series will be treated as a separate entity for Federal tax purposes.
Given the similarity under Delaware law between series LLC's and series trusts, it will be interesting to see if the regs are ultimately expanded to apply to series trusts, as well. It will also be interesting to see how far the "separate entity" theory with respect to the individual series can stretch-- can an individual series stand as a debtor in bankruptcy, for instance? Based on this recent article in the Delaware Journal of Corporate Law, that may well be the case.
