The Delaware Series LLC is becoming a popular legal tool for asset protection. Delaware Statute 18-215 states that limited liability company may establish or provide for one or more designated series of members, managers, or interest each having separate rights, powers or duties with respect to specified property or LLC obligations
. If the LLC operating agreement provides for more than one series then the debts and liabilities with respect to a particular series shall be enforceable against the assets of that particular series and not against the assets of any other series. Each series may have a different business purpose. The liability wall created by the statute theoretically permits an owner of multiple businesses or the owner of several real estate parcels to isolate each in a particular series so that liability with respect to on business or property does not contaminate other assets owned by the same businessman or investor.
There is a danger that the businessman forgets or ignores an important requirement of the Delaware Series LLC statute. That is, the statute mandates that each series maintain in separate and distinct records and there must be separate financial accounting for each series. If money of different series are commingled, or if books and records are consolidated or confused, a creditor has a good argument that the Delaware Series LLC does not provide an asset protection wall because the debtor has failed to follow express requirements of the statute.
Therefore, those people who make the Delaware Series LLC part of their asset protection plan must make sure that their bookkeeper and CPA is aware and follows the separate accounting requirements of Delaware law.
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