SERIES LLC Allen Sparkman - The Bond Law Firm, PLLC Melissa Stubenberg – Richards, Layton & Finger, P.A.

1. SERIES LLCAllen Sparkman - The Bond Law Firm, PLLCMelissa Stubenberg – Richards, Layton & Finger, P.A. February 22, 2012 ABA Business Law Section Subcommittee on Limited Partnerships and Unincorporated Associations Free Webinar

2. What is a Series LLC? A Series LLC is an LLC formed pursuant to a statutory provision permitted to have separate identified series of limited liability company interests or assets, each of which may have its own separate members, managers, business purpose or investment objective, and each of which may be treated separately with respect to liabilities to third parties such that the liabilities with respect to one series can be enforced against the assets of that series only and not against the assets of the LLC generally or of any other series. SERIES LLC Series A Series B

3. Factors to Consider • Administrative considerations • Separate books • Cost considerations • Uncertainties • Not tested in the courts • Not all states have similar statutes permitting a series structure • Uncertain tax treatment especially for state taxes

4. Securitization POOLED ASSETS C POOLED ASSETS A POOLED ASSETS B SPONSOR Certificates C Certificates A AssetsB Certificates B AssetsC AssetsA ISSUER Series A Series B Series C NotesA NotesB NotesC INVESTOR INVESTOR INVESTOR

5. Mutual Fund Board (common to all series) Investment Advisor (common to all series) MUTUAL FUND Series A Series B Series C investor investor investor investor investor

6. Real Estate Transaction

7. Private Equity/Hedge Fund Investors Investors Investors GP GP GP Feeder B Feeder C Feeder A MASTER FUND Series A Series B Series C GP of Master (all series) Portfolio Co. Portfolio Co. Portfolio Co.

8. In what deal does a Series LLC make sense? • Deals that require a regulatory, tax or other advantage of only one legal entity yet still want to shield liabilities between series • Deals with minimal liability concerns, Series LLC’s may be used to lower administrative costs and ease of operation

9. What should you to tell your client about Series LLCs? • Initial drafting of LLC Agreement may have higher costs • Address series with specificity • How series are created • How members are admitted • Dissolution and other exits • Address how assets and liabilities are allocated between series • More than just separate classes of interests • If all that is wanted are different rights between different groups of members, this may be done in a standard LLC and a Series LLC may not be needed.

10. What should you to tell your client (cont’d) • Uncertainties with treatment • Not tested by courts, especially bankruptcy • Treatment in other jurisdictions • Tax effects • Not a separate legal entity • Mechanics of executing contracts may be more complicated • Obtaining financing, licenses or other approvals • May be more difficult to obtain • Mergers and other reorganizations

11. Conclusion • The Series LLC is a relatively new type of entity designed to allow parties the benefits of segregation of assets without the burden of formation of multiple entities • Makes sense for some deals but not others