Creating Separate Ventures Within One LLC

Business owners are often reluctant to utilize the Series Allowance under the Delaware Series LLC statute. 

This allowance permits a business owner to create separate ventures within one LLC, but directs that each internal venture be insulated from the other ventures’ liability. Business owners hesitate to utilize this allowance due to a lack of supporting case law, and therefore a lack of predictable judicial treatment. Ultimately, business owners do not want to be the first to rely on the Series Allowance because they are afraid it will fail to isolate liability and shield their other LLC assets in the face of a lawsuit. Instead, these business owners choose to create multiple LLC’s in order to achieve this goal of isolating liability.

The Texas LLC statute contains the same Series AllowanceTexas business owners are also hesitant to utilize the allowance, for the same reason – lack of judicial precedent. However, the statute expressly states that the liability of one venture in a series, as long as the LLC’s bookkeeping and accounting is sufficient to create clear separation between each venture, is isolated to that one venture within the LLC. Additionally, the statute states that all provisions of the LLC law apply to each venture of the series individually. This implies that judicial treatment of series liability can be inferred, to a degree, using general LLC liability case law, which provides a more solid justification for taking the LLC Series Allowance.

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