Critical Changes To DLLCA

⇒ Now existing Delaware LLCs can divide themselves into two or more separate LLCs and allocate their partnership interests, assets and liabilities among the resultant LLCs without any tax consequences.

There are many reasons why this can be beneficial:

⇒ If the LLC wishes to reorganize or facilitate a spin-off or sale without dissolving the original LLC or requiring a legal transfer or distribution of assets, rights, properties, and related liabilities.

⇒ After such a division the LLC can stop existing, or it can become a subsequent LLC.

Beware: Such divisions of existing entities can result in state and local transfer taxes depending on the location of the assets.

Procedures And Requirements

⇒ A majority of the LLCs members must approve and adopt a plan of division.

⇒ It must detail how assets and liabilities will be allocated among the subsequent LLCs.

⇒ It does not have to file these documents with the state.

⇒ It is meant for creditors and lenders to identify and pursue the correct subsequent LLCs to which their original claims have been assigned.

Now Delaware LLCs can form protected and registered series LLCs starting after August 1^st,

Background:

It has been established for more than twenty years that Delaware LLCs are permitted to series of members ( or various series), managers, interests, and assets to shield the assets from creditor’s claims against the debts, obligations and liabilities of those LLCs or their other LLC series. Of course, lenders were not keen to lend to a series. Series were not recognized as registered organizations by the UCC (Uniform Commercial Code), while competing state laws made it tough for lenders to entirely secure their interests in specific series, which meant that creditors lacked the required leverage they needed to seize collateral in the event of a default.