IRS Issues Proposed Rules Regarding Series LLCs and Cell Companies

On September 13, 2010, the Internal Revenue Service ("IRS") and Treasury Department issued proposed regulations regarding the classification for Federal tax purposes of a series of a domestic series limited liability company ("LLC"), partnership, or trust; a cell of a domestic "cell company" (as defined below); or a foreign series or cell that conducts an insurance business.¹

OVERVIEW

In general, the proposed regulations make it clear that each "series" established by a particular "series organization" (e.g., a series LLC) can be treated as a separate entity for tax purposes that can have its own tax classification separate from the series organization and the other series. This position confirms what many people already thought should be the tax treatment of a series in a series organization. However, the proposed regulations also leave a number of questions unanswered.