SERIES LLC CAPTIVESJeffrey K. SimpsonGordon Fournaris & Mammarella, P.A.1925 Lovering AvenueWilmington, DE 19801Tel: (302) 652-2900Fax: (302) 652-4765Email: jsimpson@gfmlaw.comwww.gfmlaw.com00596511

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WHAT ARE SERIES LLC CAPTIVES?Check the Series Captive LawSurprise, There Isnt One!No Express Provision

Marriage of LLC Act and Captive StatuteLLC Act must allow for SeriesCaptive Statute must allow for LLCsSpecial Purpose Category really helps!*

WHAT IS A SERIES?Cell with Superpowers!Separate OwnersStatutory Separation of Assets and LiabilitiesAbility to contract in its own nameAbility to have its own governance

Now for an abstract legal distinction:Cells come from Insurance Law (Regulatory)Series come from Entity Law (Corporate)

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EVOLUTION

First Approved in 2010Get Around your own lawDozens of Series LLCs and Hundreds of SBUs*

Series LLCWHY SO POPULAR?Capital Access, Preservation and GrowthFlexibilityCustomizabilityRegulatory intellectual capital and support*

SERIES ASERIESCOWNERBOWNERAOWNERDOWNERCSPONSOR1SPONSOR2XYZ LLCSPONSOR2SERIES DSERIES CSERIES B*

SERIES CMORE$$250,000SERIES BLESS$SERIES DLESS$SERIES CLESS$$250,000CORE CAPITAL EXPOSEDCORE CAPITAL PROTECTEDSERIES AMORE$SERIES BMORE$SERIES DMORE$SERIES ALESS$THEORETICALLY, BUT NOT PRACTICALLY!*

RISK IN THE CORENO RISK IN THE CORESERIES AGENERAL ACCOUNT$250,000SERIESBSERIESCSERIES DSERIESASERIESBSERIESCSERIES DPOLICY HOLDERSPOLICY HOLDERSREINSURANCEREINSURANCEINSURANCEGENERAL ACCOUNT$250,000INSURANCEREINSURANCEREINSURANCEREINSURANCEANOTHER WAY TO PROTECT CORE CAPITAL*

PREMIUM TAXSERIES ACORESERIESBSERIESCSERIES DPOLICY HOLDERSREINSURANCEREINSURANCEPOLICY HOLDERSubject To Premium TaxNot Subject To Premium TaxNO MINIMUM TAX ON SBUs*

USES OF SERIES LLC CAPTIVESponsored Enterprise Risk (831(b)) Vehicle- Captive Managers- Financial Advisors- Wealth Planners

Multiple Owner EnterprisesMultiple Classes of Insured*

SUCCESSES - GENERALLower Initial CapitalReduced Operating CostsCustomized DesignEase of Entry*

CHALLENGES - GENERALEvolving Regulatory LandscapeRegulators and Participants Necessarily learning as they goTypes of RiskFirst Party vs. Third PartyConcern about authority to supervise single seriesCost of RegulationTax and Fee Structure not SustainableReportingAnnual Report = Consolidated with SchedulesAnnual Audit = Consolidated with SchedulesActuarial Opinion = Migration Toward Individual OpinionOpening Accounts

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Montana Specific Highlights Low Minimum Core CapitalFlexibility for Special Purpose CaptivesAttractive to Sponsors Pool as Front is OKReduces number of transactions Currently, No SBU Application Fee or Minimum Premium Tax Investments in Special Purpose Captive are same as Pure*

Montana Specific ChallengesPublic filing of name and series agreement for every series May Facilitate account openingLikely to chill sponsors and participants seeking confidentialityInitial series capital at ratio of 4 to 1May be too high an initial numberSBU Application Fee or Minimum Premium TaxMay have to ImplementPre-Approval of Secretary of State FilingsAdds time and Frictional cost

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