SERIES LLC CAPTIVESSERIES LLC CAPTIVES
Jeffrey K. SimpsonGordon Fournaris & Mammarella, P.A.
1925 Lovering AvenueWilmington, DE 19801
Tel: (302) 652-2900Fax: (302) 652-4765
Email: [email protected]
0059651100596511
WHAT ARE SERIES LLC CAPTIVES?WHAT ARE SERIES LLC CAPTIVES?
Check the “Series Captive” LawCheck the “Series Captive” LawSurprise, There Isn’t One!Surprise, There Isn’t One!No Express ProvisionNo Express Provision
Marriage of LLC Act and Captive StatuteMarriage of LLC Act and Captive StatuteLLC Act must allow for SeriesLLC Act must allow for SeriesCaptive Statute must allow for LLCsCaptive Statute must allow for LLCs
Special Purpose Category really helps!Special Purpose Category really helps!
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WHAT IS A SERIES?WHAT IS A SERIES?Cell with SuperpowersCell with Superpowers!!Separate OwnersSeparate OwnersStatutory Separation of Assets and LiabilitiesStatutory Separation of Assets and LiabilitiesAbility to contract in its own nameAbility to contract in its own nameAbility to have its own governanceAbility to have its own governance
Now for an abstract legal distinction:Now for an abstract legal distinction:Cells come from Insurance Law (Regulatory)Cells come from Insurance Law (Regulatory)Series come from Entity Law (Corporate)Series come from Entity Law (Corporate)
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EVOLUTIONEVOLUTION
First Approved in 2010First Approved in 2010 Get Around your own lawGet Around your own law Dozens of Series LLCs and Hundreds of SBUsDozens of Series LLCs and Hundreds of SBUs
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Series LLCSeries LLC
WHY SO POPULAR?WHY SO POPULAR? Capital Access, Preservation and GrowthCapital Access, Preservation and Growth FlexibilityFlexibility CustomizabilityCustomizability Regulatory intellectual capital and supportRegulatory intellectual capital and support
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SERIES A
SERIESC
OWNERB
OWNERA
OWNERD
OWNERC
SPONSOR1
SPONSOR2
XYZ LLC
SPONSOR2
SERIES D
SERIES C
SERIES B
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SERIES CMORE$
$250,000
SERIES BLESS$
SERIES DLESS$
SERIES CLESS$
$250,000
CORE CAPITAL EXPOSEDCORE CAPITAL PROTECTED
SERIES AMORE$
SERIES BMORE$
SERIES DMORE$
SERIES ALESS$
THEORETICALLY, BUT NOT PRACTICALLY!
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RISK IN
THE CORE
NO RISK
IN THE CORE
SERIES A
GENERAL ACCOUNT$250,000
SERIESB
SERIESC
SERIES D
SERIESA
SERIESB
SERIESC
SERIES D
POLICY HOLDERS POLICY HOLDERS
REINSURANCE REINSURANCE
INSURANCE
GENERAL ACCOUNT$250,000
INSURANCE
REINSURANCE
REINSURANCE
REINSURANCE
ANOTHER WAY TO PROTECT CORE CAPITAL88
PREMIUM TAXPREMIUM TAX
SERIES A
CORE
SERIESB
SERIESC
SERIES D
POLICY HOLDERS
REINSURANCE
REINSURANCE
POLICY HOLDER
Subject To Premium Tax
Not Subject To Premium Tax
NO MINIMUM TAX ON SBUs99
USES OF SERIES LLC CAPTIVEUSES OF SERIES LLC CAPTIVE
Sponsored Enterprise Risk (831(b)) VehicleSponsored Enterprise Risk (831(b)) Vehicle
- - Captive ManagersCaptive Managers
- Financial Advisors- Financial Advisors
- Wealth Planners- Wealth Planners
Multiple Owner EnterprisesMultiple Owner Enterprises Multiple Classes of InsuredMultiple Classes of Insured
1010
SUCCESSES - GENERALSUCCESSES - GENERAL
Lower Initial CapitalLower Initial Capital Reduced Operating CostsReduced Operating Costs Customized DesignCustomized Design Ease of EntryEase of Entry
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CHALLENGES - GENERALCHALLENGES - GENERAL Evolving Regulatory LandscapeEvolving Regulatory Landscape
Regulators and Participants Necessarily learning as they goRegulators and Participants Necessarily learning as they go Types of RiskTypes of Risk First Party vs. Third PartyFirst Party vs. Third Party Concern about authority to supervise single seriesConcern about authority to supervise single series Cost of RegulationCost of Regulation Tax and Fee Structure not SustainableTax and Fee Structure not Sustainable
ReportingReporting Annual Report = Consolidated with SchedulesAnnual Report = Consolidated with Schedules Annual Audit = Consolidated with SchedulesAnnual Audit = Consolidated with Schedules Actuarial Opinion = Migration Toward Individual OpinionActuarial Opinion = Migration Toward Individual Opinion Opening AccountsOpening Accounts
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Montana Specific HighlightsMontana Specific Highlights
Low Minimum Core CapitalLow Minimum Core Capital Flexibility for Special Purpose CaptivesFlexibility for Special Purpose Captives Attractive to SponsorsAttractive to Sponsors
Pool as Front is OKPool as Front is OK Reduces number of transactionsReduces number of transactions
Currently, No SBU Application Fee or Minimum Premium TaxCurrently, No SBU Application Fee or Minimum Premium Tax
Investments in Special Purpose Captive are same as PureInvestments in Special Purpose Captive are same as Pure
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Montana Specific ChallengesMontana Specific ChallengesPublic filing of name and series agreement for every Public filing of name and series agreement for every series series
May Facilitate account openingMay Facilitate account opening Likely to chill sponsors and participants seeking Likely to chill sponsors and participants seeking
confidentialityconfidentiality
Initial series capital at ratio of 4 to 1Initial series capital at ratio of 4 to 1 May be too high an initial numberMay be too high an initial number
SBU Application Fee or Minimum Premium TaxSBU Application Fee or Minimum Premium Tax May have to ImplementMay have to Implement
Pre-Approval of Secretary of State FilingsPre-Approval of Secretary of State Filings Adds time and Frictional costAdds time and Frictional cost
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