Series LLCs are gaining ground, but slowly.

Nine US states, the District of Columbia and Puerto Rico have statutes that allow limited liability companies to create different pockets or cells of investments, each potentially with different owners, a different managing member and different assets. In at least three of the nine states, each series can have a separate right, in its own name, to sign contracts, hold title to assets and grant liens and security interests in the assets belonging to that series. The debts of a particular series may be enforceable only against the assets of that series.

The structure opens a number of possibilities. For example, wind companies that build out projects in 100- or 200-megawatt increments using a single interconnection agreement may have trouble getting consent from the utility to divide up the interconnection rights among separate project companies. If a series LLC were used, then the interconnection agreement could remain in the name of a single LLC.

A big open issue is how each of the separate LLC subsidiaries is treated for tax purposes. The IRS proposed in 2010 to treat each subsidiary as a separate entity for tax purposes. Therefore, some could be treated as separate partnerships or disregarded entities at the same time that the parties might to choose to treat others as corporations.

The American Bar Association tax section surveyed all 50 states about their treatment of series LLCs. Thirty-one states had responded by May.

The survey found that series LLCs are gaining popularity, but the numbers are not staggering. In Delaware, 8,068 series LLCs have been formed and, in Illinois, 6,320. Twenty-two states said they would follow the federal lead and let each LLC subsidiary make its own income tax election. Six states were undecided. Texas will not follow the federal lead and will treat all the LLCs in the series as a single entity for purposes of the state’s “margin” tax, which is effectively its corporate income tax.

The Uniform Law Commission is working on a uniform draft law for use by the states, but the draft will not be completed until 2015 at the earliest.