The Seris LLC helps doctors C.O.P.E. with liability

For years, LLC's (limited liability companies) and other charging order protective entities (COPE's) have served as an asset protective device for doctors. Most commonly, a group of physicians will establish a COPE to hold the practice group, one to hold the medical office building, and one or more to hold expensive equipment that might otherwise be "rich targets" for would-be tort claimants. While this has been an effective asset protection strategy, it gives rise to multiple business entities which can be complex and costly to administrate.

The Delaware LLC Act yields a COPE called the "Series LLC." Within one entity (the Series LLC) are a number of "series" that can hold assets (like equipment) or entire segments of a business. Think of each series as a "virtual bucket" to hold title to property and be solely liable for it's own liabilities, including successful future tort claims.

How might a Series LLC be used by doctors?

  • a urology practice might establish a Series LLC and put a lithotripsy machine in one bucket and a CT scanner in another
  • two gastroenterology groups might want to use a Series LLC to aggregate their businesses for the sake of negotiating insurance reimbursements but keep their assets, liabilities and cash flows in separate buckets for other purposes
  • a physician-turned-real-estate-mogul might want to store each of his rental properties in a separate bucket under the LLC to shield one property from potential liabilities of the others

As I consider practical implications of the Series LLC, I can't help but think about the "control group" aspects that might be an issue for employer-sponsored retirement programs (aka "your 401k) and all the numerous tax and medicolegal implications of such arrangements. If you think a Series LLC might be right for your practice, it goes without saying that you should consult your CPA, your attorneys and your pension consultant.