A Texas Series LLC is a special type of limited liability company structure that is recognized in many states including Texas. A series LLC allows the company to form sub-parts called “series” that while part of the overall LLC, operate independently. Each series is responsible only for its own debts, liabilities, obligations and expenses. The debts, liabilities, obligations and expenses incurred by one Series are not enforceable against another series within the LLC. By utilizing this structure, a company can effectively compartmentalize its risks and obligations.
A Texas Series LLC can be used to for holding real estate where each property is held in an individual series, it can be used for construction companies where each series is used for a different construction project, or it can be used to separate more risky operations of a company from the less risky ones.
Steps to Set up a Series LLC
In order to maintain the special protection available under a series LLC, you must follow the rules outlined in §101.602 of the Texas Business and Commerce Code.
- Your certificate of formation filed with the Texas Secretary of State needs to state that you are forming a series LLC and contain the notice required by §101.602 of the TBCC.
- Your company operating agreement should designate it as a series LLC and contain the notice required by §101.602 of the TBCC.
- The series LLC should have a bank account and EIN from the IRS.
Steps to Set up a Series
Once the series LLC is set up. You then must set up each individual series. Here is the process to set up each series:
- File an assumed name with the Texas Secretary of State with the name for the series.
- Draft a series agreement for each series and appropriate corporate minutes. A series agreement works similar to an operating agreement and governs the operations of that series.
- Obtain a EIN from the IRS for this individual series.
- Open a bank account for this individual series and keep the books and finances separate from your other series.
The process of setting up a series LLC is significantly different than setting up a regular LLC and should be drafted and performed by an attorney who is experienced in this area of the law. If you are interested in setting up a series LLC, please contact us for a flat-rate quote.
© Law Office of Justin Scroggs, PLLC. All rights reserved. This article is provided for educational purposes only and is not legal advice. This firm will represent you only after being retained by written contract.