Series LLC Texas: Everything You Need to Know

Form a new Texas Series LLC (or convert an existing LLC)

To create a new series LLC you must include specific language in the Certificate of Formation. This document also allows you to notify the public of your asset protection. For these reasons, avoid using templates and internet forms. They typically don't include the level of detail needed to establish a series LLC. Filing a Certificate of Amendment can convert a traditional LLC to a series entity. While this carries a lower filing fee than creating a new company, you'll need to replace your organizational agreement and other company documents. You should not convert an LLC that is burdened with lawsuits, debts or other pending obligations. In this case, it is advised to start a new business entity.

Insulation of Each Series

• In a series LLC, each business or property is protected from the legal and financial liabilities of the others and of the LLC as a whole. A property holding does not necessarily need to be a separate series if it is an asset of the overall LLC.
• If a property held by one series is sold for less than the amount owed to the lender, and the series is then subject to a judgment, that judgment would not be enforceable against the assets held by other series within the LLC. This is not the case with a traditional LLC, in which all assets are held together, and thus, are more vulnerable.

Recordkeeping

• For a successful series LLC, good recordkeeping is essential. Without separate records for the assets of each series account, the insulation from liability provided by a series LLC is no longer valid. This includes the ability to identify the separate series record by a specific:
  • Categorization system
  • Listing
  • Procedure.

  Series Assets

  Investors should avoid holding radically different businesses within the same LLC. This can create a situation in which one series is much more vulnerable to legal action and liability than the others. Within a series LLC, avoid establishing a series with a very different debt structure or a substantially different tax treatment than the LLC's other businesses.

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