Limited Liability Company
A statutory business entity formed under TBOC Title 3 that combines limited liability for owners (members) with substantial flexibility in management, taxation, and internal governance. A common choice for new closely held Texas businesses.
A Texas LLC is a statutory business entity that combines limited liability for its owners (called "members") with substantial flexibility in management, taxation, and internal governance. The LLC is governed by a charter document filed with the Texas Secretary of State (the "certificate of formation") and an internal governance contract (the "company agreement").
The two distinguishing features
Limited liability. Under TBOC § 101.114, unless the company agreement specifically provides otherwise, a member or manager is not liable for the debts, obligations, or liabilities of the LLC, including those arising under judgment, decree, or court order. The LLC's creditors look to the LLC's assets, not the members' personal assets, except in narrow veil-piercing circumstances under § 21.223 (made applicable to LLCs through § 101.002). See Veil-Piercing.
Pass-through taxation by default. For federal income tax purposes, a multi-member LLC is taxed as a partnership unless it elects otherwise; a single-member LLC is taxed as a "disregarded entity" (its activities are reported on the owner's tax return). The LLC may elect to be taxed as a C corporation or S corporation by filing IRS Forms 8832 or 2553.
Member-managed vs. manager-managed
Texas LLCs may be either member-managed (members directly manage the LLC) or manager-managed (designated managers, who may or may not be members, manage the LLC, with members keeping the rights the company agreement and the statute reserve to them). The certificate of formation must state whether the LLC initially has managers (§ 3.010), but since September 1, 2021 the company agreement controls the management structure, and the certificate governs only if the agreement is silent (§ 101.251).
Contractual flexibility
§ 101.052(c) provides that, with limited exceptions specified in § 101.054, provisions of TBOC Title 3 and of Title 1 applicable to LLCs may be waived or modified in the company agreement. The exceptions still cover a good deal: most of Chapters 2 and 3, all of Chapters 4, 5, 10, 11 and 12, and certain sections of Chapter 101. As amended effective May 14, 2025, § 101.401 permits the company agreement to expand, restrict, or eliminate any duties (including fiduciary duties) and related liabilities.
Charging order exclusivity
Under § 101.112, the entry of a charging order against a member's interest is the exclusive remedy by which a judgment creditor may satisfy a judgment out of the member's interest. The creditor cannot foreclose on the membership interest, force its sale, or obtain dissolution. This exclusivity rule applies to both single-member and multi-member LLCs. § 101.112(g). See Charging Order.
Series LLC option
Under Subchapter M of Chapter 101 (§§ 101.601–101.636), a Texas LLC may establish series within the LLC, including registered series formed by a filing with the Secretary of State since June 1, 2022. A series may have its own assets, members and managers. The liabilities of a protected or registered series are enforceable only against that series's assets if its records account for those assets separately and the company agreement and certificate of formation contain the required notice of the limitation. § 101.602. See Series LLC.
Formation
A Texas LLC is formed by filing a certificate of formation with the Texas Secretary of State (Form 205) accompanied by a $300 filing fee. §§ 4.152(1), 4.154. Under § 101.0515, LLC filing instruments must be signed by an authorized officer, manager, or member.
Foreign LLCs
An LLC formed in another jurisdiction must register to transact business in Texas under TBOC Chapter 9. The internal affairs of a foreign LLC are governed by the law of the jurisdiction of formation; "transacting business" in Texas without registration bars suit on claims arising from that business until registration and exposes the LLC to penalties and fees, but it does not make members or managers personally liable for the LLC's debts.
The Texas LLC combines limited liability, federal pass-through taxation by default, contractual flexibility, charging-order exclusivity and (effective May 14, 2025) statutory authority to eliminate fiduciary duties through the company agreement. The same flexibility means that, without a written company agreement, the statute's default rules decide matters the members may not have anticipated.
Companion article: Starting a Business in Texas
Practice guide: Texas LLC Operating Agreements