Series LLC
A Texas LLC that has established one or more designated series within itself. Each series may have separate members, managers, assets, and limitation of liability. If the statutory conditions are met, the assets of one series are protected from the creditors of another series.
A Texas series LLC is a Texas LLC that has established one or more designated series within itself. Each series may have separate members, managers, assets, and limitation of liability. Properly maintained, the assets of one series are protected from the creditors of another series and from the creditors of the LLC itself. The series LLC is most commonly used in real estate (one series per property), insurance, and complex investment structures.
Establishment
Under § 101.601, the company agreement may establish or provide for one or more designated series of members, managers, membership interests or assets. Whether a series gets inter-series liability protection depends on the separate conditions in § 101.602(b), discussed below.
The internal liability shield
Under § 101.602, the debts, liabilities, obligations, and expenses incurred or contracted for or otherwise existing with respect to a particular series are enforceable against the assets of that series only, and not against the assets of any other series or against the assets of the LLC generally. This is the principal feature distinguishing a series LLC from a single LLC owning multiple assets.
Notice requirements
The internal liability shield is not automatic. It applies only (1) to the extent the records maintained for the series account for its assets separately from the other assets of the company and of any other series; (2) if the company agreement contains a statement to the effect of the limitation; and (3) if the certificate of formation contains notice of the limitation. A filed certificate of formation containing that notice is itself notice of the limitation. §§ 101.602(b), 101.604.
Protected series and registered series (2022)
Effective June 1, 2022, Texas added the registered series and gave the original Texas series the name protected series. A protected series exists within the LLC without a separate filing. A registered series is a series that has filed a certificate of registered series with the Texas Secretary of State, providing a public filing for each series. Registered series are useful where third parties (lenders, title companies, insurers) require evidence of series existence.
Separate operations
The statutory operating condition is record-keeping. The shield applies only to the extent a series' records account for its assets separately, and § 101.603(b) treats records as sufficient if the series' assets can be reasonably identified by listing, category, formula or another objective method. Series assets may be held in the name of the series, in the name of the company, through a nominee or otherwise (§ 101.603(a)). The statute does not separately require series-specific bank accounts, insurance or contracts.
Tax treatment
The federal income tax treatment of series LLCs remains unsettled. Treasury proposed regulations in 2010 that would have treated each series as a separate entity for federal tax purposes; the regulations were never finalized.
The Texas series LLC is most commonly used in real estate (one series per property, allowing inter-property liability separation without forming separate LLCs for each property), insurance vehicles, securitization structures, and complex investment partnerships. The principal advantages over forming separate LLCs are reduced filing fees and simplified administration. The principal disadvantages are the unsettled tax treatment, the unsettled treatment in non-Texas jurisdictions (some states do not recognize the inter-series liability shield), and the ease with which sloppy operations can compromise the protection.
Companion article: Starting a Business in Texas
Practice guide: Texas LLC Operating Agreements