Since 2009, Texas has authorized the formation of series LLCs, which are variants of the standard LLCs, or limited liability companies. Like common LLCs, a series LLC is a legal business entity that can be used as an operating business or as a holding company, primarily for asset protection of the owners. The series LLC takes the asset protection a step further by providing asset protected “cells” within the LLC; each “cell” is protected from liabilities of other “cells” in the same LLC. This has made series LLCs especially popular with Texas real estate investors who want to own all of their properties in a single LLC, but still want to provide some legal separation between the properties.
As of June 1st, 2022, amendments to the Texas Business Organizations Code (TBOC) differentiate between a “protected” series LLC and a “registered” series LLC. Until June 1st, the protected series was the traditional way to form a series LLC and all existing series LLCs are deemed “protected” series. The new Texas laws are based on similar laws recently passed laws in Delaware.
What Are the Benefits of a Registered Series LLC?
In the past, it has not been a requirement to file any paperwork with the Texas Secretary of State to form a new series within the LLC. This could result in a lack of transparency and issues with certain banks and other financial institutions. This lack of transparency led some banks and financial institutions to come up with their own set of rules and regulations for series LLCs, which in turn added to inconsistency as to the acceptance of series LLCs as a valid legal entity.
The introduction of registered series LLCs aims to clarify legal modalities and simplify relationships between series LLCs and institutions like banks. When forming a registered’ series LLCs, one must file a certificate of registered series with the Texas Secretary of State.
The name of a registered series LLC must clearly show its registered nature. In addition to the standard naming conventions for LLCs, one must also add any of the following to the name of the series: “registered series”, “R.S.”, or “RS”.
Can You Change the Series of Your LLC After Forming It?
Yes, you can convert a protected series LLC to a registered one, which is helpful for people who previously formed a protected series LLC before the new law went into effect. You can also convert a registered series LLC into a protected one. However, you need to file a plan of conversion to implement the change.
The new TBOC provisions also authorize mergers among protected and registered series of the same LLC.
Hire a Business Formation Attorney to Create Your LLC in Texas
Although the law authorizes you to form your series LLC on your own as long as you meet all the requirements, consulting a business formation attorney can help you prepare and submit your series LLC application properly and avoid unnecessary delays and possible legal concerns.
At Dossey & Jones, PLLC, we always review your situation during our initial consultation. Whether you are already set on a type of business entity or not, our team can make recommendations based on your needs and goals. If you are unsure whether to file for a protected or registered series LLC, we can help you. Our attorneys can help you determine what the company’s assets are, file all the appropriate forms, and discuss recordkeeping.
Our legal services do not end after you create your business. If you ever want to create another business or are interested in converting your series LLC to another type, our team is here for you. Our mission is to help you achieve your business goals.
Do you want to create a series LLC in Conroe or Montgomery Counties? Contact Dossey & Jones, PLLC today at (281) 410-2792 to schedule a consultation with one of our business formation attorneys!