The main areas of legal uncertainty involve taxation, bankruptcy, and doing business in multiple states. Due to their relative infancy, not much case law exists regarding Series LLCs in general and Texas Series LLCs in particular, so hard and fast answers will be hard to come by until issues arise and are litigated. This is not a structure for a company looking for definite answers on taxation, liability, or asset protection issues.

TEXAS BUSINESS ORGANIZATIONS CODE

SUBCHAPTER M. SERIES LIMITED LIABILITY COMPANY

Sec. 101.601. SERIES OF MEMBERS, MANAGERS, MEMBERSHIP INTERESTS, OR ASSETS.

(a) A company agreement may establish or provide for the establishment of one or more designated series of members, managers, membership interests, or assets that:

      (1) has separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations; or

What is it?

The Texas Series LLC is a special form of a limited liability company that provides liability protection across multiple series, each of which is theoretically protected from liabilities arising from the other series. Essentially, a Texas Series LLC contains one or more subsidiary LLCs set up under the one parent LLC; comparable to structure of a corporation with several subsidiaries. The Texas Series LLC is essentially a single umbrella entity that has the ability to partition its assets and liabilities among various sub-LLCs or series. Each sub-LLC may have different assets, economic structures, members, and managers. The profits, losses, and liabilities of each series are legally separate from the other series.

If you plan on starting a new business in Austin, Texas, you should contact an Austin business lawyer to help you work through the various factors that effect your choice of entity type. There are many different types of entities and many different factors to consider when choosing the appropriate entity type. Factors to consider include: goals of the business, number of owners, tax consequences, owner liability for debts of the company, size of the company, availability of insurance, ability to offer ownership to employees, existence of outside investors, ease of ownership transferability, ability to raise outside capital, risks involved with your particular business, ownership anonymity, and many others. Once these factors are evaluated, the pros and cons of the various entity types are weighed, taking into account the varying state laws.