Under Texas state law, a series LLC is defined as an LLC that “provides in its governing documents for the establishment of a series of members, managers, membership interests, or assets that have separate rights, obligations and liabilities and business purposes from the general LLC.”

When it comes to incorporating a business, you are going to be making decisions that will shape the future of your business. The truth is that if you decide to form a Limited Liability Company (LLC), S Corporation, or some other kind of company, you should be aware that they can have long-term effects on the financial health and stability of your business.

If you are still considering the kind of company you want to run — and you are looking to start the business in Texas, then you might want to look into whether a series LLC is the right choice for your business. Although most people may not have a full grasp of how series LLCs work in Texas, you don’t have to worry because that is what this article is all about.

How Does a Series LLC Work in Texas?

Under series LLC in Texas, each individual series retains all the rights of a regular LLC, including liability protection that keeps the series separate from each other. Just like other LLCs, they can enter into contracts, hold titles, grant liens, or even sue another company and be sued in return.

But since all the series within a series LLC are linked, they are not individually considered separate entities, at least under the Texas Business Organizations Code.

Interestingly, real estate companies are good examples of companies that make use of the series LLC model, since it allows one master LLC to manage a series of related LLCs under one umbrella while keeping the assets of each distinct from one another.

Property managers or investors in Texas (and other states where the series LLC is allowed) can use it to manage each property separately and help protect the entire operation against losses from a single investment.

Benefits of a Series LLC in Texas

Operates As a Big Family

One of the benefits you stand to enjoy when you register a series LLC in Texas is that the business will operate as a big family; a family that corporates with one another and works as a team.

The truth is that, when you organize your business into a series LLC in Texas, you are in essence creating an interconnected unit of LLCs that all operate under one single umbrella. Each one has its own members, bank accounts, debt, etc., but they are all unified into one consolidated entity.

Less Risk and Liability

Another benefit you stand to enjoy if you have your business unified into a series LLC in Texas is that you will be able to minimize your liability and legal risk. This is so because your risk and liability will be shared throughout all your businesses.

For example, one series within your series LLC in Texas could get sued, while the rest of the series remains protected from any legal ramifications.

Debt Protection

Registering your series LLC in Texas will give you the opportunity to enjoy a bit of debt protection because of the nature of the business structure. The fact that all your series are connected makes it easier for you to manage the movement of revenue and debt repayment with more options on how to handle it.

Less Paperwork is Required:

Lastly, another benefit you stand to gain when your register a series LLC in Texas is that you will have less paperwork to deal with. The truth is that nobody likes having to deal with all the red tape involved in registering and setting up their business.

But when you set yours up as a series LLC, you can take advantage of some consolidation: Instead of going through the same steps for multiple LLCs, you only have to endure the cost and paperwork for one series LLC.

The Drawback of Registering Series LLC in Texas

State Limitations

One of the major drawbacks you will encounter when you register your series LLC in Texas is that you will have limitations as regards operating the business in other states. This is so because not all states in the US recognize series LLC.

Within the United States, series LLCs are only a legal option across 16 states, the District of Columbia, and Puerto Rico. Remember, you are expected to comply with the laws of any states where you do business, which could complicate matters since some states prohibit series LLCs.

Limited Protection in Some Locations

Another drawback you will face when you register a series LLC in Texas is that you will have limited protection in some locations.

The fact that series LLC laws vary from one state to the next means that you could be exposed more in one state than you realize, leading to increased liability that could affect your bottom line. In keeping with the perils of operating across state lines, your series LLC could fall into some hot water if it gets sued or suffers losses.

Complex Finances

In spite of the benefits of a series LLC in Texas, it is important to note that, you will also find yourself with a more complex task when it comes to accounting and financial management.

The truth is that when it comes to juggling the bank accounts for each unit series LLC (company), keeping them all 100% separate and independent can increase your costs or create an administrative complication if you are not prepared.

Low Popularity

Lastly, another drawback you will be confronted with if your register a series LLC in Texas is that you will be operating a new business structure that has not gained popularity in Texas. The law is still undecided about series LLC in many cases (that is why they are nonexistent in most states). So, it is advisable to tread carefully and consult your team first.

In Conclusion,

It is important to note that a series LLC in Texas might not be the best option for every company which is why you should try and understand what a series LLC is before making up your mind to settle with it or not. Depending on your business needs and your long-term plans, a series LLC could be a smart way to incorporate your business.