In 1996, Delaware introduced the idea of a series LLC, a single entity containing a number of “series” within it which hold separate properties or business operations. Since then, states have slowly begun to incorporate series LLCs into law, including Texas which did so in 2009.
The purpose of a series LLC is to act as one entity providing several layers of limited liability protection which otherwise requires multiple entities to accomplish. Each series, also known as cells or branches, can be thought of as its own floor of a multi-story building, controlled by the building itself. Texas law dictates that the obligations of one series are enforceable only against the assets of that specific series, internally providing the protection of an LLC by segregating assets.
Without a series LLC, the same objective can be accomplished through a holding company overseeing different LLCs within its control. However, this requires the establishment and maintenance of each entity in compliance with Texas law. Because of this, in Texas, a series LLC may be a more cost-effective option that provides the same level of protection.
With the additional federal reporting requirements for limited liability entities via the Corporate Transparency Act (CTA) beginning on January 1, 2024, series LLCs are an increasingly convenient alternative. For more information regarding the CTA and necessary compliance, please visit our website or contact our office.
For purposes of Texas law, series LLCs are a viable business organization offering reduced startup costs and continuing requirements while maintaining the limited liability and utility of having separate LLCs. Although the Supreme Court of Texas has confirmed the validity of protections afforded in a series, LLC within the State, because only a minority of states have similar statutes creating series LLCs, the uncertainty of future litigation involving series LLCs outside of Texas remains uncertain.
The attorneys at Waldron & Schneider have created series LLCs for clients to facilitate real estate ownership and business purposes. If you are interested in the possibility of a series LLC to provide asset protection for your business, please contact our office today to speak with one of our transactional attorneys.
The legal information in this blog entry is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, nothing contained in this article is intended to create an attorney-client relationship with any reader. This article and website are made available by Waldron & Schneider for educational purposes only and to give basic information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and Waldron & Schneider. The article and website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. For more information or questions you can contact us and one of our attorneys will be in touch soon.