The series LLC is a relatively new concept of business ownership and not well understood. However, individuals who own and operate several businesses or who have many diverse investments may benefit from the protections a series LLC affords. Entrepreneurs and business people in Texas may wonder, what is a series LLC, and does the state recognize them?
According to The Balance Small Business, a series LLC is a sort of umbrella entity that shelters several other LLCs that remain separate for liability purposes. The distinct LLCs, or “cells,” have their own separate assets and members, and each is liable for the debts and obligations it incurs. The series LLC, on the other hand, controls all the cells in the series.
There are several benefits to forming a series LLC, the biggest of which is asset protection. The assets of each distinct cell enjoy protection from judgements against assets of those in another. This type of protection may be attractive to, say, a property management company that owns several pieces of real estate, or a business that has several product or service lines.
As one would with any other type of business entity, the owner of a series LLC must register the business with each state in which it plans to do business. The problem is, the majority of states do not allow the formation of series LLCs, and many do not allow series LLCs to conduct business within the state. This is something companies that conduct interstate business should bear in mind before forming a series LLC.
According to the Texas Secretary of State, the state does allow the formation of series LLCs. However, it does not have a specific form one must use to form this type of entity. Instead, a business owner would use the LLC form and indicate the desire for a series LLC in the supplemental text section.