How to Start a Series LLC in Texas
To start a Series LLC in Texas, you must submit a Certificate of Formation to the Texas Secretary of State and include a supplemental Series LLC provision on your certificate authorizing the establishment of series within your Texas Series LLC. You can file this document online, by mail, or in person. The Certificate of Formation costs $300 to file, plus a 2.7% convenience fee if you pay with a credit card.
Starting a Texas Series LLC is similar to starting an ordinary limited liability company in Texas, but there are several differences worth exploring. This how to start a Texas Series LLC guide should be a good place to start.
Texas Series LLC Guide:
What Is a Texas Series LLC?
Texas is one of several states where you can form a Series LLC. A Series LLC is a unique type of limited liability company that can establish divisions, called “series,” with purposes, rights, and obligations separate from the parent LLC and each other. The basic idea behind forming a Texas Series LLC is that it allows an organization to segregate and protect assets without being forced to start numerous independent limited liability companies.
A series of a Texas Series LLC is not actually a business entity separate from the parent organization, but it behaves a lot like a separate business entity. A series of a Texas Series LLC can enter into its own contracts, for instance, have its own assets, and sue and be sued. If properly established and maintained, a series of a Texas Series LLC is typically not liable for the obligations and debts of other series or its parent LLC.
Learn more about the Series LLC business structure in general, as well as other states where you can form a Series LLC, at Northwest’s Series LLC Guide.
Texas Series LLC Certificate of Formation Requirements
To form a Texas Series LLC, you must complete and file the Certificate of Formation with the Texas Secretary of State. This is the same form submitted by an ordinary Texas limited liability company, but a Texas Series LLC’s Certificate of Formation must include an additional provision called the Notice of Limitation on Liabilities of Series. See the document below and click on any number to see what information is required in the corresponding section.
The rules for naming your Texas Series LLC don’t differ from the rules for naming an ordinary LLC, which means your Series LLC’s name must contain the words “Limited Liability Company,” “Limited Company,” or a corresponding abbreviation. However, each series of your Texas Series LLC must file an Assumed Name Certificate if it does business under a name that differs from the parent organization.
Include the name and physical address of your organization’s Texas registered agent. You can appoint or hire an individual (including yourself) or a business that provides registered agent service, so long as the agent is available to receive service of process at the listed registered office during normal business hours.
Your Certificate of Formation should indicate if your Series LLC will be member-managed or manager-managed. Member-managed means that your Texas Series LLC will be managed by its owners (called members). If you intend to leave the day-to-day operations and decisions to one or more managers, however, you will select manager-managed. The names and addresses of these “governing persons” should be included in this section of your Certificate of Formation.
The form for the Texas Certificate of Formation already includes a general statement of purpose, which you can alter (if necessary) to suit the business purpose of your Texas Series LLC.
This is the section where you can include your Texas Series LLC’s Notice of Limitation on Liabilities authorizing your parent LLC to establish one or more series. For the required language, see section 101.602(a)(1)-(2) of the Texas Business Organization Code. You can also use this section for any other optional conditions you would like to place on your Texas Series LLC, such as how long the organization will exist (its duration of existence).
Your Series LLC’s organizer is simply the person who signs, dates, and submits your Certificate of Formation. An organizer does not need to be part of your Texas Series LLC.
Most often, a Texas Series LLC’s effective date (the date of its official creation) is the same as its filing date, but you can also delay the effective date up to 90 days after filing.
This is the section where your Texas Series LLC’s organizer signs and dates the Certificate of Formation.
How much does it cost to start a Texas Series LLC?
The Texas Secretary of State charges a $300 filing fee for the Certificate of Formation (this is the same filing fee paid by a traditional Texas LLC). You’ll also pay a 2.7% convenience fee if you pay by credit card.
How long does it take to form a Texas Series LLC?
Texas usually approves online and in-person filings around 2 business days after receiving them. Mailed filings take longer (5-7 business days on average, plus time for mailing), but the state offers expediting options for mailed filings.
Does a Texas Series LLC need a Texas registered agent?
Yes. Your Texas Series LLC, like a traditional limited liability company, must appoint a Texas registered agent to receive service of process on its behalf. You can do the job yourself, appoint a willing associate, or hire a third-party commercial registered agent service, but in any case your Texas Series LLC’s registered agent must be available during normal business hours at the registered office address listed on your Certificate of Formation.
Does every series of a Texas Series LLC need its own registered agent?
No. Your Texas registered agent can be the registered agent for each series of your Texas Series LLC, so long as the registered agent is willing to do so (be sure to check!). And keep in mind that many Texas registered agents will charge additional service fees to be the registered agent for the parent organization and each series.
Texas Assumed Name Certificate Requirements
Since each series of your Texas Series LLC will presumably operate under a different name from the parent organization, you will need to file a Texas Assumed Name Certificate (Form 503) for each series. For a Texas Series LLC, the assumed name certificate requires the following information:
- The assumed name of the series of your Texas Series LLC
- The legal name of your Texas Series LLC (the parent organization)
- Your entity type
- The file number your organization received from the Texas Secretary of State (if any)
- The state, country, or jurisdiction where your Series LLC was formed
- The address of your Series LLC’s principal office
- The period of duration during which the assumed name will be used (which can’t exceed 10 years from the date of filing)
- The Texas counties where the series using the assumed name will do business
How much does it cost to file a Texas Assumed Name Certificate?
The Texas Secretary of State’s office charges $25 for each assumed name certificate.
Create a Texas Series LLC Operating Agreement
Why is an operating agreement important for a Texas Series LLC?
The operating agreement is one of the means (combined with your Certificate of Formation) by which your Texas Series LLC provides for the establishment of series. It works like this: your Certificate of Formation provides the notice of the limitation of liability as a supplemental provision, but you actually create the individual series by amending your Texas Series LLC’s operating agreement. This make your Texas Series LLC’s operating agreement one of your organization’s most essential internal documents.
Of course, an operating agreement also serves other purposes. Your Texas Series LLC will use its operating agreement to clearly define the organization’s structure, membership interests, and operating procedures—information banks, creditors, and potential future partners will expect your Texas Series LLC to have on hand.
Do I have to write the Operating Agreement?
The Series LLC is one of the most complicated business structures out there, so we recommend getting a qualified attorney to help you write your Texas Series LLC’s operating agreement. But you don’t have to start from scratch. At Northwest, we provide free LLC operating agreement templates, as well as other free LLC forms, that you can use as springboards for writing documents that fit the needs of your Texas Series LLC. Take a look:
Get Federal EINs from the IRS
Does My Series LLC Need a Federal EIN?
Your Texas Series LLC will need a federal employer identification number (FEIN or EIN) to hire employees, and most banks will also expect your series LLC to have an EIN to open a bank account. You can get an EIN through the IRS website, by mail, or by fax. Fortunately, getting an EIN is free.
Should I Get a Separate EIN for Each Series in My Series LLC?
Most likely, yes. One of the most important things to do when establishing a Texas Series LLC is to maintain each series’ limited liability, and that means maintaining separate finances and financial records. This means it’s simply wise to establish separate bank accounts for each series, which will require each series to get its own EIN.
Learn more about how to get a Federal EIN for your business.
Open Bank Accounts For Your Texas Series LLC
To open a bank account for your Texas Series LLC, you will need to bring the following with you to the bank:
- A copy of your Texas Certificate of Formation
- Your Series LLC Operating Agreement
- Your Texas Series LLC’s EIN
You may also want to bring an LLC resolution stating that the person going to the bank is authorized to open the account in the name of your Texas Series LLC.
Should I open separate bank accounts for each series?
Opening separate bank accounts (and keeping separate finances) is crucial to maintaining each series’ limited liability, so it likely isn’t a good idea for your parent LLC and its individual series to share the same bank account. But make sure to call the bank ahead of time and explain your situation. Many banks are unfamiliar with the complexities of the Texas Series LLC and may not understand the relationship between your parent organization and its individual series.
Obtain any Required Business Licenses
Does a Texas Series LLC need a business license?
Texas does not issue a general, statewide license for all businesses, but many types of businesses and professions must get a license from the state. If individual series of your Texas Series LLC take part in business activities that require a license, they may also need to apply. If your Texas Series LLC or any of its series sells goods or services, for instance, this requires a Texas Sales Tax Permit.
File the Texas Franchise Tax
What is the Texas Franchise Tax?
The Texas Franchise Tax is an annual business tax required of Series LLCs and other types of businesses operating in Texas. The tax is based on a businesses’s total gross revenue, and it is due by May 15 each year. Businesses with less than $1,130,000 in gross revenue for the year do not need to pay the Texas Franchise Tax, but they must submit a “No Tax Due Report” online at the Texas Comptroller’s website.
Does each series of my Texas Series LLC pay the Texas Franchise Tax?
No. Despite its unique structure, a Texas Series LLC is still a single business for the purpose of the Texas Franchise Tax. However, considering the complexity of the Texas Franchise Tax and the equal complexity of the Texas Series LLC business structure, we recommend enlisting the help of a financial specialist or CPA to file the required form and pay the tax each year.
Learn more at Northwest’s Texas Franchise Tax Report Filing Instructions.