A Series LLC can help protect business assets, particularly when it comes to real estate holdings. Here’s what to know about Series LLCs in Texas:
What is a Texas series LLC?
A Series LLC is a business structure that allows one LLC to house several other LLCs within in. It’s essentially the same as forming one main LLC, then forming several single-member LLCs and listing that main LLC as their sole member—but forming a series LLC is less expensive, and easier to set-up. In a series LLC, the main LLC is typically called the “parent LLC,” and each LLC offshoot is known as a “series.”
You can read more about the process of forming a series LLC on Northwest’s page: How to Start a Series LLC in Texas.
Why create a series LLC in Texas?
One of the main reasons to form a series LLC is to create liability protection WITHIN your LLC. The LLC structure inherently separates your business finances from your personal finances, which—if your company ever finds itself in hot water—can take any potential financial burden off you, personally.
However, some aspects of your business might pose more of a risk than others. If all your business operations are lumped into the same LLC, this means lucrative parts of your business would be liable for the potential debts of others. With a series LLC, you can enforce limited liability protections within your company so the debts of one part of your business don’t hamper the others.
How is a Texas Series LLC helpful for real estate?
Real estate is a very popular arena for series LLCs because each real estate venture carries inherent risk. For example, say you own two pieces of property in Texas—property A and property B—both owned by your company, AB Property LLC. If tech giants set-up shop near property A and its value increases dramatically, while a sewage treatment plant gets built across from property B, the assets of A might skyrocket and B might plummet.
Since both properties are owned by AB Property LLC, the company is wholly responsible for all gains and losses. However, if AB Property was formed as a series LLC, and property A and property B were separated into their own LLCs (or “series”), property A would be protected from the debts of property B.
Can a Texas series LLC be owned by a trust?
Yes. In general, there are few restrictions on LLC ownership in the US. According to the Texas Certificate of Formation (the document used to form a traditional LLC or a series LLC in Texas), series LLCs may be owned by: “individuals, partnerships, corporations, and any other type of legal entity.” Since a trust is a legal entity, a trust may own a Texas Series LLC.