Series LLC Formation

Some states have authorized the use of Series LLCs and Texas has joined those ranks. What is a Series LLC and how is it different that the traditional LLC, though?

In short, a Series LLC allows for the formation of multiple sub-LLCs within the structure of a single LLC. In other words, each series of sub-LLCs can be formed under one umbrella LLC, but they are each treated as an individual LLC. The benefit of this is found primarily in the reduction of cost. The Texas Secretary of State charges a $300 filing fee to form a traditional LLC, corporation or Series LLC. However, the Texas SOS does not charge for each new series (which are essentially new LLCs). This means that essentially, the benefit of multiple, separate LLCs is available for the just the initial cost of the formation of a Series LLC.

Additionally, this means that as long as they are operated properly, debts, liabilities, obligations and expenses incurred under a sub-LLC (“series”) are not enforceable against the assets of the Series LLC and vice versa. This new authorization provides insulation of the assets of one series from the liabilities and obligations of the Series LLC.

Finally, each sub-LLC, known as a “series”, maintains the ability to own assets, borrow money, incorporate different ownership/management structures, operate with different business purposes and handle its own legal issues. In short, each series acts and functions as a unique business entity with all the rights and legal protections of a traditional LLC, but for a lower initial cost.

Contact us to find out if a Series LLC is the right choice for you and your business.