When forming a Limited Liability Company (LLC) in Texas, entrepreneurs have the option to create a unique structure called a Series LLC. But what exactly is a Series LLC, and why is it popular among investors, real estate owners, and small businesses in Texas?
In this article, we’ll explain:
- What a Series LLC is
- How a Series LLC works in Texas
- The benefits and risks
- How to form a Series LLC in Texas
- Tax and legal considerations
What Is a Series LLC?
A Series LLC is a special type of LLC that allows you to create multiple “series” or “cells” within a single parent LLC — each with its own assets, operations, members, and liabilities. Think of it like a holding company with several independent sub-companies operating under one legal umbrella.
Texas was one of the first states to authorize Series LLCs under the Texas Business Organizations Code (BOC § 101.601–101.622).
Example of How a Series LLC Works
Let’s say you form ABC Holdings LLC, a Texas Series LLC. You can then create:
- Series A: Owns and manages Property #1
- Series B: Owns and manages Property #2
- Series C: Manages an e-commerce store
Each series operates independently. If Series A is sued, the assets of Series B and C are protected (assuming proper separation and compliance).
Key Features of a Texas Series LLC
- One parent LLC (the “master” LLC)
- Unlimited number of internal series
- Separate liability protection for each series
- Shared EIN or individual EINs for each series (optional)
- Only one Texas filing required to form the LLC
Note: Each series is not a separate legal entity by default under federal law, but Texas law allows for each series to have “protected series” status.
Benefits of a Series LLC in Texas
1. Asset Protection
Each series has limited liability — meaning creditors of one series generally cannot go after assets in another.
2. Cost Savings
Only one Certificate of Formation is filed with the Texas Secretary of State. This reduces formation and annual maintenance fees.
3. Operational Flexibility
Each series can have its own managers, members, business purpose, bank accounts, and contracts.
4. Ideal for Real Estate Investors
You can place each property into its own series without forming multiple LLCs.
Risks and Considerations
- Series LLCs are still a relatively new legal structure, and not all states recognize them. If your business operates outside Texas, this can create confusion or risk.
- Each series must maintain complete separation (records, bank accounts, contracts) to preserve liability protection.
- Some lenders and insurers may be unfamiliar with the Series LLC structure.
- The IRS does not officially recognize Series LLCs as separate entities unless elected, so tax treatment can be complex.
How to Form a Series LLC in Texas
1. Choose a Name
Your LLC name must be unique and include “LLC” or “Limited Liability Company.”
2. File Certificate of Formation – Form 205
File with the Texas Secretary of State and include Series LLC language in your formation document.
3. Draft a Company Agreement
You’ll need a well-structured operating agreement that outlines how each series operates independently.
4. Create Separate Records
Maintain separate accounting, ownership records, and bank accounts for each series.
5. Obtain EINs (optional but recommended)
Each series can get its own EIN for banking and tax reporting.
How Is a Texas Series LLC Taxed?
By default, a Texas Series LLC is taxed as a pass-through entity (like a sole proprietorship, partnership, or S Corp). You can choose to:
- File taxes as a single entity
- Elect separate taxation for each series (with separate EINs and elections)
In Texas, all entities — including series LLCs — must also file the Texas Franchise Tax Report and Public Information Report annually.
Final Thoughts
A Series LLC in Texas offers a powerful, flexible, and cost-effective solution for managing multiple assets or lines of business under one umbrella — especially for real estate investors and business owners seeking asset segregation and simplicity.
However, proper setup, documentation, and ongoing compliance are critical to ensure liability protection. If not managed correctly, courts may “pierce the veil” and hold all series liable.
At FormLLC, we help entrepreneurs form and structure Series LLCs in Texas — including operating agreements, EIN registration, BOI reporting, and ongoing compliance.
