What is the Texas Series LLC?
Real estate investors rarely invest in one property at a time. Instead, these investors will take on the purchase of multiple properties. Fortunately, Texas provides protection for these investors with a business formation called the Texas Series LLC. What is the Texas Series LLC and what protections does it provide? Let’s discuss.
Real Estate Law 101 Series, by the Houston Real Estate Attorneys (832) 509-0445.
The Texas Series LLC, Generally
Formed under Texas law, the Texas Series LLC is a form of limited liability company (LLC).
According to Section 101.601 of the Texas Business Organization Code,
(a) A company agreement may establish or provide for the establishment of one or more designated series of members, managers, membership interests, or assets that:
- has separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations; or
- has a separate business purpose or investment objective.
(b) A series established in accordance with Subsection (a) may carry on any business, purpose, or activity, whether or not for profit, that is not prohibited by Section 2.003.
This LLC does not only provide limited liability protect for one set of members, but instead, for a series that has distinct rights, obligations, managers, liabilities, and business purposes. The creation of a Series LLC grants the series of entities the ability to negotiate and enter contracts; own assets; acquire grants, liens, and security interests; and sue and be sued.
The Effect of the Texas Series LLC on Real Estate Investors
The Texas Series LLC may be a confusing topic to some, however it is a highly valuable tool that provides real estate investors who wish to invest in multiple properties with liability protection. Why is the Series LLC more beneficial to investors than the typical LLC? This is best illustrated through an example.
In the past, real estate investors would purchase real property through a properly formed LLC. This process protects the investors’ assets from any liabilities that may arise from the property ownership. However, this is a problematic process for investors who would like to invest in more than one property. Forming an LLC each property is timely, costly, and overall inefficient. Not to mention, the investor would only have to file taxes for the LLC instead of multiple properties.
This is where the purpose of the Series LLC arises. Instead of opening a separate LLC for each property investment, the Series LLC will save valuable money and time by forming one LLC. This Series LLC will be able to protect the properties of owners and investors liability arising from other properties and responsibilities. Therefore, the debts or obligations of one series will not spill over to another series. This gives the owners and investors a maximum source of protection at a much less cost.
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