As an entrepreneur, multiple business owner or real estate investor, you probably own several investments, each through a different limited liability company (LLC), in an attempt to limit your liability with respect to each business or property. For each LLC, you likely file a separate form 1065 with the IRS in April and business tax return with the State of Texas in May, and you have likely spent significant funds toward formation costs for each LLC. With numerous LLC's, this can be a paperwork nightmare and quite expensive.
A series LLC is a new creation of the Texas legislature (as well as the legislatures of a handful of other states), that is designed to address these issues. A series LLC is designed as a single umbrella entity, which is organized in units that each are separately accountable, housing their own level of liability protection, financial structure, managers and members. For example, if you own a shopping center, a storage rental property, a construction company, and a cleaning service company, the series LLC is designed so that you can own all of those businesses through the same LLC, with the shopping center being categorized as Series A, the storage rental property being categorized as Series B, etc. If someone is injured on the job in connection with your construction company (Series C), in theory, that injured party would not be able to pursue the assets or cash flow of the cleaning service business (Series D), for example.
On the other hand, if you are doing business with a series LLC, it is imperative that you understand that only the specific applicable series (e.g. series B) is on the hook for the obligations under your respective contract. A potential solution is to require the LLC as a whole (or some other specific series) guaranty those obligations in order to improve your likelihood of having sufficient recourse in the event the business with whom you are under contract defaults.
The series LLC is a new legal creation, and the law surrounding it is somewhat unsettled and fluid, but it may soon become a very popular way of organizing businesses in Texas. If you wish to form a series LLC or have concerns in doing business with one, please retain competent legal counsel to assist you with your legal concerns.
