The Series Limited Liability Corporation. Ever heard of it?
It’s been approved in Texas since 2009. This relatively new type of entity is easily the most exciting option that has ever been available in Texas.
The Series LLC establishes one corporate shell can hold a myriad of assets, business arrangements and members, all sheltered from one another. It can be for profit or not for profit, and can be set up to carry on any business, purpose or activity.
How useful is this? Imagine a married couple who own several rent houses. They set up the Series LLC, and establish a separate “shell” for each house. Each house is protected from the liabilities of the other rent property.
Another scenario – a group of investors who hold interests in 5 different businesses. In the old days, to protect themselves, and to insulate each business from the other business’ liabilities, they most probably would have set up a holding company, which would then own 5 corporations (one for each business). That’s a total of 6 companies, each with a board of directors, an annual tax return, and lots of paperwork. The framework is unwieldly and expensive to maintain.
Using a Series LLC, the investors can set up one company with 5 different series. Each series can have its own members, managers, membership interests and assets. It can also have separate rights, powers or duties with respect to specific property. A Series LLC can even establish a different division of profits and losses for each series or asset.
The Certificate of Formation of the LLC can provide that the debts of one series are enforceable against the assets of that series only, and not against the assets of any other series or of the LLC generally.
The assets of the series can be held in the name of the series, the name of the LLC or through a nominee. The LLC does have to keep records that identify the assets.
Each Series can, in its own name, sue and be sued, contract, hold title to assets of the series, including real property, personal property, and intangible property, and grant liens and security interests in assets of the series.
Best yet, the company agreement of a Series LCC can provide that a member or manager associated with a series or a member or manager of the company will not be not liable for a debt, obligation, or liability of a series, including a debt, obligation, or liability under a judgment, decree, or court order.
The company agreement can establish classes or groups of members or managers, each with different duties, powers and voting rights.
The possible variations on a Series LLC are endless. That alone means there will be a lot for the courts to sort out when these entities become more common. For the present, however – what a great business vehicle to take out for a drive.