The Texas legislature recently passed new legislation regarding Texas series LLCs, which went into effect on June 1, 2022. This new legislation will potentially offer more protection and peace of mind for individuals and entities conducting business with series LLCs.
The statute refers to a series as being either “protected” or “registered,” as most notably stated in Tex. Bus. Org. Code § 101.602 (effective as of June 1, 2022):
This is most notably made in Tex. Bus. Org. Code § 101.602 [effective 6/1/2022]:
“(2) none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series shall be enforceable against the assets of a particular protected series or registered series.”
Ordinary and Protected Series
All series properly created before June 1, 2022, will be called “ordinary” series. All non-registered series created after June 1, 2022, will be called “protected” series. These two are the exact same thing in the eyes of the law, but because the term “protected” didn’t exist before June 1, 2022, those series are referred to as “ordinary.” Ordinary series are given the same rights as protected series despite “ordinary” not being mentioned in the language of the statute. Therefore, nothing needs to be done to ordinary series unless one wishes to create a registered series. Going forward, the means of creating a series LLC will remain the same for a protected series as it was for an ordinary series.
Registered series are the new series that will be introduced to Texas on June 1, 2022. These series are modeled after the registered series that have been utilized in Delaware since 2019.
The new legislation gives the following definition:
“(78-a) “Registered series” means a series of a domestic limited liability company that is formed as a registered series in accordance with Section 101.602.” Tex. Bus. Org. Code § 1.002 [effective 6/1/2022]
The difference between a protected/ordinary series and a registered series is that a registered series has been publicly filed and registered with the Texas Secretary of State. Registered series are simply an option and not a requirement.
In order to create a registered series you must file a certification of registered series for each series with the Texas Secretary of State.
Tex. Bus. Org. Code § 4.162 [effective 6/1/2022] highlights the filing cost associated with a registered series:
“Sec. 4.162. FILING FEES: REGISTERED SERIES OF LIMITED LIABILITY COMPANY (a) For a filing by or for a registered series of a domestic limited liability company, the Texas Secretary of State shall impose the following fees:
(1) for filing a certificate of registered series, $300;
(2) for filing a certificate of amendment, $150; and
(3) for filing a certificate of termination, $40.”
The filing fee for each certification of registered series is $300. This filing fee is in addition to the $300 to create the general series LLC. For example, if you wanted to create a series LLC and two of the series were to be registered, your total cost would be $900: $300 for the cost to create the general series LLC and $300 for each certificate of registered series (2).
Example: $300 (general series LLC) + $300 (certificate of registered series for Series A) + $300 (certificate of registered series for Series B) = $900
A registered series can only be created when a general series LLC has already been formed; however, they may be filed simultaneously. The Texas Secretary of State will issue a certificate of fact for those series, thus offering more legitimization for that series existence.
Naming of a registered series
The name of the registered series MUST contain:
- The phrase “registered series” OR the abbreviation “RS” or “R.S.” of that phrase; AND
- The name of the company at large.
Examples: ABC LLC, Series 1 RS; ABC LLC, Series 1 registered series; ABC LLC, RS Series 1
Series LLC Options
Individuals with existing ordinary/protected series may:
- Wait it out to see if it is worth doing anything;
- Convert series to a registered series;
- Create a new registered series;
- And/or merge registered and protected/ordinary series.
The Effect is unknown at the moment because this is new terrain for Texas. However, there may very well come a point when lenders, title companies, banks, etc. will only do business with registered series.
Forms for converting and merging registered, protected, and ordinary series will be available from the Texas Secretary of State after June 1, 2022.
You should also note that any series, registered, protected, and ordinary, may now file assumed name certificates. Certificates must state: the name of the series AND the name of the LLC.
Turn to the Farah Law Firm for Your Texas Series LLC
Whether you have an existing Texas Series LLC or want to form or upgrade to one, the real estate attorneys at The Farah Law Firm will help you understand the implications of this new legislation. Contact our office to discuss your business needs and ensure you’re getting the most out of your series LLC.
About Michael Farah
Michael Farah is the founder and managing attorney of the Farah Law Firm. Mike graduated from the University of New Hampshire School of Law and is licensed to practice law in Texas and New York.