Answering Questions About Texas Series LLCs
September 30, 2011 | By Kevin Vela
As we wrote a few months ago, Texas Series LLCs are rapidly becoming the preferred investment vehicle entity in Texas. As I’ve been forming Series LLCs for clients, I keep getting the same questions, so I thought it would be helpful to answer a few of them here.
1) How do I name them?
While the Texas legislature did us all a favor by establishing a means to create Series LLCs, it left out several crucial details which the legal community has been left to fill in. What most attorney’s have agreed on is that adding “Series A” to the end of the name (or “Series B”, “Series C” etc.) is the cleanest way to name the series entities. For example, if you were to establish Newco Holdings LLC, the first Series would be “Newco Holdings LLC – Series A.” Moreover, you could file an assumed name certificate for Newco Holdings LLC – Series A in order to use an entirely different name, but still retain an accurate Series name. Signing a legal document may be a bit cumbersome – “Newco Holdings LLC – Series A d/b/a Widgets R Us” but it’s a small annoyance for the convenience of a Series LLC.
2) Do I need to get a separate EIN for each Series LLC?
Although we do not have a clear answer from the law, I recommend to my clients that they get a separate EIN for each Series LLC. If you will recall, one of the key components of a Series LLC is that the “records of a series [must be] maintained in a manner so that the assets of the series can be reasonably identified by specific listing, category, type, quantity, or computational or allocational formula or procedure…” This can arguably be accomplished by good accounting records, but if you have several Series sharing one bank account, the funds will be commingled and you may jeopardize your Series LLC status and protection. Thus, I advise my clients to establish separate EINs and bank accounts for each LLC within a Series.
3) Does the management structure have to be the same?
Again we are left to interpret the intent of the legislature, but the prevailing wisdom seems to be yes – keep the management (or member structure) the same throughout each Series LLC. This is one that I think is the most likely to be interpreted differently (so that each Series can have a different manager/member setup), but until we get further direction from the legislature or judiciary, I advise my clients to keep the same management structure for each Series.