Creative Uses for Texas Series LLCs
April 20, 2014 | By Vela Wood
As I’ve written before, Series LLCs are fast becoming the preferred vehicle for Texas real estate investors. They are an efficient and easy way to limit liability for multiple rent houses or investment properties. Well, easy may be a stretch, but they are definitely useful. Just make sure that you don’t trigger your due on sale clause when you deed your properties into them.
Now that our firm is two full years into aggressively forming and using Series LLCs for our clients, I want to share one thing we’ve found that doesn’t work quite as practically as hoped under the current laws.
Avoid Multiple Owners. Even though the language of the statute which creates Series LLCs specifically allows for “the establishment of one or more designated series of members, managers, membership interests, or assets…” we have found it very difficult to file taxes for cells with a Series when the cells contain different members. (To be clear, we’re not filing the taxes, but we frequently have this conversation with our clients’ CPAs). The difficulty lies in the “combined group” treatment of the cells within a particular Series. Theoretically, if all of the cells had the exact same ownership structure, then taxes for the parent Series LLC could be allocated based on that structure, however once you have differing ownership structures, it makes the allocations nearly impossible.