Step 1: Name Your Series LLC
1. Naming Rules: Series LLC naming rules vary from state to state. In Texas, you are only required to follow traditional LLC naming laws when naming your series LLC. You must also file the assumed name certificate for each child series.
Follow the required Texas LLC Naming Rules:
- Your name must include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency.
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
- For a complete list of naming rules in Texas, you can read the Secretary of State's guidelines.
2. Consider these general tips for making your series’ names more recognizable, uniform, and clear:
- Use the word “protected series” within the name of each company.
- Name the parent LLC in a way that distinguishes it from the child series.
- Include the full name of the parent LLC in the name of each child series.
- The name of the child series should include the name of the assets it holds. This creates a clearer asset picture to the public and creditors.
Example of a series LLC naming system that uses both the Texas requirements and general tips:
My Holdings Co., LLC, a series LLC
123 Main Street, LLC, an individual protected series of My Holdings Co., LLC, a series LLC
123 Division Street, LLC, an individual protected series of My Holdings Co., LLC, a series LLC
3. Is the name available in Texas? Make sure the name you want isn't already taken by doing a name search on the Texas Comptroller of Public Accounts website.
4. Is your business name available as a URL? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Step 2: Choose a Registered Agent
You are required to nominate a Registered Agent for your Texas series LLC. The Registered Agent for the parent LLC will need to be the same for each child series.
What is a Registered Agent? A registered agent is a person or business that agrees to send and receive legal papers on behalf of your LLC. Such papers include service of process of legal action (if you are sued) and state filings.
Who can be a Registered Agent? A registered agent must be a resident of Texas or a corporation authorized to transact business in Texas. You may elect an individual within the company including yourself.
In Texas, a Registered Agent must consent to appointment in written or electronic form.
The statement of consent should include:
- The name of your series LLC and all child series
- An express statement that the person designated consents to serve as the series LLC’s registered agent
- The name of the person designated as registered agent
- The signature of the registered agent
- The date of execution
The consent statement does not have to filed with the secretary of state. For in-depth information on this requirement, as well as a fillable consent form, view the Acceptance of Consent Form 401-A.
Learn more about the role of a registered agent and why you should consider hiring a professional service.
Step 3: File The Certificate of Formation
To register your series LLC, you will need to file the Certificate of Formation with the Secretary of State. This can be done online or by mail.
The key to creating a protected series LLC in Texas is drafting a legally correct Certificate of Formation and Operating Agreement.
The Texas Secretary of State has a “supplemental provisions/information” box on its Certificate of Formation form for your series LLC information. You or your attorney can also include an addendum if extra space is needed.
We recommend working with an Attorney to help create your Certificate of Formation.
The cost of filing the Certificate of Formation for the master LLC is $300. There is no additional cost for the child series.
FILE THE CERTIFICATE OF FORMATION
OPTION 1: File Online with the Secretary of State
OPTION 2: File the Certificate of Formation by Mail
State Filing Cost: $300, payable to the Secretary of State. (Nonrefundable)
Secretary of State
P.O. Box 13697
Austin, TX 78711
James Earl Rudder Office Building
Austin, TX 78701
Fax: (512) 463-5709
Processing Time: 3 business days online, 5 to 7 by mail.
Application for a Foreign Series Limited Liability Company here.
Step 4: Create An Operating Agreement
We recommend working with an Attorney to help you complete your series LLC Operating Agreement.
Or read our free guide to form a standard single or multi-member LLC in Texas.
An operating agreement is required when forming a series LLC in Texas. The operating agreement doesn’t have to be filed with the state.
What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.
Why are operating agreements important? The operating agreement is important for a Texas series LLC because it creates the protection between the child series and parent LLC. The operating agreement outlines the liability limitations (asset protection) of the child series.
The series LLC operating agreement should be written by, or with the advice of, an attorney.
Step 5: Obtain an EIN
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. Each of the child series in your series LLC will require an EIN.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
How do I create an EIN for my series LLC? The IRS doesn’t have specific guidelines for creating an EIN for the child series of a series LLC. Experts suggest using the name of your series LLC combined with the child series name for each additional EIN.
Example Series LLC EIN
Series LLC Name: My Holdings Co., LLC, a series LLC
EIN entry: My Holdings Co LLC a series LLC
Child Series Name: 123 Main St., LLC, an individual protected series of My Holdings Co., LLC, a series
EIN Entry: 123 Main St LLC an individual protected series of My Holdings Co LLC a series
Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done online or by mail.
FOR INTERNATIONAL APPLICANTS: You do not need an SSN to obtain an EIN. Learn more here.
Key Steps After Forming a Series LLC
OPEN A BUSINESS BANKING ACCOUNT
A dedicated business banking account is required for each child series of a series LLC. Without dedicated accounts, the child series are NOT protected from liabilities incurred by the other child series or the parent LLC.
SET UP ACCOUNTING
Accounting and record keeping for the series LLC MUST be clear, concise, and separate. Without careful record keeping, your series might not be protected. Separate record keeping helps ensure the courts will never allow a creditor or plaintiff to pierce the corporate veil.
Accounting for your series LLC should be handled by a professional accountant or firm that is familiar with the series LLC.
SET UP ACCOUNTING
*Recommended: Mazuma’s team of CPAs and accountants can help manage your series LLC’s finances, including bookkeeping, accounting, and tax filing services.
REGISTER YOUR SERIES LLC FOR TEXAS STATE TAX
We recommend consulting a tax professional for help in tax planning and filing for your series LLC.
Maintain your LLC: Avoid fines and the risk of dissolution.
FILE YOUR LLC ANNUAL REPORT
Texas requires LLCs to file an annual report along with their Franchise Tax. The annual report form can be submitted through the Texas Comptroller of Public Accounts website. You will need to create an online account to complete the filing process.
The annual report will be filed by the parent LLC on behalf of all of the entities in your series LLC. Your franchise tax will be based on this information too.
FILE YOUR ANNUAL REPORT
File Online with the State of Texas
Filing Fee: Free
Tax Calculation: LLCs with annualized revenue below $1,130,000 do not pay any tax, but must file a “no tax due report.” LLCs with annualized revenue greater than $1,130,000 pay a graduated tax that is calculated based on a complex formula.
Due Date: Due by May 15 each year. Reports do not need to be filed in the same year that an LLC is formed.
Late Filings: Texas charges a $50 penalty for failure to file on time (whether or not you have tax due). Additionally, a late tax payment is subject to a 5% penalty fee, which increases to 10% if you pay after 30 days
Recommendation: The Texas Annual Report and Franchise Tax are complex, visit the Texas Comptroller website for more information.
REPORT LLC INCOME
Reporting income for your series LLC is best handled by an accountant who is familiar with series LLC tax code.
Series LLCs may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines, and even submitting reports on your behalf for an additional fee.
Become a knowledgeable LLC owner. Learn more about these important topics.
OBTAIN A CERTIFICATE OF GOOD STANDING
A Certificate of Good Standing, known in Texas as a Certificate of Status, verifies that your series LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:
- Seeking funding from banks or other lenders
- Forming your business as a foreign LLC in another state
- Obtaining or renewing specific business licenses or permits
DISSOLVE YOUR TEXAS LLC
If at any point you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:
- Close your business tax accounts
- File the Articles of Dissolution