Many people may be wondering what a registered series limited liability company (LLC) is and when it would be used, as Texas law does not currently require registration of a series LLC.
A registered series is a type of series within a Texas series LLC that is created by filing a certificate of formation with the Texas Secretary of State and specifying the creation of one or more series within the LLC. Series LLCs that do not “register” like this are now referred to as “protected series.”
Some businesses may find that a registered series offers certain advantages, such as enhanced credibility, greater flexibility, or easier transfer of ownership, while others may prefer the simplicity of a protected series LLC. It is ultimately up to each business to decide which type of series LLC is best suited to its needs.
The Registered Series vs. Protected Series
The Texas series limited liability company (LLC) is a business structure that allows for the creation of separate “registered series” and “protected series” within the LLC. These series function as separate units within the LLC and have their own liability protection.
A “registered series” is a type of series within a Texas series LLC that is created by filing a certificate of formation with the Texas Secretary of State and specifying the creation of one or more series within the LLC. The registered series must also have an operating agreement that sets out the rights, powers, and duties of the series within the LLC.
A “protected series” is also a type of series within a Texas series LLC. It is similar to a registered series in that it is a separate unit within the LLC and has its own liability protection. However, a protected series is not required to file a separate certificate of formation with the Texas Secretary of State. Instead, the creation of a protected series is typically established through the operating agreement of the LLC.
There are a few potential benefits to using a registered series within a Texas series limited liability company (LLC) and filing a certificate of formation for it, rather than just creating a protected series within the LLC. These benefits may include:
- Enhanced credibility: Filing a separate certificate of formation for a registered series with the Texas Secretary of State can potentially enhance the credibility of the series as a separate business entity. This can be especially useful for businesses that want to establish a separate brand or identity for the series.
- Easier to transfer ownership: Because a registered series is a separate business entity with its own certificate of formation, it may be easier to transfer ownership of the series to another party. This can be useful for businesses that want to sell or transfer ownership of the series without also transferring ownership of the entire LLC.
- Greater flexibility: A registered series may offer greater flexibility in terms of the business activities it can engage in. Because it is a separate business entity, a registered series may be able to enter into contracts and engage in business activities without affecting the legal status of the overall LLC.
Both registered series and protected series are types of series within a Texas series LLC.
Both types of series have their own liability protection and function as separate business entities within the LLC.
The main difference is that a registered series is required to file a separate certificate of formation with the Texas Secretary of State, while a protected series is not.
Will Registered Series be Required?
Registered series are a relatively new concept in Texas. Prior to this, most series LLCs were just filed and noted in the filing. Then the Company Agreement (which is not public) set out the name and nature of the series. There was no public record that set out the name or number of the series.
With the new law allowing for registered series, which are not mandatory, one is left wondering whether they will eventually be required. Since many series LLCs are used to hold real estate, it may be that the lenders eventually start requiring borrowers who buy property in series LLCs to use registered series. Lenders typically consider a variety of factors when deciding whether to provide financing to a business, and the type of business entity that a business is organized as may be just one of those factors.
That being said, some lenders may be more familiar with traditional business structures, such as corporations or traditional LLCs, and may be less familiar with the concept of a series LLC. In these cases, a registered series LLC may be viewed as a more established and credible business structure, which could potentially make it more attractive to lenders. However, this would depend on the specific lender and the context in which the business is seeking financing.
Ultimately, whether a business decides to organize as a registered series LLC or a different type of business entity will depend on its specific needs and goals. Lenders will consider a variety of factors when deciding whether to provide financing, and the type of business entity that a business is organized as may be just one of those factors.
How to Amend a Texas Registered Series
If you filed a registered series in Texas, you may be wondering how you can change the series or add additional series once the initial filing is made. The short answer is that you have to make a new filing with the state each time you want to make a change. In order to amend the certificate of registered series for a registered series within a Texas series LLC, there are several steps that must be followed.
A certificate of amendment must be filed with the Texas Secretary of State. This certificate should include the name of the LLC and the name of the registered series being amended, as well as an identification of any provisions that are being added, altered, or deleted and a statement of the text of any added or altered provisions.
The amendment to the certificate of registered series must also be approved in accordance with the company agreement of the LLC and the provisions of the Texas Business Organizations Code. If the company agreement specifies the manner in which an amendment to the certificate of registered series should be adopted, the amendment must be adopted in accordance with those provisions.
If the company agreement does not specify the manner of adoption but does specify the manner in which an amendment to the provisions governing the registered series should be adopted, the amendment must be adopted in that manner.
If the company agreement does not specify either of these things, the amendment must be approved by all of the members of the registered series, all of the managers of the registered series if there are no members, or in the manner specified by the company agreement for the establishment of a new registered series.
It is also important to note that any manager or member associated with the registered series who becomes aware that a statement in the certificate of registered series was false when made, or that any provision in the certificate has changed making the certificate false in any material respect, must promptly amend the certificate.
Once the certificate of amendment has been properly executed, it must be filed with the Texas Secretary of State in accordance with Chapter 4 of the Texas Business Organizations Code and will take effect as a filing instrument as specified by that chapter.
Get Help With Your Texas Seires LLC
We have been working with Texas series LLCs since the law was enacted in 2009. We know Texas series LLC and the law that allows for them. If you have questions about Texas series LLCs, please reach out to us to see if we can help.