Series LLCs in Texas: How They Work and When They Make Sense

By Hank FasthoffJuly 5, 2026

A series LLC is a single limited liability company that can create multiple internal divisions, each holding its own assets, conducting its own business, and shielding its liabilities from every other division and from the parent company. Texas Business Organizations Code Chapter 101, Subchapter M authorizes the structure, and it's popular with real estate investors and business owners who want the protection of separate entities without the cost and paperwork of forming dozens of individual LLCs.

An investor who owns 10 rental properties can form one series LLC with 10 series rather than 10 separate LLCs. Each series holds one property, and a liability arising from one property (a slip-and-fall judgment, a contractor lien, a tenant dispute) can be enforced only against that series' assets, not against the other nine properties or the master entity. One certificate of formation, one franchise tax report, one registered agent, and one company agreement govern the entire structure.

How the Structure Works

A series LLC has two layers. At the top is the master LLC, which is the legal entity you form with the Texas Secretary of State by filing a certificate of formation (Form 205, $300 filing fee). Below it are individual series, each designated in the company agreement and identified by name (typically "Master LLC, Series A," "Master LLC, Series B," and so on).

Each series can have its own members, managers, classes of membership interests, and voting rights, none of which need to overlap with any other series. One series might have three investor-members focused on commercial real estate, while another series has a single member managing residential rentals. Both exist inside the same master LLC but operate with independent governance and financial objectives.

Under Texas Business Organizations Code § 101.601, a company agreement may establish or provide for the establishment of one or more designated series that have separate rights, powers, or duties with respect to specified property or obligations, or that have a separate business purpose or investment objective. Each series can carry on any lawful business, purpose, or activity.

Three Conditions for the Liability Shield

Internal liability protection isn't automatic. Section 101.602(b) imposes three conditions, and all three must be satisfied for the shield to apply. Missing any one of them can collapse the protection and expose one series' assets to another series' creditors.

First, separate records. You must maintain records for each series that account for the assets associated with that series separately from the assets of the master LLC and every other series. Separate bank accounts, separate accounting ledgers, and separate financial statements for each series are what make the liability barrier enforceable.

Second, company agreement language. Your company agreement must include a statement providing that the debts, liabilities, obligations, and expenses of a particular series are enforceable only against that series' assets and aren't enforceable against the assets of the master LLC or any other series. This language mirrors the statutory protection and must appear in the company agreement itself.

Third, certificate of formation notice. Your master LLC's certificate of formation must include a notice of the limitation on liabilities of series. This is the public-facing component of the shield. It puts anyone searching the Secretary of State's records on notice that the debts of one series can't be collected from another series or the parent company. Without this notice in the certificate of formation, the protection doesn't apply.

If you form a standard LLC and later want to convert it to a series LLC, you'll need to amend the certificate of formation to add the series notice and revise the company agreement to include the required liability-limitation language.

Protected Series and Registered Series

Since June 1, 2022, Texas law recognizes two distinct types of series, created by SB 1523 from the 87th Legislature. Both offer the same internal liability shield, but they differ in formation and legal capacity.

A protected series is created entirely through the company agreement without any filing at the Secretary of State. It's the simpler and less expensive option, and it's adequate for most internal asset-segregation purposes. A protected series can sue and be sued, enter into contracts, hold title to property, and grant liens and security interests in series property under § 101.605.

A registered series requires a separate filing with the Secretary of State (a certificate of registered series under § 101.623). Registration creates a public record of the series' existence and provides the registered series additional legal capacity, including the ability to establish its own existence more easily with lenders, counterparties, and courts. Under § 101.626, a registered series' name must include the phrase "registered series" or the abbreviation "RS" or "R.S.," plus the name of the parent LLC.

For most real estate investors and small business owners, protected series are sufficient. Registered series make sense when the series needs to transact with third parties who want to verify the series' existence through the Secretary of State's records, or when a lender requires a publicly filed entity as the borrower.

Neither a protected series nor a registered series is a separate legal entity. Section 101.622 provides that a series has the rights, powers, and duties provided by Subchapter M but "is not a separate domestic entity or organization." A series isn't an LLC, and its name can't include "LLC." It exists only within the structure of the master company.

Tax Treatment

For Texas franchise tax purposes, a series LLC is treated as a single legal entity. It pays one filing fee at formation, registers as one entity with the Secretary of State, and files one franchise tax report under its Texas taxpayer identification number. Individual series don't file separate franchise tax reports and don't register separately with the Comptroller (though registered series file a certificate with the Secretary of State, that filing doesn't create a separate taxpayer).

Federal tax treatment of series LLCs remains less settled. The IRS hasn't issued final regulations addressing whether each series is treated as a separate entity for federal tax purposes. In practice, many practitioners treat each series as a separate entity and obtain a separate EIN for each series that conducts business, holds assets, or has its own members. If a single-member series is disregarded for federal tax purposes, its income and expenses flow through to the member. If a multi-member series is treated as a partnership, it files its own Form 1065.

Consult a CPA or tax advisor on federal classification, because the IRS's position may change when final regulations are issued.

When a Series LLC Makes Sense

Real estate portfolios are the most common use case. An investor holding five, 10, or 20 rental properties can isolate each property's liability without forming and maintaining a separate LLC for each one. A single series LLC with 10 protected series costs $300 to form (one filing fee) and generates one franchise tax report. Ten separate LLCs cost $3,000 to form (10 filing fees at $300 each) and generate 10 franchise tax reports.

Businesses with multiple product lines or service divisions can use series to segregate the liabilities of each line. A company that operates a consulting practice, a software product, and a training program can assign each to a separate series, so a claim arising from the software product can't reach the consulting division's revenue.

Franchise operators who hold multiple franchise locations can use series to isolate location-specific liability while operating under a single management structure.

Limitations

Not every state recognizes series LLCs. Texas, Delaware, Illinois, Nevada, and a handful of other states have series LLC statutes, but many states don't. If a Texas series LLC does business in a state that doesn't recognize the series structure, the liability barriers between series may not be enforceable in that state's courts. This is a significant limitation for businesses that operate across state lines.

Some lenders and counterparties won't transact with a series because it isn't a separate legal entity. A bank may refuse to issue a mortgage to "Master LLC, Series C" because the series can't independently establish creditworthiness, doesn't have its own organizational documents filed with the state (unless it's a registered series), and doesn't fit the bank's standard underwriting categories. Real estate investors using series LLCs sometimes discover this limitation when they apply for financing and the lender requires a standalone LLC as the borrower.

Title insurance companies in some jurisdictions have been reluctant to issue policies to series rather than standalone entities, though acceptance has increased as the structure has become more common.

Commingling assets between series defeats the liability protection. If Series A's rental income is deposited into Series B's bank account, or if the master LLC pays Series C's expenses without proper accounting, a creditor can argue that the series boundaries are a fiction and that all assets should be available to satisfy a judgment. The record-keeping discipline required by § 101.602 is what makes the structure work.

Practical Recommendations

Include the series notice in your certificate of formation at the time you form the master LLC. Adding it later requires an amendment and creates a question about whether the protection applies to series created before the amendment was filed.

Draft a company agreement that authorizes the creation of series, includes the liability-limitation language required by § 101.602, and establishes governance provisions for each series (how series are created, how members and managers are assigned to series, how assets are allocated, and how decisions are made within each series).

Open a separate bank account for each series and deposit all income from series assets into the corresponding account. Pay all expenses attributable to a series from that series' account. Don't commingle.

Use protected series unless you have a specific reason to register. Registration creates a public record and additional legal capacity, but it also adds filing fees and administrative requirements. For internal asset segregation, protected series are sufficient.

Evaluate whether the states where you do business recognize the series structure before relying on it for cross-border liability protection. If a series holds property in a state that doesn't recognize series LLCs, consider forming a standalone LLC in that state instead.

A series LLC is a useful structure for the right situation, particularly multi-property real estate portfolios and businesses with distinct operating divisions. It isn't a substitute for proper insurance, and it doesn't work if the record-keeping requirements aren't followed. Structure the series correctly at formation, maintain the required separation, and the liability protection holds. Skip any of the three conditions, and it doesn't.