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CONROE BUSINESS LAWYER
SMITH & GARG - LIMITED LIABILITY COMPANY LAWYERS
LIMITED LIABILITY COMPANY (LLC)
A limited liability company ("LLC") is a hybrid entity that is neither a partnership nor a corporation; however it contains a combination of features from both types of entities. The individuals that own and make up an LLC are called its "members". An LLC may have one or more members that may be an individual, a partnership, a limited partnership, an LLC, a foreign LLC, a trust, an estate, a corporation, a custodian, a trustee, an executor, an administrator, a nominee, or an entity in a representative capacity. Typically, the members of an LLC have no liability for obligations of the LLC. Also, professionals, such as lawyers or doctors, may form what is called a professional limited liability company ("PLLC"); however, a PLLC is subject to restrictions as to who may qualify to be a member which is similar to the restrictions on who may be a shareholder of a professional corporation (see Corporations below). In order to comply with the formal requisites of becoming an LLC under the Texas Limited Liability Company Act ("TLLCA"), a member/organizer must sign the articles of organization (discussed in more detail below) for the LLC and send them to the secretary of state's office.Articles of organization, which are similar to articles of incorporation for a corporation (see Corporations below) must set forth the following information: (1) the name or title of the LLC, which must contain the words "Limited Liability Company" or "Limited Company" or the abbreviation "LLC"; (2) the intended duration of the LLC which may be perpetual; (3) the purpose for which the LLC is organized which may be as broad as "the transaction of any lawful business for which LLCs may be organized under Texas law", (3) must state the address of the LLC's initial registered office and the name of its initial registered agent at that address; and (4) must include, if there are any managers of the LLC, a statement to that effect and the names and addresses of the initial manager, or managers. Alternatively, if the LLC does not have managers, the articles must have a statement to that effect and list the names and addresses of the initial members.
After filing the articles of organization, the secretary of state issues what is called a "certificate of organization" to the main person who organized and complied with all formal requirements This certificate is conclusive evidence of the company's existence. By analogy to corporate law, this seems to preclude any notion of personal liability for defective organization once a certificate is issued.
The limited liability of an LLC member is a significant advantage that is largely responsible for the widespread and growing popularity of LLCs. In this regard, an LLC should be contrasted with a general partnership, where every general partner has unlimited liability for the partnership's obligations. Even in a situation involving a limited partnership, under Texas law there must be at least one general partner with unlimited liability. In contrast, every member of an LLC has limited liability. There is nothing comparable to a general partner in an LLC. In this respect, the LLC is very much like a corporation. However, for tax purposes, a properly structured LLC is treated like a partnership (a pass through entity), which is generally beneficial, except that Texas LLC's are assessed a franchise tax, and this can be substantial depending on your revenue and holdings. Overall, an LLC enjoys the best of both business entity worlds - corporations and partnerships.
Please contact our office to see how we can assist you. Learn more about our Areas of Practice.