Over the last few weeks I have converted three Texas limited liability companies to Texas series limited liability companies (Wikipedia) and I am currently in the process of converting another.
At the June 2013 University of Texas Continuing Legal Education conference on LLCs, LPs, and Partnerships we discussed series LLCs in Texas. During one of the sessions the speaker asked how many attorneys in the audience had formed a Texas series LLC. (Texas passed series LLC legislation in 2009.) I was surprised by the number of corporate lawyers who had not yet created a Texas series LLC. I raised my hand and was one of about seven attorneys from across Texas (in a room of approximately 300) who had. Of the seven, only me and one other attorney had created more than four series LLCs.
I am a proponent of the series LLC structure. Of the three Texas LLCs I recently converted to series LLCs, two are involved in real estate (one commercial and the other residential) and the third is a software development company. I believe real estate companies (with multiple assets) and software development companies (with multiple projects) are perfect candidates for organizing as a series LLC. (In a future post I will opine on the reasons why.)
If I assume (based on the very nonscientific sample from June’s UTCLE) that less than 2% of Texas corporate attorneys have actually formed a Texas series LLC, then I believe I am safe in assuming that less than one-half of 1% have ever converted a Texas LLC into a Texas series LLC. I thought, therefore, that I would share with you how I have gone about successfully converting Texas LLCs to Texas series LLCs.
- Review the existing LLC’s certificate of formation.
- Determine which provisions in the existing LLC’s certificate of formation must be deleted or amended.
- Determine what provisions must be added to the LLC’s restated certificate of formation. For example, under Texas law, a series LLC’s certificate of formation must contain the notice of limitations provided in Tex. Bus. Org. Code § 101.602(a).
- Adopt a plan of conversion as required by the BOC § 10.101 et seq.
- Order a Certificate of Account Status from the Texas Comptroller of Public Accounts.
- Once the plan of conversion is approved, draft the restated certificate of formation.
- Complete Texas Secretary of State Form 414 (.PDF link) for filing a Restated Certificate of Formation with New Amendments.
- File Form 414 and the restated certificate of formation with the Secretary of State.
Admittedly, there are many, many more issues and tasks that are required throughout the conversion process then those outlined above. I intended with this post, however, only to offer a general overview of the process. Please share your thoughts in the comments below (and for all of my out-of-state readers, please share your experience in your state).