This is perhaps one of the most frequently asked questions I receive from prospective clients inquiring about the series LLC structure.
In Texas, a series LLC (despite the number of series) files one franchise tax report and one public information report under its Texas taxpayer identification number. (See FAQ #19) A Texas series LLC may qualify to file a “No Tax Due Information Report” (Form 05-163) if its total annualized revenue is below the current threshold amount. For 2014 and 2015, that threshold amount is $1,080,000.00 (up from $1,030,000.00 in 2012 and 2013). (See FAQ #16)
If the combined annualized revenue of the master LLC and all of its series is less than $1,080,000 for 2014 and 2015 then the series LLC does not owe Texas franchise tax. If, however, the annualized revenue of the master LLC and all of its series is greater than $1,080,000 then the series LLC owes Texas franchise tax.
Why is this important?
This is important because if each of the series that combined for annualized revenue over the threshold amount were formed as individual limited liability companies (as opposed to a series LLC) then each individual series alone would not have reached the threshold amount and no franchise tax would be due. The combination of their revenue, inside the series LLC structure, subjects them to the franchise tax.
Side note: I personally do not agree with the State’s position in combining the revenue of individual series for purposes of calculating the threshold amount.
