Texas Legal Entities
Limited Liability Company (LLC)
A limited liability company offers limited liability to its owners. It is classified as a hybrid business as it has the characteristics of both a partnership and a corporation. Its popularity has increased due to its flexibility, the ability of owners to have limited liability for their actions and debts of the company, and suitability for smaller companies with a single owner. The primary partnership characteristic is availability of pass-through income taxation where the primary corporate characteristic is limited liability.
All LLC’s are required to have at least one member. LLC members are considered owners of the company as shareholders are to a corporation or partners to a partnership. The liability to repay the LLC’s obligations is determined by the member’s capital contribution. Members can take the form of a person, corporations, partnerships, or other LLCs.
A member’s ownership interest in the LLC is labeled membership interest. The membership interests are divided into standardized units know as shares. A member’s right to manage or control the LLC lies in proportion to their membership interest unless specified otherwise in the operations agreement.
LLCs are managed by their members although many operating agreements allow for a manager or board of managers to run the daily operations. Members elect or appoint managers and have the power to remove them. A member is qualified to be a manager and generally goes by the title managing member.
LLCs are required to file their existence with the secretary of the state in which they are organized. The Articles of Organization serve as evidence of the existence and are for an LLC what a corporation’s articles of incorporation are. Included in the articles must the company name, appointed statutory agent, and valid business purpose.
The Operating Agreement defines the rights of members. Due to the flexibility of LLC statues, Operating Agreements must be drafted with detailed specifics. For legal assistance in starting your own Limited Liability Company, please contact the law firm of Slater & Kennon L.L.P. at 512-472-2431 today.
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