Limited Liability Company
A statutory business entity formed under TBOC Title 3 that combines limited liability for owners (members) with substantial flexibility in management, taxation, and internal governance. The default Texas business entity for new closely-held formations.
A Texas LLC is a statutory business entity that combines limited liability for its owners (called "members") with substantial flexibility in management, taxation, and internal governance. The LLC is governed by a charter document filed with the Texas Secretary of State (the "certificate of formation") and an internal governance contract (the "company agreement"). Most closely-held Texas businesses formed since 2010 are LLCs.
The two distinguishing features
Limited liability. Under TBOC § 101.114, a member or manager is not liable for the debts, obligations, or liabilities of the LLC, including those arising under judgment, decree, or court order. The LLC's creditors look to the LLC's assets, not the members' personal assets, except in narrow veil-piercing circumstances under § 21.223 (made applicable to LLCs through § 101.002). See Veil-Piercing.
Pass-through taxation by default. A multi-member LLC is taxed as a partnership unless it elects otherwise; a single-member LLC is taxed as a "disregarded entity" (its activities are reported on the owner's tax return). The LLC may elect to be taxed as a C corporation or S corporation by filing IRS Forms 8832 or 2553.
Member-managed vs. manager-managed
Texas LLCs may be either member-managed (members directly manage the LLC) or manager-managed (designated managers, who may or may not be members, manage the LLC, with members exercising only the rights specifically reserved to them in the company agreement). The choice is made in the certificate of formation under § 3.010.
Contractual flexibility
§ 101.052(c) provides that, with limited exceptions specified in § 101.054, virtually any provision of TBOC Title 3 or Title 1 applicable to LLCs may be waived or modified in the company agreement. As amended effective May 14, 2025, § 101.401 permits the company agreement to expand, restrict, or eliminate any duties (including fiduciary duties) and related liabilities. This makes the Texas LLC the most contractually flexible Texas business entity.
Charging order exclusivity
Under § 101.112, the entry of a charging order against a member's interest is the exclusive remedy by which a judgment creditor may satisfy a judgment out of the member's interest. The creditor cannot foreclose on the membership interest, force its sale, or obtain dissolution. This exclusivity rule applies equally to single-member LLCs and multi-member LLCs, a significant Texas-distinctive feature. See Charging Order.
Series LLC option
Under Subchapter M of Chapter 101 (§§ 101.601–101.622), a Texas LLC may form designated series within the LLC. Each series may have its own assets, members, managers, and limitation of liability, properly maintained, the assets of one series are protected from the creditors of another series. See Series LLC.
Formation
A Texas LLC is formed by filing a certificate of formation with the Texas Secretary of State (Form 205) accompanied by a $300 filing fee. § 4.151. Effective June 1, 2022, § 101.0515 requires LLC filing instruments to be signed by an authorized officer, manager, or member.
Foreign LLCs
An LLC formed in another jurisdiction must register to transact business in Texas under TBOC Chapter 9. The internal affairs of a foreign LLC are governed by the law of the jurisdiction of formation; "transacting business" in Texas without registration triggers personal liability of agents and other consequences.
The Texas LLC is the default modern Texas business entity. Its combination of limited liability, pass-through taxation, contractual flexibility, charging-order exclusivity, and (effective May 14, 2025) statutory authority to eliminate fiduciary duties through the company agreement makes it the most owner-friendly business entity available to Texas closely-held businesses. The contractual flexibility is also its principal failure mode, a Texas LLC operating without a written, carefully-drafted company agreement is exposed to expensive disputes that the statute will resolve in ways no member would have wanted. Properly used, the Texas LLC is one of the strongest legal-entity choices in U.S. business law.
Companion article: Starting a Business in Texas
Practice guide: Texas LLC Operating Agreements