All Forum Posts by: Bradley Clark

@Marker Johnson, 

To help avoid this issue in the future you can request a preliminary determination of name availability from the Texas Secretary of State by emailing corpinfo [at] sos.tx.us or calling the TXSOS (I can't post the telephone number but you can find it at this link under the "SOSDirect" heading). 

I set up a canned email to send the TXSOS at the email address above with the subject line "Preliminary Name Availability": 

In my experience, the TXSOS will respond within 24 hours of sending this email. 

For your specific situation now I recommend doing one of the following: (1) use a name that is available and file an Application for an Assumed Name Certificate (TXSOS Form 503) with the name you want to use (assuming it is available), or (2) contact the owner of the company with the similar name and ask him if he will consent to your use of a similar name--if he will he must execute the Consent to Use of Similar Name form (TXSOS Form 509) and you must file it with your Certificate of Formation. In my experience, however, owners are not likely to give you their consent. 

There is a third option but it only applies if the company is no longer "active" in Texas and that is to file a request to terminate the name so that you can use it. I did this a few years ago for a client who really wanted the name. It took a long time and wasn't cheap. 

Your best bet is probably to file a COF with a name that is available and then obtain a DBA.

Best of luck! 

Bradley

Alan Sikarskie, Why did RBFCU make that decision? You can email me offline if you'd like. Thanks, Bradley

Form your entity first. Use your entity as the "buyer" in your purchase agreement (to avoid personal liability if you breach the purchase agreement for some reason). If you use a series LLC make sure the "buyer" in your purchase agreement includes "and/or its assigns." (See this blog post for more information: http://bradleybclark.com/read-this-real-estate-purchase-contract) Then, just before closing, assign the purchase agreement to the series you create to hold that asset.

The level of legal risk is very high with simultaneous closings.

@CraigBullers - imagine you have an LLC that holds title to 12 properties. If a liability is incurred for which there is no insurance coverage (or insufficient insurance coverage) then all of the properties--particularly the one(s) that are owned free-and-clear--are at risk for satisfaction of that liability. That is how a typical LLC works. Before the advent of the Series LLC, if you wanted to avoid this possibility you had to form 12 LLCs. In Texas, that's at least $4,000 in filing fees with the Texas Secretary of State (and 12 company agreements, etc. to keep up with).

Now imagine you have an egg carton that has 12 eggs in it. Each "egg" represents an individual series of the Series LLC (which is the egg carton itself). Each egg holds title to its own property. In Texas (and most other states that have the series LLC structure), no series is liable for the debts and liabilities of another series (except in certain statutorily defined circumstances). In other words, it's as if you have twelve LLCs when you really only have one. The hope--and expectation--is that you avoid the formation costs and administrative burdens associated with creating multiple entities over-and-over again every time you buy and sell a property.

There are tax consequences--at least in Texas--that should carefully be considered when deciding between an LLC and a Series LLC.

I hope this helps explain the differences between the two entity types. 

If a lawsuit is brought against an individual series and that series assets are commingled with the assets of other series in a single bank account, then I--as a litigator--am going to ask for the bank statements for that account in order to determine whether the owner is keeping accurate account of each series' assets; on the other hand, if individual bank accounts are used, I am not entitled to discover the existence, much less the amount on deposit, of any series' accounts or assets not otherwise liable for the debt or claim upon which I have sued. While maintaining separate bank accounts can be burdensome and more expensive, you have to weigh that burden and cost against the possibility of a claim that you failed to properly account. Some clients are willing to accept that risk, others are not; each person's situation is different which is why it's extremely important to involve counsel and your CPA in the decision. 

@ScottSmith, What do you mean "once the investor acquires them they are split into the individual series"? 

Thanks Jean. I have several clients in Texas who have not had a problem with Wells Fargo opening bank accounts for series LLCs. This information is very helpful to me and I'm sure to others who are looking for lenders and banks to do business with. 

I keep a list of lenders that lend to series limited liability companies. It's been nearly 2 years since I've run into a lender unwilling to lend to a series LLC. What lenders are you aware of that do or do not loan to series LLCs?

@Don Konipol: 

Are you using multiple lenders (i.e., lender A for Series A, lender B for series B, etc.?). In my experience, when a single lender is used for assets in multiple series then cross collateralization becomes an issue).