Limited Liability Company: A limited liability company (LLC) is not a partnership or a corporation. An LLC is a distinct type of entity that has the powers of both a corporation and a partnership. LLCs are very common these days and we definitely set up more LLCs than any other business structure.
The owners of an LLC are called “members.” It can have several members or only one, which is called a “single member LLC.” A member can be an individual, partnership, corporation, trust, and any other legal or commercial entity. Generally, the liability of the members is limited to the amount of their investment (like a shareholder) and they may elect to be taxed individually by the pass-through tax treatment afforded to partners in a partnership, rather than filing a tax return for the LLC as an entity.
An LLC is formed by its members or member by filing a Certificate of Formation with the Texas Secretary of State and paying the required fee. A limited liability company can be managed by managers or by its members. The management structure must be stated in the Certificate of Formation. Management structure is a determination that is made by the LLC and its members. While it is currently not mandated by the Texas Business Organizations Code, most LLCs create a Company Agreement to set forth specific rights and responsibilities of members/managers. The Company Agreement is not filed with the Texas Secretary of State, but often financial institutions will request a copy to confirm the authority of a member/manager to enter into contracts/receive funds.