Texas Limited Liability Company Act-Acting As A Protective Shield

Safeguards Interests Of Members

September 8, 2004
By Akhilesh Goenka

The Texas Limited Liability Company Act is imperative as they assist in providing critical information to beginners. This form of business organization has joint features of both partnerships as well as a corporation. The act helps in safeguarding the interests of both the promoters as well as the limited liability company in question. Owners of such a business enterprise are known as members and the management of the business lies in the hands of its managers.

There are countless countries, which consent to the usual structures of partnership, sole-proprietorship, or corporation for business ownership; In America however the business structure of a Limited Liability Company is very general as compared to other nations. There is no fastening to the number of members and they may cover individuals and corporations.

There are umpteen numbers of provisions in the act for a Limited Liability Company, which protects the members from being sued personally. The company and its members are distinguished and treated as separate legal entities, due to which the lawsuits framed in opposition to the company need not affect the owner personally. This is a very significant factor and helps in determining which business structure to opt for.

A major advantage of this act is that the Limited Liability Company is treated distinctly from its owners protecting the members from being personally liable. A Limited Liability Company provides a legal protection between business life and personal life. For the formation of a LLC the articles of organization must be signed by at least two persons.

Preferably the management of the company should be given to those members or managers who have no ownership interest in the company. Any ownership interest in the company forms a part of the member's personal property and can be transferred/assigned in accordance with the procedures specified in the articles of organization or in the operating agreement. If this procedure remains unspecified in the articles of organization or the operating agreement, then members can approve the transfer to a non-member of the company in writing.

The act states that the member can only resign from a limited liability company if it is in accordance with the operating agreement. He is not permitted to pull out from the company prior to dissolution and winding up unless specified in the operating agreement. The assistance by a member to the company may consist of property, cash or services rendered or a promissory note, etc.