Texas Security Agreement regarding Member Interests in Limited Liability Company

• Category: Contracts - Security
• State: Multi-State
• Control #: US-1033BG
• Format: Word; Rich Text

Description

A Limited Liability Company ("LLC") is a separate legal entity that can conduct business just like a corporation with many of the advantages of a partnership. It is taxed as a partnership. Its owners are called members and receive income from the LLC just as a partner would. There is no tax on the LLC entity itself. The members are not personally liable for the debts and obligations of the entity like partners would be. Basically, an LLC combines the tax advantages of a partnership with the limited liability feature of a corporation. Management of an LLC is vested in its members. An operating agreement is executed by the members and operates much the same way a partnership agreement operates. Profits and losses are shared according to the terms of the operating agreement. Most, if not all, major loans involve creating a lien on the property. A lien on real estate would take the form of a mortgage or a deed of trust. A lien on all other property would be covered by a security agreement. In this agreement, the borrower in a loan transaction would give a security interest in personal property in order to secure payment of his loan or credit obligation. Article 9 of the Uniform Commercial Code deals with secured transactions. A creditor who complies with the requirements of Article 9 can create a security interest that protects him against the debtor's default by allowing the creditor to recover by selling the goods covered by the security interest.

The Texas Security Agreement regarding Member Interests in a Limited Liability Company (LLC) is a legal document that outlines the terms and conditions for securing member interests within an LLC. This agreement provides protection for creditors by establishing a collateral interest in the member's ownership stake in the LLC. Under Texas law, there are two main types of Security Agreement regarding Member Interests in a Limited Liability Company: 1. Pledge Agreement: This type of security agreement involves the pledging of member interests as collateral for a loan or other obligations. The member, known as the pledge, pledges their ownership interest in the LLC to a creditor as security. In the event of default, the creditor has the right to foreclose on the pledged member interests and take ownership. 2. Security Agreement with Assignment: This type of security agreement involves both the assignment of member interests as collateral and the granting of a security interest to a creditor. Unlike the pledge agreement where the pledge retains ownership, the security agreement with assignment allows the creditor, known as the secured party, to assume ownership of the member interests upon default. In both types of agreements, the security interest is established by filing a UCC-1 financing statement with the Texas Secretary of State. This filing puts other creditors on notice of the secured party's interest in the member interests and helps establish priority in case of multiple claims. The Texas Security Agreement regarding Member Interests in a Limited Liability Company typically includes the following provisions: 1. Identification of the LLC and its members: The agreement includes details about the LLC, such as its legal name, address, and identification numbers. It also identifies the members whose interests are being pledged or assigned as collateral. 2. Granting of the security interest: The agreement explicitly states that the member grants a security interest in their ownership interest to the creditor. 3. Collateral description: The agreement provides a detailed description of the collateral being pledged or assigned, including the percentage of membership interest, voting rights, profit allocation, and other related rights. 4. Terms and obligations: This section outlines the terms of the agreement, including any repayment schedule, interest rate, and default provisions. It also covers any additional rights and remedies available to the creditor in case of default. 5. Governing law and jurisdiction: The agreement states that it is governed by Texas law and specifies the appropriate jurisdiction for any legal disputes that may arise. It is crucial for both the LLC member and the creditor to carefully review and understand the terms of the Texas Security Agreement regarding Member Interests in a Limited Liability Company before entering into it. Seeking legal advice from an attorney specializing in business law is highly recommended ensuring compliance with applicable laws and protection of the parties' rights and interests.