For those interested: LLC rule in TX

**JB Thompson** · 09-26-2007, 07:43 PM

I had to do a little research for myself so I'm passing it along. It may not be of any concern to you, but it's free!

One of the new changes for TREC is the abolishment of the necessity of a corporation or LLC to be licensed (thanks for the info from Nolan). I began looking at some of the requirements for being an LLC in TX on the Secretary of State's website. The application (form 205) states that:

This form cannot be used to engage in a licensed activity when such license cannot be issued to the LLC. (my bold) To form a professional limited liability to provide a professional service use Form 206.

Well I began really wondering now because our LLCs will not be licensed by TREC any longer. So I contacted all parties involved.

Long boring story shortened: Here are the responses I rec'd from the SOS and TREC today.

SOS:
Dear Sir,
Home Inspectors file regular limited liability companies using form 205 even though they are licensed.

TREC:
There is no need as far as TREC is concerned to change to a PLLC, and I am not aware of any reason why the SOS would require you to do so.

Pretty exciting huh?

Oh well, if you can use the information - there you go.

Bruce

Similar Threads:

**Jim Luttrall** · 09-26-2007, 08:08 PM

I have a C corp (other reasons than liability) but I have pretty well figured out that the corporate veil would be readily pierced by any competent lawyer since the inspector and his license number are required on the report and in the past, the Corp. or LLC was required to have a licensed officer in order to be licensed.
Bottom line in Texas, an LLC won't limit your liability; at least not the way I understand it. I can't see any other reason to form a Corp or LLC.
Jim

**JB Thompson** · 09-26-2007, 08:14 PM

Originally Posted by Jim Luttrall

I have a C corp (other reasons than liability) but I have pretty well figured out that the corporate veil would be readily pierced by any competent lawyer since the inspector and his license number are required on the report and in the past, the Corp. or LLC was required to have a licensed officer in order to be licensed.
Bottom line in Texas, an LLC won't limit your liability; at least not the way I understand it. I can't see any other reason to form a Corp or LLC.
Jim

You're absolutely correct. I was trying to explain that on the NACHI website to someone in GA, but to no avail.

I originally formed my LLC to combat liability. Ah, how naive I was.

Bruce

**JB Thompson** · 09-26-2007, 08:16 PM

As far as my original post, I had become concerned that the SOS might come back on me for my LLC not being licensed! That's why I decided to begin looking in to it.

Nolan Kienitz · 10-04-2007, 06:27 AM

Bruce,

... And then there is the PLLC and the LLC from the SOS. It all depends upon who you have talked with at the office that day. A friend of mine was told he had to do a PLLC (by the SOS) and I talked to them about my filing and I was told that I could "not" do a PLLC and had to do an LLC. Go figure !

Now ... to be tacky ... you could likely call/write SOS and TREC again next month with the same questions and get a slightly different answer. The one thing that appears to be consistent about the related agencies is the "lack of consistency".

Now as for the LLC/PLLC being "licensed" ... you can stand on the fact that "you" as the owner/leader/director of the LLC are "licensed". That should suffice ... "my opinion" anyway.

Ron Dawes · 10-04-2007, 06:46 AM

Also in the FYI category: Things are going to change again with respect to licensing requirements.

http://www.trec.state.tx.us/pdf/arti...e_20071001.pdf

Thanks to Mike Boyett for finding this.

Brandon Chew · 10-04-2007, 07:56 AM

On the subject of PLLC vs LLC

An LLC can be formed by anyone.

A PLLC is required when someone plans to perform professional services in a "licensed profession". Your state will have a strict legal definition of which professions fall into that category. It usually applies to people such as doctors, lawyers, accountants, engineers, architects, etc. While as home inspectors many of us are required to get a license and we call what we do a profession and refer to ourselves as professionals, these definitions are not the same as the one being used to determine who is required (or eligible) to form a PLLC in your state law.

I am an engineer and when I formed my company it was (and had to be) a PLLC because under that company name I would be providing engineering services. I also provide home inspection services. In my state, home inspections are defined to clearly exclude engineering (otherwise only engineers would be authorized to do home inspections). If I was forming a company where I was only going to provide home inspection services (or any other non-engineering services), I could have formed it as an LLC even though I am a licensed Professional Engineer. The catch with doing that is that I wouldn't be able to use my qualifications as a PE or the title Professional Engineer in any of my advertising or on any reports or correspondence I produced under an LLC, and I'd need to be constantly on my guard to not inadvertently slip on my engineer's hat while my brain was processing the information my senses gathered while I was performing a home inspection -- I'd need to be a PLLC to do that stuff.

I suspect that the situation in Texas (or in most states) on this subject is very similar to what we have in New York. To get the best answer and advice on this subject for your situation, you really need to consult a lawyer who knows small business law in your state.

**JB Thompson** · 10-04-2007, 08:42 AM

Originally Posted by Brandon Chew

On the subject of PLLC vs LLC

An LLC can be formed by anyone.

A PLLC is required when someone plans to perform professional services in a "licensed profession". Your state will have a strict legal definition of which professions fall into that category. It usually applies to people such as doctors, lawyers, accountants, engineers, architects, etc. While as home inspectors many of us are required to get a license and we call what we do a profession and refer to ourselves as professionals, these definitions are not the same as the one being used to determine who is required (or eligible) to form a PLLC in your state law....

I suspect that the situation in Texas (or in most states) on this subject is very similar to what we have in New York. To get the best answer and advice on this subject for your situation, you really need to consult a lawyer who knows small business law in your state.

Were it that easy. The Texas law is just vague enough to give one pause, which is why I made the phone call back when I formed and again recently.

We do not, unfortunately, have a list of occupations that would require the PLLC. A quick glance in a phone book for trades such as: HVAC, Pest Control, Real Estate, Electrician, Plumber, etc... (all "licensed" occupations/services) reveals that the PLLC is rarely used. On the other hand, there are several doctors, dentists and a few lawyers that do use the PLLC brand.

So, as Nolan said, it depends upon to whom you speak on any given day.

Really, the law should not be so convoluted that people with average to better-than-average intelligence should be able to understand it. Will that preach?

Amen.

**Jim Luttrall** · 10-04-2007, 09:29 AM

Really, the law should not be so convoluted that people with average to better-than-average intelligence should be able to understand it.

Did everyone read the proposed change than Ron posted? Talk about convoluted, look up convoluted in the dictionary and this new proposal is now listed in the definition.

I wish I knew what problem in the HI industry the legislature was trying to "fix" when they started this last round of changes. It is just like the smoke detector disclosure law that was recently enacted. Lots of show and no go, the people filling out the disclosure (sellers) and the people responsible for getting it filled out (realtors) don't have a clue as to the requirements about smoke detectors and half of what they check off will be in error and be of no benefit to anyone. As best as I can tell, this was just feel good legislation that made it through because of a legislator that died in a house fire. BTW, the legislation would not have had ANY effect on that death even if it was in place before the legislators death took place. It just created a whole lot of paperwork and head aches for a whole lot of people.
Typical knee-jerk political response by idiot politicians in my opinion.