Nonprofit LLCs
Titles 2 and 3 of the Texas Business Organizations Code (TBOC) do not restrict the purpose of an LLC to the rendition of a for-profit business, trade, or profession. Before the TBOC went into effect, it was the secretary of state’s position that the formation of a nonprofit LLC was inconsistent with the provisions of the Texas Limited Liability Company Act (repealed) and the laws made applicable to an LLC—namely, the Texas Business Corporations Act (repealed) and the Texas Revised Limited Partnership Act (repealed). Because the TBOC does not restrict the purpose, an LLC may be formed to engage in a nonprofit purpose. Other state law regulating a particular activity may contain restrictions that would prohibit an LLC from engaging in the regulated activity.
An LLC may be organized solely for one or more nonprofit purposes specified by TBOC section 2.002. Nonprofit purposes include—
(1)serving charitable, benevolent, religious, eleemosynary, patriotic, civic, missionary, educational, scientific, social, fraternal, athletic, aesthetic, agricultural, and horticultural purposes;
(2)operating or managing a professional, commercial, or trade association or labor union;
(3)providing animal husbandry; or
(4)operating on a nonprofit cooperative basis for the benefit of its members.
See Tex. Bus. Orgs. Code § 2.002.
§ 11.2Nonprofit LLC vs. Nonprofit Corporation
An LLC with a nonprofit purpose is distinct from a nonprofit corporation or other nonprofit association. See Tex. Bus. Orgs. Code § 1.002(58), (59). A TBOC provision that applies specifically to a nonprofit corporation does not apply to an LLC formed for a nonprofit purpose. See Tex. Bus. Orgs. Code § 1.002(58)–(60). For example, the default tax-exempt provisions found in TBOC section 2.107 apply to a nonprofit corporation but do not apply to a nonprofit LLC.
There is no statutory basis for distinguishing between an LLC formed for a for-profit purpose and an LLC formed for a nonprofit purpose. Filing fees established under TBOC sections 4.151 and 4.154 apply to all LLCs regardless of purpose.
Section 171.088 of the Texas Tax Code permits an entity that is not a corporation to qualify for a tax-exempt status if its activities would qualify it for a specific tax exemption were the entity formed as a corporation. See Tex. Tax Code § 171.088.