Texas asset protection: the best armor in the country, and the trapdoor underneath it

Texas has the strongest charging order statute in the country and the hardest veil-piercing standard in the country. A creditor coming at your Texas LLC from the outside faces a wall with no obvious door in it.

Then Texas hands you a trapdoor. Miss one annual form that costs nothing to file, and every member and manager becomes personally liable for the company’s debts, with no fraud alleged and no veil pierced. The front door is welded shut. The side door is unlocked, and almost nobody selling Texas LLCs mentions it.

The charging order cannot be foreclosed

Start with the outside attack: a personal creditor with a judgment against you, looking at your LLC. The charging order protection page has the general mechanics. Texas writes the strongest version.

A Texas charging order lien may not be foreclosed on under this code or any other law, and it is the creditor’s only remedy.

Tex. Bus. Orgs. Code § 101.112 does four things in a row that most states do not do together. Subsection (c) makes the charging order a lien and says the lien may not be foreclosed on under the Business Organizations Code or any other law, which is an unusually broad shutdown. Subsection (d) makes the charging order the exclusive remedy for satisfying a judgment out of a membership interest. Subsection (f) says a creditor has no right to obtain possession of, or exercise any legal or equitable remedy against, the property of the LLC itself. The creditor is left holding a lien on distributions the company may never make.

Set that against the weak end. California hands a court the charging order plus a receiver plus foreclosure plus any other order it finds fair. Florida lets a creditor foreclose on a single-member LLC and take the whole company. Texas forecloses nothing, for anyone.

The single-member gap closed in 2023

Texas used to have the same soft spot Florida still has, and the legislature took it away.

Since September 2023, Texas protects the single-member LLC by name, after a court decision had put it in doubt.

Texas appellate decisions, Heckert v. Heckert among them, had eroded charging order protection for one-owner LLCs on the usual reasoning that there are no innocent partners to shield. In 2023 the legislature responded with SB 2314, adding § 101.112(g): the section applies to both single-member and multiple-member limited liability companies. The bill said outright that it was clarifying existing law. So the one-owner Texas LLC now gets the same statutory protection as a ten-member one, which is the exception to the rule described on the single-member LLC page. Anything you read calling Texas weak on single-member protection predates this amendment.

Piercing requires actual fraud

Now the attack running the other direction: the company’s creditor trying to reach you. Texas sets the highest bar in the country for contract claims.

To pierce a Texas LLC on a contract debt, a creditor must prove actual fraud committed for the owner’s direct personal benefit.

Under Tex. Bus. Orgs. Code § 21.223, applied to LLCs through § 101.002, a plaintiff suing on a contractual obligation must show the owner used the entity to perpetrate an actual fraud on that plaintiff, primarily for the owner’s direct personal benefit. Sloppy formalities are expressly not enough. The piercing the veil page describes what sinks owners elsewhere; in Texas most of that list does not reach the standard on a contract claim.

One practical caution from Texas litigators: piercing claims get pleaded anyway, and defeating one costs real money in discovery even when it fails. Clean books are still worth keeping, for the cost of the fight rather than the odds of losing it.

The trapdoor: forfeiture makes owners personally liable

Here is the part that belongs on every Texas LLC page and appears on almost none of them.

Miss the free annual filing and Texas makes each member and manager personally liable for company debts, as if the LLC were a partnership.

Every Texas LLC must file a franchise tax report and a Public Information Report with the Comptroller by May 15. For most LLCs both cost nothing, because revenue falls under the no-tax-due threshold. Skip them and the entity’s privileges are forfeited. Under Tex. Tax Code § 171.255, once privileges are forfeited, each director or officer, which reaches LLC managers and members, becomes liable for each debt the company creates or incurs in Texas after the filing was due and before the privileges are revived, and the statute spells out the measure: in the same manner and to the same extent as if they were partners and the company were a partnership. The entity also loses the right to sue or defend in Texas courts, so a forfeited LLC cannot enforce its own contracts.

Two details make it worse. Reinstating the company does not erase the personal liability that accumulated while it was forfeited. And no creditor has to prove fraud, allege alter ego, or pierce anything; the liability comes from the tax code, not from a piercing case. Texas welds the front door shut and leaves this one open. The mechanics of the filing, and how to fix a forfeiture, are on the filing page.

There is one narrowing rule worth knowing. Texas courts have held that debts arising from agreements and conduct that predate the forfeiture are treated as created before it, even if the dollar amount is fixed later, so the exposure attaches to obligations genuinely incurred during the forfeited window rather than to everything that lands afterward.

The homestead, and the entity that must never hold it

Texas protects the home about as completely as any state in the country.

Texas caps the homestead by acreage and not by dollars, so a $5 million house is protected the same as a $50,000 one.

Tex. Prop. Code § 41.002 places no limit on the value of a homestead. The limit is size: 10 acres for an urban homestead, in one or more contiguous lots with improvements, and for a rural homestead 200 acres for a family or 100 acres for a single adult, which need not be contiguous. An urban homestead can double as the place you run your business, and renting out part of the home does not defeat it. Whether a property is urban or rural turns on a statutory test involving municipal limits and services, and it is a fact question that gets litigated.

Two limits belong right next to that.

The Texas homestead protects a person, not an entity, so putting your home in the LLC forfeits it.

The exemption runs to individuals. Title your homestead in an LLC or a limited partnership and you have traded the strongest home protection in the country for a deed. The related practitioner rule is to keep a hard line between the entity that holds your investments and the home, and never let one entity hold both. The other limit is bankruptcy, which is federal: a homestead acquired within roughly the last 40 months before a filing is capped near $214,000 regardless of Texas law, and conversions made to defeat creditors reach back ten years. As in Florida, a Texas debtor with large home equity is often far better off in state court than in bankruptcy.

What else Texas protects, and what it does not have

Texas exempts a broad list of personal property, subject to a statutory cap that is higher for a family than for a single adult, along with retirement accounts and life insurance benefits. Its wage protection is unusually strong: Texas does not allow garnishment of current wages for ordinary consumer debts, with exceptions for support obligations, taxes, and student loans.

Two things Texas does not have. It is a community property state, so there is no tenancy by the entireties, and the married-couple analysis runs through community property rather than the entireties tool that protects a jointly held LLC interest in Florida. And Texas has no domestic asset protection trust statute. Like Florida, Texas does the work through exemptions and entity law rather than a self-settled trust, which is why the trusts and LLCs page matters here for continuity planning more than for creditor protection.

The courts

Texas opened a statewide Business Court on September 1, 2024, with dedicated judges sitting in divisions across the state and a dedicated appellate court created to hear its appeals. It is the newest serious business court in the country. Two honest qualifications: its jurisdiction carries high amount-in-controversy thresholds, so most ordinary LLC disputes still go to general district courts, and unlike the chancery model in Delaware or Wyoming it permits jury trials. The courts page explains why the jury question gets priced into every settlement.

The bottom line

Texas has the strongest charging order statute in the country: no foreclosure under any law, exclusive remedy, no creditor access to company property.

Since September 2023 that protection covers single-member LLCs by name, so older articles calling Texas weak on this point are out of date.

Piercing a Texas LLC on a contract debt requires proof of actual fraud for the owner’s direct personal benefit, the hardest standard anywhere.

None of that stops Tex. Tax Code § 171.255, which makes members and managers personally liable for debts incurred while the company is forfeited for a missed filing.

The homestead is unlimited by value and capped by acreage, and it protects individuals only, so the home must never sit inside an entity.

Texas has no asset protection trust and no tenancy by the entireties, because its exemptions and entity statutes do that work instead.

What this page does not cover

This page is about how creditors reach you in Texas. What the statute lets your company agreement do, including the default that runs on records most LLCs never keep, is on the governance page. The franchise tax, series LLCs, and the absence of a transfer tax are on the structure and cost page. The May 15 filing, the forfeiture, and how to reverse one are on the filing page.

Last verified July 2026.