How to Title a Mineral Interest: Ownership Structures for Buyers

By Richard Partin, Managing Member, Texas State Royalties LLC Fort Worth, Texas | Published: October 16, 2026 | Last Updated: October 16, 2026

How you take title to a mineral interest is a decision that affects your taxes, liability exposure, estate planning, and ability to sell. Most buyers default to individual ownership without considering the alternatives — but for buyers acquiring multiple interests or planning to hold for the long term, the ownership structure matters significantly. This guide covers the four main options and what each means for Texas mineral interest buyers.

Quick Answer: Texas mineral interests can be titled individually, in an LLC, in a trust, or in joint tenancy. Under Texas Property Code § 1.002, mineral interests are real property; the ownership structure affects liability, estate planning, and tax treatment. Consult a qualified attorney and CPA before closing — the ownership structure cannot be changed without a new deed and potential tax consequences.

What Are the Four Main Ownership Structures for Mineral Interests?

Individual ownership. The simplest structure — the buyer takes title in their own name. Royalty income flows directly to the individual and is reported on Schedule E of the federal income tax return. Individual ownership offers no liability protection and no estate planning benefits beyond a will or trust. For buyers acquiring a single interest for personal investment, individual ownership is often appropriate.

LLC ownership. The buyer takes title through a limited liability company. Royalty income flows through the LLC to the member(s) and is reported on the member's individual return (for a single-member LLC) or on a partnership return (for a multi-member LLC). An LLC provides liability protection — the member's personal assets are generally shielded from claims arising from the mineral interest. For buyers acquiring multiple interests or holding interests with working interest exposure, LLC ownership is worth considering.

Trust ownership. The buyer takes title through a revocable living trust or an irrevocable trust. A revocable trust provides estate planning benefits — the interest passes to beneficiaries without probate — while maintaining the grantor's control during their lifetime. An irrevocable trust may provide additional asset protection and estate tax benefits. Trust ownership is common for buyers who are planning for generational transfer of mineral interests.

Joint tenancy or tenancy in common. Two or more buyers take title together. Joint tenancy includes a right of survivorship — if one owner dies, their interest passes automatically to the surviving owner(s) without probate. Tenancy in common allows each owner to hold a separate fractional interest that can be sold or devised independently. For married couples, community property ownership is also available under Texas law.

What Are the Tax Implications of Each Structure?

Under IRS Publication 535, qualifying royalty interest owners may deduct percentage depletion at 15% of gross income from the property, regardless of ownership structure, subject to the limitation that the deduction cannot exceed 100% of net income from the property. Reserve classifications follow SEC Regulation S-X Rule 4-10.

The Texas Comptroller imposes severance tax at 4.6% on oil and 7.5% on gas before the royalty reaches the mineral owner — regardless of ownership structure. Under Texas Natural Resources Code, the operator is obligated to pay royalties as specified in the lease once the division order is processed.

Under Texas Estates Code, mineral interests held individually pass through probate at death unless held in a trust or subject to a beneficiary designation. Unestablished heirship — the most common title defect in Comanche and Eastland County acquisitions — arises when heirs do not probate the estate or file an affidavit of heirship. Holding mineral interests in a trust or LLC can prevent this defect from arising in future generations.

The ownership structure cannot be changed without executing a new deed conveying the interest to the new owner (the LLC, trust, or individual). This triggers a new recording in the county deed records and may have tax consequences. Consult a qualified attorney and CPA before closing — not after.

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Key Takeaways

• Texas mineral interests can be titled individually, in an LLC, in a trust, or in joint tenancy; the structure affects liability, estate planning, and tax treatment — consult a qualified attorney and CPA before closing
• Under Texas Property Code § 1.002, mineral interests are real property; the ownership structure cannot be changed without a new deed and potential tax consequences
• Under Texas Estates Code, interests held individually pass through probate at death; holding in a trust prevents this and avoids the unestablished heirship title defect that is most common in Comanche and Eastland County acquisitions; cross-reference production volumes against Texas Railroad Commission (RRC) records periodically to confirm accuracy
• The Texas Comptroller imposes severance tax at 4.6% on oil and 7.5% on gas regardless of ownership structure; qualifying owners may deduct percentage depletion at 15% of gross income under IRS Publication 535
• Reserve classifications follow SEC Regulation S-X Rule 4-10; under Texas Natural Resources Code, the operator is obligated to pay royalties as specified in the lease once the division order is processed
• LLC ownership provides liability protection and is worth considering for buyers acquiring multiple interests or holding interests with working interest exposure
• Decimal interest errors are common in estate proceedings — a 1/4 royalty on a 1/8 mineral interest equals 0.03125, not 0.25; verify the decimal interest independently before closing

Frequently Asked Questions

Should I hold my mineral interest in an LLC or individually?

For a single producing royalty interest with no working interest exposure, individual ownership is often appropriate. For buyers acquiring multiple interests, holding interests with working interest exposure, or planning for long-term generational transfer, LLC or trust ownership is worth considering. Consult a qualified attorney and CPA — the right structure depends on your specific tax situation, liability exposure, and estate planning goals.

Can I transfer my mineral interest to an LLC after closing?

Yes, but it requires executing a new deed conveying the interest from you individually to the LLC, recording the deed in the county deed records, and notifying the operator to update the division order. This may have tax consequences — consult a qualified CPA before transferring. The transfer also creates a new link in the chain of title that future buyers will need to trace.

How does trust ownership affect the division order?

If the mineral interest is held in a trust, the division order should be executed by the trustee on behalf of the trust. The operator will pay royalties to the trust, which then distributes them to the beneficiaries according to the trust terms. Confirm with the operator that the division order reflects the trust ownership correctly.

About the Author

Richard Partin is the Managing Member of Texas State Royalties, a Fort Worth-based, buyer-first firm that sources producing oil and gas mineral interests through established industry relationships. He holds a degree from the University of Texas at Arlington and has years of hands-on experience in oil and gas acreage interests, working interests, and capital formation across active Texas producing regions.

Texas State Royalties facilitates mineral-interest acquisitions and works exclusively with buyers. Information is for educational purposes only and is not legal, tax, or investment advice. Buyers should consult qualified legal, tax, and financial advisors before making any acquisition decision.