Have you taken the plunge and decided to launch your very own limited liability company (LLC)? You could be sitting on a fantastic idea that has to be shared with the world, or your strength could just be peeking for a break from the monotony of your everyday routine. In any case, forming a limited liability company (LLC) in Texas can assist you in becoming your boss, creating a personal work schedule, and entering the business world.
A limited liability company, more often known as an LLC, is a type of business organization that, in comparison to a corporation, provides its owners with some of the benefits and protections afforded by the latter but does so without the accompanying administrative hassle and expense. While it may be simpler to establish a sole proprietorship, this type of business does not protect the owner’s assets from business responsibilities such as legal action and debt collection.
LLCs are formed to separate the owners’ assets from the business’s assets. On the other hand, transferring ownership of an LLC is not as straightforward as it is with a corporation. In addition, the tax benefits you receive may not be as extensive as those provided by a corporation; therefore, it is essential to have a solid understanding of the various types of company structures in Texas.
Forming an LLC can be an intimidating process. Each state has its own set of filing requirements and costs associated with them. To register an LLC in Texas, you will need to pay attention to a variety of specific measures since the state’s regulations are particularly stringent.
Is an LLC right for you?
Consider forming an LLC as your company of choice if you want to run a company that is either small or medium in size and will have workers. It is also an excellent choice to think about for early-stage firms that may not have the time or money immediately available to commit to the process of establishing a company.
How to Form a Texas LLC Yourself in 7 Steps
Before you file your LLC paperwork, you must understand the processes and prerequisites involved. Before moving forward with the procedure, there are a few particular conditions that must be satisfied before you may do so in the state of Texas, and this is true in every state.
Name Your Texas LLC
Before registering your LLC, you’ll need to pick a name to use in your articles.
The names must adhere to Texas naming regulations. The following are the most significant considerations to make:
- The terms Limited Liability Company, LLC, or LLC must occur in your company name.
- Your business name must not be identical to that of another company in the condition. To see if a sure business name is in use, go to the Secretary of State’s website and search. Check this page for name availability in Texas.
- A business name cannot contain terms used to determine a government entity (i.e., State Department, C.I.A., F.B.I., Treasury, etc.)
- Additional documentation and license papers may be required for some restricted terms (bank, lawyer, attorney, credit union, and so on).
- You’ll probably need a web page despite the availability of URLs, even if you don’t believe you’ll require one. At the very least, by buying your domain name now, you reserve the option of having one in the future. It’s good to check if the URL is available before deciding on an LLC name.
- Make a note of your name. You may reserve your LLC name for a nominal price if you aren’t ready to register it but are afraid that it will be stolen by someone else. In Texas, you can reserve a name for up to 120 days by paying a fee and submitting additional paperwork to the state.
Choose Your Registered Agent
It would be best to choose a registered agent for your LLC in Texas. A registered representative is an individual or company who is allowed to accept service of operation and other formal legal documents and notices on your LLC’s behalf.
A registered agent might be an individual (such as yourself or a worker of your LLC) or a company that delivers this function. They must complete the following requirements:
- Registered representative services must be provided by entities (or businesses).
- The agent must have a Texas address.
- The agent must be on-site and prepared to accept papers during standard business hours.
Prepare and File the Certificate of Formation
The Certificate of Formation (also known as Articles of Organization in some states) is a document that formally organizes your LLC by putting out its fundamental facts.
To legally establish your Texas LLC, prepare a Certificate of Formation and file it with the Texas Secretary of State. Though it may be an enormous task, it merely entails completing and submitting an internet form, and it’s also possible to send it through the mail.
You’ll generally need the following information to create your Certificate of Formation:
- Name of your limited liability company (considering the designation).
- Your registered agent’s name and address.
- You have a cause for forming the LLC This might be a broad remark.
- The length of time that a limited liability company (LLC) will be in operation. LLCs are almost often perpetual, which means they last indefinitely. An endless limited liability company (LLC) can be dissolved voluntarily or involuntarily. If your LLC is formed for a specific reason that will terminate at a certain date, you will provide that date here.
- Structure of management: Will managers or members manage the LLC?
- The name and address of each member, if the LLC is member-managed.
- The name and address of each original manager, if managers control the LLC
- The LLC’s organizer’s name and address.
- The Certificate’s effective date.
- The Certificate must be signed by the person who forms the LLC
The secretary of state will examine the filing once you have submitted your Certificate of Formation. If the Certificate of Formation is authorized, the limited liability company (LLC) will be recognized as a valid business entity.
Receive a Certificate From the State
After the formation paperwork of the limited liability company has been filed with the state and been given its approval, the state will offer you a certificate that verifies the LLC’s official existence.
With this Certificate, the limited liability company will be able to get an Employer Identification Number (E.I.N.), business permits and a bank account for the firm.
Create an Operating Agreement
An operating arrangement is a legal record that spells out how your limited liability company (LLC) will operate.
Although an operating contract is not needed in Texas for LLCs, it is an essential part of your business. Having a standard operating agreement readily known is valuable, including resolving disagreements about financial arrangements and other possible lawsuits.
Without a contract, the courts will make decisions based on state law rather than what is best for the LLC and its members.
The following things may be incorporated in the operating agreement but are not limited to:
- Name of the LLC and its primary address
- The LLC’s life span
- Information about the Certificate of Formation, including the registered agent’s name and address
- The company’s raison d’être
- Members and the contributions they make
- How profits and losses will be allocated
- The process for accepting new members and terminating departing members as outlined below.
- The LLC’s management
- Clauses of indemnification and responsibility
Get an Employer Identification Number
The Internal Revenue Service (I.R.S.) assigns a nine-digit Employer Identification Number (E.I.N.) to your LLC to identify it for tax purposes. You may get your E.I.N. from the I.R.S. by mail or online.
An E.I.N. aims to help with the following:
- You must file and manage taxes at both the state and federal levels.
- Open a bank account for your business.
- Employers are needed.
File an LLC Franchise Tax and Public Information Report
The Texas Comptroller’s Office requires all Texas LLCs to file a Franchise Tax and Public Information Report. Every year, on May 15th, your LLC’s Texas franchise tax and public information filings are due. The first report isn’t required until the year after the formation of your LLC
The formation of your LLC provides you with a legal base on which to do business. Plan to maintain your LLC up to date and compliant on the state’s website.
Making quarterly tax payments is one example. It would be best to have a registered agent for your company.
You can also perform the following with an LLC that is registered:
- To run your business, obtain the necessary permissions and licenses, such as health department permits, zoning permits, home occupation permits, professional support, etc. To perform transactions in some states, you’ll need a seller’s permit.
- The state’s tax department will need you to register your firm.
- Open a bank account for your business.
- Make an application for a business credit card.
- Make a company insurance purchase.
- With a trademark, you can protect your company’s name and logo.
Cost to Set Up an LLC in Texas
The necessary forms for filing your LLC and the associated filing costs are below.
Form 205: The “Certificate of Formation—Limited Liability Company” is the most crucial document you’ll need to start an LLC It’s free to download, and there’s a $300 filing charge.
Form 304: This form is for LLCs previously incorporated in another state but who want to register to do business in Texas. You may find the form here. The cost of submitting is $750.
Texas State Franchise Tax Fee
Texas LLCs must file a state franchise tax return every year, and LLCs with more than $1.18 million in income must pay a franchise tax starting in 2021. Additional information on how the tax is determined is available on the official Texas Comptroller website. Here you will discover associated tax paperwork. There are no extra annual costs involved with operating your L.L.C in Texas.
Correcting Texas LLC Filing Errors
Mistakes are bound to occur. If you form an LLC and then discover problems, you must file a Certificate of Correction, often known as Form 403, with the Texas Secretary of State, and it may be found here.
When you’re through with the document, make a list of things you want to change. Please be mindful that there is a filing expense of $15. Furthermore, the procedure cannot be done online at this time.
Should You Create a Corporation or D.B.A? Instead of an LLC?
One often asked an issue about LLCs is if they are required in the first place. The cost of forming a company in Texas is about the same as developing an LLC
It’s critical to understand the fundamental tax, ownership structure, management, and liability differences between LLCs and corporations before selecting.
The $25 state registration cost makes registering a “doing-business-as” or D.B.A. name affordable. You may also be needed to pay a minor county charge. D.B.A.s, on the other hand, frequently perplex new business owners. A DBA is not the same as a limited liability company (LLC) or a corporation.
On the other hand, A DBA is effectively a registered pseudonym for your previously existing company. While the phrases are commonly used interchangeably, D.B.A.s and LLCs are not the same.
Other Texas LLC Types
A Texas Series LLC is an option provided by the state. This unique corporate organization allows you to administer many LLCs from a single location. If you don’t like to waste time and money forming a different LLC for each firm you run, it’s a suitable option.
There is no specified form for forming a Texas Series LLC in the state. To develop an LLC, fill out the standard format and include the relevant information in the additional text field. The filing fee is $300, the same as for a conventional LLC
- Determine if a Series LLC is the best option for your new company.
- What Is a Texas Series LLC and Why Would You Need One?
Certain companies are allowed to incorporate Professional Limited Liability Companies in several states, including Texas (PLLCs). Members of a Texas PLLC are usually required to be licensed, and additional conditions may be imposed.
Accountants, electricians, real estate brokers, and cosmetologists are just a few professions that can create PLLCs.
You’ll need to fill out paperwork and pay a $300 filing fee to create a Texas PLLC. The condition franchise tax and public data reporting obligations will also apply to your PLLC.
The Texas Professional LLC provisions are described in Chapter 301 of the state’s Business Organizations Code: 301 BOC.
You’ll need to register a foreign LLC if your company is based in another state and you wish to grow into Texas – or vice versa).