Starting a limited liability company (LLC) in Texas? Follow these six steps to ensure the process goes smoothly.
Step 1: Naming Your Texas LLC
The first task involves choosing a unique name for your LLC, which shouldn't be identical or similar to the names of other business entities already registered with the Texas Secretary of State. You can confirm the availability of your chosen name via the Texas Secretary of State SOSDirect website.
The name of your LLC under Texas law must include one of the following suffixes: Limited Liability Company, Limited Company, Ltd. Company, Ltd. Co., LLC, LLC, L.C., or L.C.
To reserve your chosen name, you can file an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the Texas Secretary of State. The form can be filed online through the SOSDirect website or by mail. The reservation, which lasts for 120 days, costs $40.
If you prefer not to use your LLC's legal name registered in your Certificate of Formation for business, you may use an assumed name (also referred to as a "D.B.A.", trade name, or fictitious business name). To do this, you should register an Assumed Name Certificate (Form 503) with the Texas Secretary of State and the county clerk where your LLC's office is. The fee for filing this is $25.
Step 2: Designating a Registered Agent
Every Texas LLC is required to appoint a registered agent for the service of process in the state. This agent, which can either be a Texas resident or a business entity authorized to operate in Texas, accepts legal documents on behalf of your LLC in case of a lawsuit. The agent must have a physical street address in Texas and cannot be the LLC itself.
Step 3: File a Certificate of Formation
To create your LLC, file a Certificate of Formation for a Limited Liability Company (Form 205) with the Secretary of State. This document must specify your LLC's name and suffix, the name and address of the registered agent, the management style of your LLC (member-managed or manager-managed), the names and addresses of the initial members or managers, a general purpose clause, the LLC's organizer's name and address, the effective date of the certificate, and the signature of the organizer. The filing fee for the certificate is $300, and it can be filed online through SOSDirect or via mail.
Step 4: Prepare an Operating Agreement
While not mandatory in Texas, it is advisable to prepare an operating agreement for your LLC This internal document stipulates the governance structure and operational guidelines of your LLC It helps to clarify the roles, responsibilities, voting powers, and the proportion of profits and losses for each member. It also includes rules for holding meetings, voting procedures, and buy-sell provisions, which are triggered when a member wants to sell their interest or if they pass away or become incapacitated. Note that even though it's crucial to have an operating agreement, it's not required to be filed with the state.
Step 5: Obtain an E.I.N.
LLCs with more than one member must obtain an I.R.S. Employer Identification Number (E.I.N.), even if the LLC has no employees. Single-member LLCs need an E.I.N. only if they will have employees or if they choose to be taxed as a corporation rather than a sole proprietorship. The E.I.N. can be obtained free of charge by completing an online application on the I.R.S. website.
Step 6: Annual Reports and Tax Requirements
Unlike most states, Texas LLCs are not mandated to file annual reports with the Secretary of State. However, they are required to file annual franchise tax reports. Computing these tax details can be complex, so for further information, refer to the Comptroller of Public Accounts website and check out Texas LLC Annual Filing Requirements.
By following these steps meticulously, you can successfully form an LLC in Texas and lay a solid foundation for your business. Always remember to keep up with the state's filing requirements and maintain your company's good standing.
Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.
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