Start an LLC in Texas
To begin the process of forming an LLC in Texas, you must first understand the state’s unique stages and requirements. This comprehensive tutorial will help you through the basic stages of forming an LLC in Texas. Learn about registering a new business in Texas, including the necessary requirements, expenses, and processes.
How to Register an LLC in Texas, USA?
The following steps to register an LLC in Texas, USA are mentioned below:
1. Select Your LLC
It is critical to choose a proper name for your company. Your chosen name should also be distinctive to successfully pass the business entity search test on the Secretary of State’s website. This means you cannot use a name that’s already in use by another business operating in Texas, as it might lead to confusion among consumers.
In addition, to prevent potential trademark issues and consumer confusion, avoid names that resemble or sound like existing businesses.
Certain terms are prohibited, including official terms like Treasury, State Department, FBI, CIA, and others. However, terms like bank, university, attorney, or doctor can be used, as long as you meet the relevant Texas State Government requirements for those entities.
If you’re considering establishing an online presence, obtaining a domain name that aligns with or closely resembles your LLC’s name is recommended. This will enable you to create a website and have a corresponding email address for your business. Such an online presence enhances your visibility and accessibility to potential customers.
When choosing a domain name, strive for a close match to your LLC’s name. Subsequently, you’ll need to purchase the domain from a domain registrar, a company that facilitates the registration and management of Internet domain names.
2. Consider a Registered Agent
A registered agent must be designated when forming an LLC in Texas. This step involves selecting an individual or entity that possesses a physical address within Texas and is consistently available during standard business hours to accept legal documents on behalf of the LLC.
The following individuals or entities are eligible to serve as a registered agent in Texas:
- An individual residing in Texas.
- An organization that operates an LLC in Texas and maintains a business office at the same location as the registered office of the entity.
- Any Texas resident, including an officer, owner, employee, friend, or family member, provided they have a physical address within the state.
Additionally, the LLC has the option to engage a service provider or another business entity to fulfill the role of a registered agent. However, it’s important to highlight that the LLC itself is not allowed to act as its registered agent.
3. File the Limited Liability Company Certificate of Formation
The essential documents for establishing your LLC, along with their corresponding filing fees are mentioned below:
- Form 205: This is the “Certificate of Formation—Limited Liability Company,” which is the fundamental paperwork required to initiate your LLC. You may either download the form or fill it out online. This form has a $300 filing charge.
- Form 304: For LLCs formed outside of Texas but wishing to conduct operations within the state, the “Application for Registration of a Foreign Limited Liability Company” (Form 304) must be submitted. This form has a filing cost of $750.
How to Finish the Certificate of Formation?
To correctly complete your LLC’s Certificate of Formation, make sure you have the essential information on hand:
- LLC Name: Provide the complete legal name of your LLC, including any designations like “LLC,” “Limited Company,” or “Limited Liability Company.”
- Registration Agent: Include the individual or business name, physical address, and phone number of your LLC’s registered agent. Obtain written consent from the registered agent to serve as the agent.
- Organizational Structure: Indicate whether your LLC is controlled by its members or managed by designated management. List manager names and addresses. Note that this information is public, so you can use a P.O. box if desired.
- Formation Date: State the date your LLC is formed, effective, or established. This can be upon filing or a future date, up to 90 days from signing.
- Objective: Briefly describe your LLC’s business activity or purpose. A general description is acceptable.
- Supplemental Provisions/Information: Optionally includes additional provisions you want in your LLC filing. Usually left blank unless directed by your attorney.
- Duration: In Texas, an LLC is perpetual by default. You can specify a limited period if desired.
- LLC Organizer: The organizer initiates and completes the LLC’s legal requirements, ensuring compliance with state regulations. They handle filing with the state and other agencies.
- Postal Address: Provide a postal address for official communications and tax papers if it is different from the primary company address.
- Execution: After reviewing, confirm accuracy with your date and signature. Ensure the registered agent’s consent is confirmed.
Once submitted, expect to receive an approved Certificate of Formation from the state of Texas in approximately 10 to 12 business days (when filing online).
What if your certificate of formation has to be amended?
The Certificate of Formation is a one-time filing necessary for establishing an LLC. However, if any details provided in the original Certificate of Formation require modification, the LLC must notify the Texas state authorities. This is done by submitting a Certificate of Amendment along with the required fee to the Texas Secretary of State. Maintaining accurate information in the Certificate of Formation is crucial, as it can impact the eligibility to obtain an official Certificate of Fact-Status. This certificate serves as proof of the LLC’s authorization to conduct business in Texas. Neglecting to adhere to state regulations and update the LLC’s information promptly can severely restrict the LLC’s opportunities.
4. Obtain a Texas LLC Employer Identification Number (EIN)
A no-cost Employer Identification Number (EIN) can be acquired for your Texas LLC. The Internal Revenue Service (IRS) issues this nine-digit identifier, which is crucial for tasks like setting up bank and credit accounts, as well as filing taxes. The EIN plays a vital role within your Texas LLC.
You can directly apply for the free EIN through the IRS. This process takes only a few minutes, and the EIN is granted immediately.
5. Establish an LLC Operating Agreement
Every Texas LLC is required to have an operating agreement outlining its daily operational procedures. Although an internal record, it holds significant value in the company’s operations. The operating agreement will precisely define matters, thereby preventing ambiguity among members and managers regarding their roles. In essence, it serves to mitigate conflicts.
Steps to Take After the Formation of an LLC
Once you’ve successfully established your Texas LLC, there are several important tasks to address to ensure the smooth operation of your business:
- Bank Account: Utilize the EIN (Employer Identification Number) to initiate the process of opening a business bank account. It’s essential to maintain a clear separation between personal and business funds. Therefore, fund the account exclusively with funds designated for business purposes.
- Annual Report: Fulfill the obligation of filing an annual report with the Texas state comptroller’s office. This report serves as a means to maintain the official status of your LLC and ensure compliance with state regulations.
- Insurance: Engage in discussions with an experienced insurance agent to assess the necessary insurance policies for your business. While exploring options, consider obtaining general liability insurance as a baseline. If your business has employees, it’s crucial to evaluate the need for workers’ compensation insurance as well.
- Permits and Licenses: Conduct a thorough inquiry together with your neighborhood municipal government to decide whether your business requires any specialized permits or licenses for criminal operations. Permits, such as health allows or production permissions, may be required relying on your sector or occupation. Permits, such as health permits or construction permissions, may be required depending on your sector or occupation. Depending on the nature of your firm, you should also examine the potential of federal or state-level permissions.
Benefits for Opening an LLC in Texas
- Being established as an LLC in Texas can significantly improve a business’s credibility and professional standing.
- LLCs can be formed with a single member or with several members. They also provide more adaptable options for profit distribution among members when compared to corporations.
- The process of transferring or selling an LLC in Texas to new proprietors is straightforward and entails minimal paperwork.
- Owners of an LLC can choose whether to have the company’s earnings flow through to their income tax filing or to opt for taxation akin to that of a corporation.
- Operating as an LLC within the state of Texas offers a safeguard of limited liability to its proprietors. This safeguard prevents the personal assets of the owners from being seized by the company’s creditors to settle its debts.
Disadvantages for Forming an LLC in Texas
- Owners of a Texas-based LLC could still retain personal accountability for the firm’s debts or legal proceedings, such as loans and illicit actions, or if they neglect to uphold a clear distinction between personal and business activities or provide personal assurances.
- LLCs necessitate handling paperwork and administrative duties, including submitting articles of organization, establishing an operating agreement, and upholding meticulous record-keeping.
- Establishing an LLC in Texas encompasses the payment of assorted fees, encompassing state, legal, and annual fees, among others. Earnings generated by the business are subject to self-employment levies.
- LLCs cannot offer stocks or shares, potentially leading to obstacles in raising funds compared to corporations.
Conclusion
If you form an LLC in Texas, you can benefit from limited liability, which protects personal assets from business responsibilities while also providing flexibility in management structures and potential tax benefits. The shortened registration procedure, along with online information and help, makes starting a business even easier. From the busy metropolitan environments of Dallas and Houston to the inventive tech centres of Austin, Texas provides a diversified setting for businesses to develop and access a large pool of talent. The state’s commitment to assisting small businesses and promoting economic growth is obvious, making it a desirable alternative for both new and established enterprises.
To form an LLC in Texas, please contact our business specialists at OnDemand International. Our expertise will assist you with selecting an acceptable business name, a registered agent, and drafting an operating agreement.
FAQ’s
Federal law mandates that all Limited Liability Companies (LLCs) with multiple members, operating within the state of Texas, must obtain an Employer Identification Number (EIN).
A Texas LLC costs $300 for Formation.
To modify the name of a Texas LLC, you need to submit a certificate of amendment to the Secretary of State, indicating the desired new name. Just like the initial name filing, it’s important to ensure that the new name is available before initiating the name change request.
It’s possible to handle the required documentation independently and present it to the Secretary of State’s office. They will then assess and decide whether to approve or decline the formation of your LLC. It’s not obligatory to engage a lawyer or any external entity for this process.
