How to form an LLC in Texas.
If you are interested in starting an LLC
in the Lone Star State, you are not alone.
Texas has one of the highest rates
of newly formed LLCs in the country.
Every state has slightly different requirements
for forming an LLC.
Follow along closely to learn the required steps
for creating your own Limited Liability Company
in the state of Texas.
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There are two ways to form an LLC in Texas.
You can form one yourself,
or you can hire a service to do it for you.
Let's start by looking at the five basic requirements
to form an LLC in Texas on your own.
You can also find these steps in more detail
on our website linked in the description below.
Name your LLC.
Every state has it's own rules about
what kind of names are allowed for LLCs.
In general, you will need
to observe these naming guidelines.
Your name must include the phrase Limited Liability Company
or one of it's abbreviations, LLC or L.L.C.
with a period following each letter.
Restricted words such as bank, attorney,
law office, etc., may require additional paperwork
and may also need a licensed professional
to be part of the LLC.
Your name cannot include words
that could confuse your LLC with a government agency
such as FBI, Treasury, state department, etc.
You cannot use a name that has already been registered.
To see if your name is available in your state,
you will need to do a name search.
This free service is available
on your state Secretary of State website.
Check out our free guide for finding
the direct link to your state.
We also recommend that you check to see
if your business name is available as a web domain.
Even if you don't plan to make a business website today,
you may want to buy the URL in order
to prevent others from acquiring it.
Two, choose a registered agent.
Texas requires that you nominate a registered agent
who then must consent
to appointment in written or electronic form.
You can get a consent form 401-A
at the Texas Secretary of State website,
but it does not need to be filed.
The registered agent can be an individual
within the company including yourself,
or you can hire a professional service authorized
to do business in Texas.
They will send and receive legal papers on your behalf.
These documents included official correspondence
like legal summons and document filings
which your registered agent will receive and forward to you.
Your registered agent will help remind you
to file the necessary reports.
Failure to properly maintain your LLC
can result in fines and dissolution.
So this assistance is valuable.
Three, file the Certificate of Formation.
To register your Texas LLC,
you will need to file the Certificate of Formation
with the Secretary of State.
This can be done online or by mail
and will cost $300.
You will need to state whether your LLC will be
member-managed or manager-managed.
Member-managed means all members
of the LLC manage the company.
This is good for small organizations
where everyone is involved in day-to-day operations.
The second option is manager-managed,
where individuals are appointed to manage the LLC.
This is appropriate for larger organizations,
where not everyone is involved in the day-to-day affairs
of the business.
Four, create an operating agreement.
Although not every state requires it,
you should always create an operating agreement
to establish ownership terms and member roles for your LLC.
This foundational document is the core of your LLC
and will help you maintain your organization
as well as further establish your LLC
as a separate legal entity.
There are six main sections of an operating agreement.
Organization outlines when
and where the company was created,
who the members are, and how the ownership is structured.
Management and voting addresses how the company
is managed as well as how the members vote.
Capital contributions covers which members financially
support the LLC and how more funds
will be raised in the future.
Distributions outlines how the company's profits and losses
are shared among members.
Membership changes describes the process for adding
or removing members as well as if
and when members can transfer their ownership shares.
And dissolution, which explains the circumstances
in which the LLC may be dissolved.
An operating agreement is an internal document.
It does not need to be filed with the state.
However, it should be updated every time
there's a change in membership or management at the company.
You can download a free sample operating agreement
or create a custom one using our
free operating agreement tool at howtostartanllc.com.
Five, obtain an EIN.
Lastly, you'll need to get an
Employer Identification Number, or EIN, from the IRS.
Also known as a Federal Tax Identification Number,
your EIN is like a social security number for your LLC
and is how the IRS tracks your business for tax purposes.
An EIN is also necessary
to open a business banking account
and legally hire employees.
EIN's are free of charge,
and can be obtained from the IRS online or through the mail.
And with that, you have formed a Texas LLC on your own.
Keep in mind Texas LLCs are required
to file an annual report and franchise tax together.
LLCs with an annual revenue below $1.1 million
do not pay any franchise tax,
but must file a no tax due report.
LLCs with an annual revenue
of greater than $1.1 million pay a graduated tax that
is calculated based on a complex formula.
This is due by May 15th each year.
Option two, hire a professional service.
The second way to create a Texas LLC
is to hire a professional service
to create your LLC for you.
Hiring a professional service to file your forms
and act as your registered agent
for the LLC will cost you an additional 50 to 150 dollars.
However, there are several benefits to working with a pro.
A hired registered agent helps
with getting your reports filed on time,
helps you stay organized
by keeping your business mail separate,
and is available at all regular business hours
to accept official mail and legal papers
on your LLC's behalf.
A paid service can also help
with additional business needs like permits,
hiring, insurance and other yearly LLC maintenance.
A final and important additional benefit
of using a service is privacy.
A professional service will provide a level of privacy
by withholding your personal name and home address
from the LLC's contact information.
There are many reasons you might not want
your personal information easily accessible
and associated with your business.
Hiring a professional LLC formation service
is an easy way to accomplish this.
Now that you have seen the different requirements
and ways you can form an LLC in Texas,
visit our site and take some time
to research your options and establish a solid foundation
for your business activities.
Click on the links in the description below
to research the top 5 professional formation services,
or get more information on
how to form a Texas LLC on your own.
Now you know all the steps to form an LLC in your state.
For a more detailed guide, go to Howtostartanllc.com.
You can also create an operating agreement
and use our business plan tool free of charge.
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And if you have questions or encounter any roadblocks,
leave a comment below.
Good luck in starting your small business.
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