Forming an LLC in Texas is a straightforward process that requires a Certificate of Formation (Form 205) be filed with the Texas secretary of state. An LLC, or limited liability company, shouldn't be confused with other business types, as LLCs are not corporations or partnerships; it is a separate business entity that has the powers of a partnership and a corporation.

Formation of a Texas LLC

The following are the areas to address when forming a Texas LLC:

  • Naming the business
  • Appointing a registered agent
  • Filing Form 205 -- Certificate of Formation
  • Creating an operating agreement
  • Applying for an Employer Identification Number (EIN)
  • Business licenses
  • Taxes
  • Foreign LLCs

Naming the LLC

When naming a limited liability company, it must be different/distinguishable from other business entities registered with the secretary of state.

The name cannot contain restricted words, such as attorney, university, or bank, without approval from the secretary of state. It may not contain prohibited words, such as FBI, or any other federal or state agency that would confuse your business with a government organization.

Texas law requires the business name to contain either LTD., Ltd., LLC, L.C. LC, L.L.C., Limited Company, Limited Liability Company, Co., or Company.

Names may be checked using the search option at the Texas Secretary of State website. A business name may be reserved by filing Form 501, which is an application and renewal form. The name can be reserved for 120 days. The filing fee is currently $40.

Appointing a Registered Agent

A registered agent must be nominated for your LLC. The person or business designated as registered agent agrees to be the recipient and sender of legal papers on behalf of your company. This would include service of process for any legal action against your LLC. The person or business must agree to the appointment as registered agent in written or electronic form.

Only Texas residents or companies authorized to do business in the state are eligible to be named as the registered agent. You do have the option of naming an individual within the company or naming yourself as the registered agent, but the LLC cannot serve as its own agent.

Certificate of Formation

Form 205 requires the following information:

  • Name of the LLC that meets the requirements of the state and its address.
  • Name and address of the registered agent.
  • A consent form from the registered agent.
  • A statement indicating whether the LLC will be manager-managed or member-managed.
  • The names and addresses of the organizers/members of the Certificate of Formation.
  • The purpose of the LLC.
  • If applicable, a dissolution date.
  • Members and manager's names, addresses, and initials.

The Certificate of Formation can be filed online or by mail. The current filing fee is $300.

Operating Agreement

For an LLC that has more than one member, creating an operating agreement is necessary. While not required by the state of Texas when filing the Certificate of Formation, the operating agreement is required when you file for a Texas tax license.

Employer Tax Identification Number

An EIN is required if an LLC has more than one member, regardless of whether there are any employees. Forming a one-member LLC requires an EIN if it has employees or if the LLC is being taxed as a corporation. An EIN is available through the Internal Revenue Service website free of charge.

Business Licenses

Contact the Texas Department of Licensing and Regulation for information about the types of businesses that may need specific state and local business licenses.

Taxes

You may be required to register with the Comptroller of Public Accounts if your LLC sells goods and sales tax is collected. There is also an annual franchise tax imposed by Texas on most LLCs. An initial franchise tax report with public information is required the first year and annually thereafter. The report must be signed by the manager or member of the LLC and filed before May 15.

If the LLC has employees, you must register for Texas Unemployment Insurance Tax. This is done through the Texas Workforce Commission.

Foreign Limited Liability Companies

Businesses organized outside of Texas must register with the Texas secretary of state. A foreign LLC must appoint a registered agent for service of process. To register, file an application for Registration of Foreign Limited Liability Company (Form 304).

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