How to Apply for an LLC in Texas

Many small business owners ask how to apply for an LLC in Texas. An LLC, or “limited liability company,” is a type of business structure. It is one of the most common forms, and is becoming more and more attractive for smaller businesses.

One of the biggest benefits of forming an LLC is the personal liability protection it provides its owners. Because a state recognizes the LLC as a distinct legal entity separate from its owners, the personal assets of the owners are generally protected against any of the LLC’s creditors. If an LLC has any financial debts or legal liabilities, the owners will not be held personally liable to any of the LLC’s creditors. The only financial liabilities they are responsible for is their initial investment in the company.

How to Create an LLC in Texas

Forming and maintaining a limited liability company in Texas is fairly easy and inexpensive. The LLC will be regulated under state law but is still subject to federal taxes. However, both state and federal law offers certain tax benefits to LLCs.

Owners of an LLC are also referred to as “members.” Members of an LLC can be other individuals, partnerships, or even other corporations. In Texas, an LLC is regulated under Texas Business Organizations Code Title 3 Section 101. This sections lays out all of the requirements a member must take in order to register their business as an LLC in the state, including:

1. Pick a Name for the LLC

One of the first steps of forming an LLC is to choose a name. Under Texas state law, the LLC’s name must be unique. It cannot be similar to any other business already registered with the Texas Secretary of State. In order to check to see if a name is available, you can run a free search through the state’s SOSDirect website. Texas allows you to register for a free account so you can run any name search and also file any required business forms electronically.

Texas also requires every LLC to include an identifying term at the end of the name. For an LLC, this means that the business must include either “LLC,” “Limited Co.,” “Ltd.,” or some other combination that identifies it as an LLC. Prohibited identifying terms include “Inc.,” “Bank,” or any other word that is misleading to the public.

2. Create and File a Certificate of Organization

An LLC will not formally exist unless the LLC’s owners file a Certificate of Organization (Form 205) with the Texas Secretary of State. The Certificate of Organization must include basic information about the LLC, including:

  • The name of the LLC
  • The name and address of the LLC’s owners/members
  • The name of the LLC’s registered agent
  • Whether the LLC is managed by members or managers
  • The termination date

If the LLC elects to be managed by a manager as opposed to members, it must choose who those individuals are going to be. The Certificate of Organization can be filed with the Secretary of State electronically or by mail. There is a one-time fee of $300.

3. Designate a Registered Agent

Texas requires every LLC to choose a registered agent who is able to accept and send legal documents on behalf of the LLC. A registered agent can be another individual (including a member) or another business entity. The only requirement is that the registered agent be a resident of Texas with a physical street address. The LLC itself is prohibited from being its own registered agent.

4. Create an Operating Agreement

Although not required under Texas state law, it is a good idea for an LLC to create an Operating Agreement. This document essentially lays out the rules and procedures of day to day operations, such as the financial contributions and responsibilities of all of the owners, the process for adding or removing members, how often to have annual meetings, etc. The document should also note how much of the LLC each member owns.

5. Apply for an Employer Identification Number

An employer identification number, or “EIN,” is required to file taxes as an LLC and may even be required to open up a bank account. Even if there is only one member that makes up the LLC, it must obtain an EIN.

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