How Do I Form an LLC in Texas?

When learning how to form an LLC in Texas, you should first know what an LLC is. By establishing an LLC, or limited liability company, a small business owner can greatly reduce the potential financial impact a catastrophic event or lawsuit can incur. The owner or owners are only responsible for their stake in the business, meaning personal assets won’t be drained to keep the business afloat. There are other benefits as well, including the owners’ ability to file business information in their personal tax forms instead of having to file taxes for the LLC itself.

That the individual owners are allowed to keep record of their own financial stake in the business makes for a more fluid and dexterous work environment, with plenty of room for growth. If you plan on starting an LLC in Texas, you’ll be pleased to find many tax benefits meant to encourage small business entrepreneurship.

How to Start a Business in Texas

When starting your LLC in Texas, asking the following questions will guide you through the process:

  • What type of business is for me?
  • How do I expand my business concept?
  • What types of licenses, financial accounts, and tax-filing forms are required to run my business properly?
  • What are the tax benefits my business can take advantage of in the state of Texas?
  • How do I use the internet to bring attention to my business?

Name Your LLC

When picking out a name for your LLC, you’ll want to first think of something that suitably connects to what your business does. Think of people who may seek out your services online and tailor your name to what they might type into a search engine. Once you’ve done that, simply make sure that your business name is in accordance with LLC naming regulations and contains either the abbreviations L.L.C. or LLC or the words Limited Liability Company.

If you want to legally use words like University, Bank or Attorney in your LLC’s name, be sure to fill out proper paperwork and ensure that at least one company owner has the work qualifications to use the word without being misleading. Additionally, using any name other than your legal name will require an assumed name certificate with the Secretary of State, which comes with a $25 fee.

Once you’ve decided on a name, you’ll want to claim and protect it. The office of the Texas Secretary of State offers a free account that allows you to search for other registered business names, so you can make sure your name isn’t already taken. If it isn’t, register a domain name. You can use your Texas Secretary of State account, or file by mail for a $40 fee, to reserve your name for 120 days with an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501).

Even if you’re still in the planning stages for your LLC, and have no intent on getting started on your website, reserving your name and claiming a domain let you plant a flag in the best name for your company before someone else gets the same idea.

Choose a Registered Agent

In order to handle your legal matters, nominating a Registered Agent is a requirement for your Texas LLC. This person or business must be a resident or authorized to do business in the state of Texas, and will be in charge of legal documents either entering or leaving your LLC. A registered agent can be an individual owner of the LLC but not the LLC itself, and will be the recipient and sender of anything, from state filings to anything lawsuit related.

Create an Operating Agreement

You don’t need to have an operating agreement for your LLC in Texas, but it can provide a helpful outline of your business’ ownership and operating procedures.

Start your operating agreement with a mission statement for your business. Then, allocate responsibilities and a designated percentage stake in the LLC to each of your partners. It will be important for you and your business to make sure someone is in charge of your financial affairs, including bookkeeping and bill-pay obligations.

You should also use your operating agreement to plan protocol for when a member departs the LLC. A process for dissolving the LLC should also be put into place, because it’s never too early to think about an exit plan.

If you need help with forming an LLC in Texas, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.