Form an LLC in Texas

To form an LLC in Austin, TX, there are several important requirements that you will need to fulfill. Forming an LLC, which is also known as a limited liability company, is a popular business structure. Other common business structures include:

  • General partnerships
  • Limited partnerships
  • Limited liability partnerships

In Texas, you can form an LLC with one member or as many members as you wish. LLCs are a unique type of business entity and differ from corporations and partnerships in several important ways.

In the Texas Business Organizations Code, the rules for LLCs are outlined in title 3, chapter 101. Reading the Code will help you understand the rules for LLC formation, including the information that must be included in your Certificate of Formation. The person or persons that own an LLC are referred to as members. Typically, LLC members are usually individuals, but members can also be corporations, partnerships, or other legal entities.

When you form an LLC in Texas, you will be required to file certain documents with the Secretary of State and pay a franchise tax to the state. More information about the franchise tax can be acquired by calling the Texas Comptroller of Public Accounts.

To pay your franchise tax and other taxes, you will need an Employer Identification Number (EIN). You can learn more about EINs by visiting the IRS' website.

When you form your LLC, your company will operate like a partnership but will have the same powers as a corporation. For example, an LLC protects member's personal assets from liabilities and debts incurred by the company.

Other than the capital that they provided to the company, an LLC shareholder will not be held liable for company debts. This differs from general partnerships, which holds all partners liable for the business' debts.

In a limited partnership, the liability of partners is limited, as is their power to make decisions on behalf of the company. All partners in a limited liability partnership are personally liable to some degree.

Once you decide whether forming an LLC is the right choice for your business, you will need to choose and register a name.

Entity Name and Type

You will need to provide a name for your company and a designation for your organization. The name you choose for your LLC must not be in use by any other business in Texas and should be as unique as possible.

Under the Business Organizations Code, LLC names that are identical or confusingly similarly to other LLCs in the state cannot be reserved or registered. You can find out more about the naming rules for LLCs in Texas on the Secretary of State's website.

It's also possible to receive the state's decision on your desired company name by calling the Secretary of State at (512) 463-5555 or by sending an e-mail. Be sure that the name of your LLC includes either “limited company” or “limited liability company. You are allowed to use abbreviations of these words such as L.L.C. Final approval will not be given to your LLC name until the Secretary of State has received all necessary documentation.

Even if you have received a preliminary LLC name determination, you should not attempt to transact business using this name until you have been issued a Certificate of Formation. 

Registered Agent and Registered Office

When choosing a registered agent for your LLC, you can select either an individual who is a Texas resident or a domestic/foreign entity that is legally allowed to transact business in the state. Your registered agent, whether it is a person or business entity, is appointed to accept service for legal documents on behalf of your LLC.

In 2010, Texas regulations changed, and registered agents are required to accept the role either in writing or through an electronic form. If you name a registered agent without the person or business' consent, you will face stiff penalties as described in the Business Organizations Code.

Your registered agent must possess a physical Texas address where they can receive service of process. A P.O. Box or address for an answering service is not acceptable.

If you're not sure if forming an LLC is the right choice for your business, you should contact an experienced attorney. The right attorney can help you handle all the paperwork needed to form your LLC, and can help you make important decisions related to management of your company and the distribution of losses and profits. 

If you need help forming your LLC in Austin, TX, you can post your legal needs 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.