1. Types of Company
2. How to Form an LLC in Texas
3. What is an Operating Agreement?

Types of Company

An operating agreement LLC Texas is an internal business document that lays out the rules of your corporation.

There are two types of companies you can choose, both of which will need an operating agreement:

  • Single-member: This type of company is used by an individual business owner that wishes to start a company while protecting their personal finances.
  • Multi-member: This structure is used when multiple members wish to form policies for their company while establishing protections for each member.

How to Form an LLC in Texas

To form an LLC in Texas, you must confirm that the name you desire for your LLC is available for use.

If you perform a Preliminary Search of Texas records, you should be able to determine if your LLC name is available and unique enough for use. You will need an online account to perform this search.

The first step to forming your LLC is hiring a registered agent. A registered agent will accept service of process for the hiring company. In Texas, a registered agent can either be an entity allowed to do business in the state or an individual resident.

Step two of forming your corporation is choosing your LLC type. There are two types of LLC that you can choose, each of which has its own forms and fees. Choosing a domestic LLC means your corporation is being formed in Texas. Registering as a foreign LLC means your corporation has already been formed in another state and wishes to do business in Texas.

Filing for registration is the third step of forming your LLC. If you are forming a domestic LLC, you will need to complete and submit a certificate of formation. To file as a foreign LLC, you will need to submit an application for registration. These documents can be filed by mail or online.

The fourth step of LLC formation is paying your fees. It costs $300 to form a domestic LLC and $750 to register a foreign LLC. When you submit online, you will pay with a credit or debit card. When registering by mail, you should include your payment and send all documents to the following address: P.O. Box 13697, Austin, Texas 78711-3697.

Negotiating and instituting your operating agreement is step five.

Step six is acquiring local licenses you will need to do business.

The next step is finding out what taxes your LLC will need to pay and if there are regulations with which you will need to comply.

You will need to contact the IRS to request an Employer Identification Number (EIN), which you can do online.

LLCs with employees in Texas must pay employment taxes in this state. You can register to pay your employment taxes using the Texas Employer Portal. You are required to inform both the State and the IRS when you hire a new Texas employee. Reference the IRS website for information about checking your employees' work eligibility and withholding allowance.

The decision to provide workers' compensation coverage is left to the discretion of the employer in the State of Texas. The program is administered by the Texas Department of Insurance, Division of Worker's Compensation.

You may need to file informational returns to the IRS if you are a small business owner.

In Texas, LLCs must pay a franchise tax, which will either be 4.5 percent of earned surplus or .25 percent of capital, whichever is greater. If your LLC owes less than $100, you do not need to pay this tax. No taxes are owed if the gross receipts of your LLC for both taxable capital and earned surplus are less than $150,000 for the current tax period. Instead, an abbreviated information report will be filed.

The eighth and final step of forming your LLC is opening a business bank account. 

Your business and personal finances should be kept separate, and the best way to accomplish this goal is by opening a business bank account. To open your account, you will likely need:

  • Your tax identification number or EIN
  • A copy of your LLC's certificate of formation
  • A resolution that identifies authorized signers, if they were not included in your certificate of formation

What is an Operating Agreement?

The operating agreement is a document that outlines how an LLC will be managed that has been agreed upon by all LLC members.  Your operating agreement differs from your articles of formation in that it does not need to be sent to the state.

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