Starting a LLC in Texas: Everything You Need to Know
Starting an LLC in Texas is the process of creating a limited liability company, a type of business entity that limits your liability for business debts.3 min read
2. Determining Management Structure
3. Choosing a Registered Agent
4. Creating an Operating Agreement
5. Submitting the Certificate of Formation
Starting an LLC in Texas is the simple, flexible process of creating a limited liability company, a type of business entity that limits your financial liability for business debts and obligations to the amount you've invested in the company. This protects your personal assets, including your home and car. LLCs are subject to pass-through taxation, which means that profits and losses are reported on the owners' individual income tax returns and not taxed at the corporate level.
To form a Texas LLC, you'll need to file documents with the Secretary of the State, pay the associated filing fee, and meet other state-specific requirements.
Choosing an LLC Name
Your LLC must have a unique name that meets the following requirements:
- Is not similar enough to be confused with the name of another business
- Does not include profanity or obscene language
- Does not include words such as CIA or IRS that may cause confusion with a federal agency
- Contains the words Limited Liability Company, Limited Company, or an abbreviation of these
- Does not include restricted words such as attorney or bank without the involvement of a licensed professional and additional state approval
You can search the name database on the Texas Secretary of State website to make sure the name you want to use isn't already taken by another business. You must sign up for an online account with the site to search and each search costs $1. You should also make sure the URL is available for the business name that you want to use.
After choosing a name, you must reserve it with the Secretary of State for up to 120 days by Filing Form 501, Application for Reservation or Renewal of Reservation of an Entity Name. The fee for this service is $40.
Trademarking your name prevents it from being used by other businesses nationwide and is recommended if you have an original name that distinguishes your products or services from those of competitors. A trademark can be registered through the U.S. Patent and Trademark Office for a fee of between $275 and $325.
Determining Management Structure
LLC owners are called members. The business can be managed by one or more members or by a board of directors or officers appointed by the members. Individual members who may act on behalf of the LLC have governing authority. Members can also hire professional managers and grant them governing authority. You'll need to make this decision before registering your Texas LLC.
Choosing a Registered Agent
Your Texas LLC application will ask for the name of a registered agent. This person agrees to accept state and legal documents on behalf of your business. They must have a permanent physical address in Texas and be available to accept legal notices during business hours. This can be an individual or a business registered in the state. It can also be an LLC member who meets these requirements. You can also hire a registered agent service, which is a convenient option if you live outside Texas. The registered agent must fill out and sign Form 401-A, Acceptance of Consent.
Creating an Operating Agreement
This document, which outlines your LLC's procedures and policies, must be submitted when you file for a tax license with the state. It should include the purpose of your business, the members' duties and powers, their ownership percentages, the name of the person responsible for accounting, the procedure to follow if a member dies or leaves the business, and dissolution procedures.
Submitting the Certificate of Formation
To create your Texas LLC, submit Form 205, Certificate of Formation, to the Secretary of State. This filing should include the name and address of your registered agent, the name of your LLC, the registered agent's signed consent form, a statement about the LLC's management structure, the names and addresses of the organizers, the business's purpose, the dissolution date (if any), the names and address of managers and members, and a method for paying the filing fees ($300).
This form can be filed online and is processed within two business days. However, additional fees may apply if you file online, including a credit card processing fee.
If you need help with starting 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.