Key Takeaways

  • Forming a Texas LLC requires selecting a compliant business name, designating a registered agent, and filing a certificate of formation.
  • Texas offers a Series LLC option, enabling separate asset protection for different business units under one parent LLC.
  • Keeping property under a Texas LLC provides enhanced liability protection, tax benefits, and asset segregation, especially useful for real estate investors.
  • An operating agreement and EIN are vital for operations, and proper licensing ensures compliance with state and local regulations.
  • Understanding the benefits, drawbacks, and best use cases of Series LLCs and property ownership through LLCs can significantly improve your liability protection strategy.

To form a state of Texas LLC, follow these steps:

  1. Choose a business name.
  2. Designate a registered agent.
  3. File a certificate of formation with the state.
  4. Create an operating agreement.
  5. Obtain an Employer ID Number and all necessary licenses and permits.

How to Form an LLC in Texas: Choosing a Name and Registered Agent

Limited liability companies (LLCs) combine features of partnerships and corporations. LLCs are pass-through entities. They offer their owners limited liability protection and flexibility in operating procedures.

You'll go through the Secretary of State office to set up your LLC.

The first step you'll take is choosing an appropriate business name. Do some research and select a name that fits your business and attracts potential customers. Adhere to the naming guidelines, ending your business name with a designator such as LLC, L.L.C., or Limited Liability Company.

Some words will be restricted, such as “attorney” or “bank.” You may need a licensed professional, such as a lawyer or doctor, to be part of your LLC in order to use certain restricted words. Other words are prohibited — such as Secret Service or FBI — because they can confuse people into associating your business with a state or federal agency.

Your business name has to be distinguishable from existing business names in the state. You can check the Secretary of State website to see if the business name you wish to use is available.

You must name someone as your registered agent, sometimes referred to as an agent for service of process, statutory agent, or resident agent. This is an individual or company that agrees to accept and send legal paperwork on your LLC's behalf. Documents may include state filings and service of process. Your registered agent must have a physical street address in Texas.

The person or company acting as your registered agent must give written or electronic consent to fill this role.

Understanding the Texas Series LLC

Texas is one of the few states that offers a Series LLC, a unique legal structure that allows a single LLC to contain multiple independent “series” or “cells” under one umbrella. Each series operates with its own assets, liabilities, members, and business purpose — and is protected from the liabilities of other series within the same LLC.

This structure can be particularly advantageous for business owners with multiple ventures or assets, such as real estate investors managing different properties. Instead of creating separate LLCs for each asset, you can form one Series LLC and establish a distinct series for each property or line of business.

Key benefits of a Texas Series LLC include:

  • Enhanced liability protection: Each series is insulated from the debts and obligations of others, safeguarding your assets.
  • Cost efficiency: Forming and maintaining one Series LLC is typically less expensive than creating multiple traditional LLCs.
  • Management flexibility: Each series can have unique managers, members, and business purposes.
  • Asset segregation: Ideal for real estate portfolios, franchises, or businesses with multiple divisions.

However, Series LLCs also come with drawbacks. Not all states recognize the structure, which can complicate interstate operations. Additionally, proper record-keeping is critical — failing to maintain separate books and accounts for each series could jeopardize liability protections.

Documents, EINs, and Licenses

To create an LLC in Texas, you'll file a certificate of formation with the state. The document must include the following:

  • The name and address of your business
  • The name and address of your registered agent
  • Each organizer's name and address
  • How the LLC will be managed, i.e. by members or managers
  • Document drafter name

To state the purpose for your LLC, it's fine to say you're forming it for "any lawful purpose." You may also choose "perpetual" for its duration. You can file your certificate with the state by mail or online.

An operating agreement outlines your business's ownership and operating procedures. Texas doesn't require you to have this legal document, but it's still a good idea to have one for your own records.

You'll need an EIN, or Employer Identification Number, also called a Federal Tax ID Number. Your LLC's EIN will be a nine-digit number that identifies your unique business. You'll need to use your EIN when you file taxes with the state and federal government. You'll also use it to open business bank accounts, as many banks require businesses to use EINs instead of an owner's Social Security Number.

After you start your LLC, you can obtain your EIN from the IRS. It's free to do so. To obtain an EIN, you can apply online at the IRS website. You can also print out an application and mail it in.

You might need to obtain certain city, county, and/or state permits and licenses to do business. This will depend on the type of business you operate and your location. You may also need to register with the Department of Revenue, depending on whether you sell goods, collect sales tax, or have employees. You can usually register for permits and licenses online or by mail.

LLCs are considered the easiest business type to start because it's generally inexpensive and quick to set them up. Many people are able to form their own LLCs without legal help. They enjoy the liability protection and flexible management that LLCs offer.

You can find resources and tips at the state website if you're thinking of starting an LLC. You can also call the state office if you have additional questions.

Owning Property Through a Texas LLC

One of the most common uses for a Texas LLC is holding real estate or investment property. Transferring property ownership from your personal name to your LLC can provide significant legal and financial advantages:

  1. Liability Protection: By holding property under a Texas LLC, your personal assets are generally shielded from lawsuits, debts, or claims related to the property. If an incident occurs on the premises, only the LLC’s assets — not your personal wealth — are at risk.
  2. Asset Segregation: Using separate LLCs (or separate series within a Series LLC) for different properties prevents liabilities associated with one asset from affecting others.
  3. Tax Benefits: Depending on your structure, profits may pass through to owners without being taxed twice. Additionally, certain business-related expenses (e.g., maintenance, management, insurance) may be deductible.
  4. Privacy and Estate Planning: Property held under an LLC is not directly tied to your personal name in public records, offering a layer of privacy and simplifying estate transfers.

That said, transferring property into an LLC must be done carefully. Lenders may require loan restructuring, and property taxes or insurance policies might change once the property is no longer held personally. Consult with a qualified attorney or tax professional to ensure compliance and avoid unintended consequences.

Frequently Asked Questions

  1. What is a Series LLC in Texas?
    A Series LLC is a type of Texas LLC that allows you to create separate divisions (series) under one parent entity, each with its own assets, liabilities, and members.
  2. Can I hold multiple properties under one Texas LLC?
    Yes. You can either hold multiple properties under a single LLC or create separate series within a Series LLC to isolate liability for each property.
  3. Are Series LLCs recognized in other states?
    Not all states recognize Series LLCs. If you plan to do business across state lines, consult an attorney to determine if a Series LLC is the right choice.
  4. What are the main tax advantages of a Texas LLC?
    Texas LLCs typically offer pass-through taxation, avoiding double taxation. Members report business profits and losses on their personal tax returns.
  5. Do I need an operating agreement for a Texas LLC?
    Although not required by law, having an operating agreement is strongly recommended. It outlines ownership, management, and operating procedures, reducing the potential for disputes.

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