Texas LLC Form: Everything You Need to Know
Filing a Texas LLC form is required to establish your limited liability company in the state.3 min read
Filing a Texas LLC form is required to establish your limited liability company in the state. A limited liability company (LLC) is a business structure best suited to small businesses because it gives the owner limited personal liability in business-related financial matters. For example, if someone sues your Texas business, you won't lose your personal assets.
LLC Benefits for Texas Entrepreneurs
Establishing an LLC ensures you maintain flexibility in how your company is run. As an LLC owner, you are only financially accountable for your investment in the company. Even better, state and federal law extend tax advantages to LLCs that other entities don't enjoy.
The LLC itself doesn't pay state or federal taxes. Instead, the company's profit passes through the business onto the owners. These owners, who are referred to as members, then report the company's net income on their own personal tax returns.
How to Register an LLC in Texas
The first step in establishing an LLC in Texas is to choose an official business name. You can choose any name you like, but it's important to note rules and restrictions about naming LLCs:
- Your LLC name must be unique; a name that is too similar to another business name will be rejected
- No obscene language or profanity
- Names that would confuse your company with a federal agency, such as IRS or CIA, are prohibited
- Texas LLCs must include the phrase “Limited Liability Company” or one of its abbreviations (LLC, L.L.C., etc.) at the end of the business name
- Certain words, such as “bank” or “university” require additional paperwork or licenses
- Check your LLC name's availability on the Texas Secretary of State's website to ensure the name is available for use (you must first request an account before searching the name directory)
After checking for your LLC name availability, go ahead and reserve a suitable domain name for your future website. Use an online search engine to make sure your preferred URL is available. If you fail to reserve your domain now, someone else may purchase it while you're waiting for your LLC registration. You should also consider getting a professional email address with your company's name.
If your ideal business name is already taken, consider getting a “doing business as” or DBA name. A DBA name is essentially an assumed, fictitious name under which you can perform daily business operations. Just remember that using the same assumed name as another company can confuse your customers and create legal problems.
When you're ready, register your legal LLC name by filing documents with your county clerk's office or the Texas Secretary of State's website. Filing requires you to provide your LLC name, each owner's information, and the nature of the business. Finally, pay the required $40 fee to register your name.
How to Set Up Your Texas LLC
Decide who your members are. An LLC can have one member or multiple members. Members are the business owners and managers who have governing authority. While most members choose to manage the business themselves, you can hire a manager who is not a member of the LLC.
However, you must decide when registering your LLC how many people are members. Be sure to make this decision before creating your Certificate of Formation.
Next, create your Operating Agreement outlining the company's procedures and policies. An Operating Agreement isn't required by state law, but it's beneficial in clarifying all verbal agreements between multiple members.
The Operating Agreement should:
- State the business's purpose
- Define each member's responsibilities, authority, and ownership percentage
- Outline dissolution procedures should the business end
After crafting your Operating Agreement, you need to find a registered agent. A registered agent is a Texas resident or company who can receive documents on your behalf during normal business hours. This person will be contacted should your LLC be sued or if the IRS attempts to collect taxes. In most cases, one of the members can act as registered agent, but you can also hire someone.
Finally, create your Certificate of Formation. Texas requires you to file the Certificate of Formation to register the LLC. It should also include the company's Articles of Organization. To make it easier, download a Certificate of Formation application from the secretary of state's site. When ready, submit these documents and pay the required $300 fee.
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