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Why use UpCounsel to form an LLC in Texas
Starting an LLC in Texas with a business startup attorney on UpCounsel is easy, informative, and cost-effective. In just three simple steps, our LLC attorneys will help you protect your business and personal assets, and help you organize your business for state and federal compliance for limited liability companies.
When forming an LLC in Texas with UpCounsel, the attorney you choose to help you will conduct a business name search for your Texas LLC and assist you in preparing your LLC Operating Agreement, along with providing other legal services based on your needs. Once your Certificate of Formation have been prepared and successfully filed with the Texas Secretary of State, your Texas LLC has been formed and begins its existence as a corporate entity.
Requirements for Forming a Texas LLC
Choosing a Company Name for Your LLC
One of the first steps in the process of forming your Texas Limited Liability Company is to choose your business name.
The business name that you choose must contain the words "limited liability company" or the abbreviation "LLC" or "L.L.C." as the last words in the name of the limited liability company. The words "limited" and "company" may be abbreviated to "Ltd." and "Co.," respectively.
It must be distinguishable (not the same as or deceptively similar to) the name of any Texas Limited Liability Company or foreign LLC reserved or registered and cannot contain the words "bank," "trust," "trustee,""incorporated," "inc.," corporation," or "corp.," or "insurer" or "insurance company" or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
Your LLC name may contain the name of one or more members.
By using UpCounsel, you can choose several business names in order of preference. Your attorney of choice can then conduct a name check for your Texas Limited Liability Company before filing to see which names are available. Once you have chosen an available name, your chosen LLC attorney can help you properly register your name with the State of Texas.
Certificate of Formation: When forming an LLC in Texas, the Certificate of Formation must be filed with the Secretary of State. Texas state law requires that certain information be included in your Certificate of Formation when forming your Texas LLC.
This information must include:
- The LLC name
- Address and Name of Registered Agent
- Registered Agent's signed consent form
- Purpose for which LLC is being formed
- Whether LLC will be manager-managed or member-managed
- Addresses, Names, and Initials of managers or members
- Addresses and Names of Certificate of Formation organizers
- Payment of fees
Additionally, a Texas LLC formation generally requires inclusion and/or consideration of the following:
Organizers: One or more people may form a LLC, yet they do not need to be members of the LLC.
Minimum Number of LLC Organizers: One (or more).
Eligibility: An organizer may be an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, whether domestic or foreign.
LLC Operating Agreement: Although not required in Texas, it is strongly recommended that an LLC with more than one member adopt an operating agreement for the company, which may also be amended and repealed as allowed by the agreement or applicable law. The Certificate of Formation may contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, any operating agreement shall initially be agreed to, in writing, by all of the members.
Eligibility Requirements: A natural person or an entity.
Procedure for Membership: The member may acquire an interest in the LLC directly from the limited liability company at the time of formation and, after formation, at the time provided in and upon compliance with the Certificate of Formation or the operating agreement or, if not provided, only upon the vote of a majority in interest of the LLC members, excluding the vote of the person acquiring the membership interest, and only when the person becomes a party to the LLC's operating agreement.
Resident Agent needed for a Texas LLC
UpCounsel attorneys can also provide your business with a registered agent in Texas. Every Texas LLC must have a registered agent in Texas, which is the person or office designated to receive official state correspondence and notice if the company is "served" with a lawsuit. The registered office may be a place of its business.
The company must have the chosen registered agent fill out and sign an acceptance of consent, Form 401-A. This must also be filed with the Secretary of State.
Texas Secretary of State
Once you create an LLC in Texas, the Texas Secretary of State will require that certain recurring responsibilities and duties be fulfilled. The most important of these are explained below.
For further information, contact the Texas Secretary of State.
Recurring Responsibilities and Duties for Texas LLCs
Annual Report: Each limited liability company shall provide an annual report to the Texas Secretary of State regarding its financial condition to each of its members.
Records: Each Texas Limited Liability Company must keep the following records open to inspection at its office:
- A current list of the full name and last known business or residence address of each member and of each holder of an economic interest in the limited liability company set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and holder of an economic interest.
- If the LLC is manager-managed, you will need a current list including the full name and business or residence address of each manager.
- A copy of the Certificate of Formation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Formation or any amendments thereto were executed.
- Copies of the limited liability company's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years
- A copy of the LLC's Operating Agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.
- Copies of the limited liability company's financial statements, if any, for the six most recent fiscal years.
- The books and records of internal affairs as they relate to the limited liability company for at least the current and past four fiscal years.
Filing Fees for a Texas LLC
Filings must be made with the Texas Secretary of State in which the LLC was organized, along with the appropriate state filing fee. The filing fee for the Certificate of Formation is $300. Fees are subject to change so make sure you check with the Secretary of State. This may be done online on the Texas Secretary of State's website or by mail.
Taxes for a Texas LLC
Having an LLC in Texas can offer certain tax advantages over having a corporation, including the availability of more tax deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation; instead, it can be considered a "pass-through entity," so that the owners of the LLC report business losses or profits on their personal tax returns, just like in a partnership.
Federal Income Tax: Unless you elect to tax the limited liability company as a corporation, the IRS will treat a single-member LLC in Texas as a sole proprietorship for tax purposes. This means that the LLC itself does not have to pay taxes or file a tax return. Unless you elect to tax the Limited Liability Company as a corporation, the IRS treats multi-member LLCs as partnerships for tax purposes. This means that LLC owners will each need to pay taxes on their lawful share of the profits on their personal income tax returns, not just on the LLC itself. However, if you file IRS Form 8832, you may elect for corporate taxation if you regularly need to keep a substantial amount of your profits in the LLC.
Federal Tax Identification Number: Your LLC will need to obtain a federal tax identification number, which is also known as an Employment Identification Number (EIN). An EIN is similar to an individual's social security number. You will need an EIN for your LLC as long as there is one member, even if the LLC does not have employees. For certain tax filing requirements the attorney you choose on UpCounsel can help prepare your Federal Tax ID Application, if you have not done so already.
State Taxes: LLCs in Texas are subject to a state franchise tax. In order to be in compliance, you must submit a franchise tax report with a public information report to the Texas Comptroller of Public Accounts. This will be a yearly requirement and annual reports will be due on May 15th every year.
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