Texas LLC Formation Checklist: Everything You Need to Know
Creating a Texas LLC formation checklist can make the process of forming your new business a little easier.3 min read
Creating a Texas LLC formation checklist can make the process of forming your new business a little easier. You must register with the Secretary of State office in Texas, fill out specific forms, and pay the required filing fees. However, the process is a little more complex than just filing a few forms.
In general, it's easy and affordable to create an LLC in Texas. However, there are some specific requirements that aren't seen in some other states. Here are some important checklist items to keep in mind when forming a new LLC in Texas. These are especially helpful when you have a business with multiple owners.
Basic Information Checklist
- Have a list of three names, in order of preference, that you want to name the LLC.
- Have complete names and addresses for all potential members, along with their spouses.
- Decide whether it will be member-managed or manager-managed?
- Will there be officers? If so, have their names and titles.
- Write a description of your business.
- Have the location in mind — will there be branch offices? Offices in other states?
LLC Name Requirements
This is one of the most important aspects of LLC creation so take ample time to choose the multiple names you have decided on. You can pick any name, provided it's not already registered, but it must include some variant of the abbreviation “LLC” or the words “Limited Liability Company” at the end. Do an LLC name search and then you can reserve your name by filing Form 501 with the Texas Secretary of State office.
Questions for Existing Businesses
If you have an existing business you plan to change to an LLC, have the answers to these questions:
- Will any properties in the business name be transferred to the LLC?
- Will all licenses, certificates of ownership, and insurance policies be transferred?
- What liability of the old business will the new LLC assume?
- Do you need to dissolve the old business?
- What are the terms of contributions? Cash, property, a combination of both? When are monies due?
- Is there an agreed value of property and what did it cost the member?
- Are any members going to contribute services or intangible property?
- Is any member loaning property to the LLC?
- What are ownership percentages?
- Will any members not be required to make a capital contribution?
- What about provisions for capital call contributions and penalty provisions in case the contribution is not made?
It helps to understand the accounting and procedures for an LLC in Texas.
- What will be the individual and fiscal years for members and the LLC?
- Will you use the cash basis or accrual method of accounting?
- When will you distribute financial statements to your members?
- How will you calculate annual profits and losses?
- Do you have special provisions on accessing the books or any restrictions for confidential information?
Deciding on the terms of your management structure is very important with an LLC.
- Will members have equal votes? If not, will they be divided into multiple groups with different voting and management rights?
- Will the management be transferred to one or more specified people? When do managers need member approval?
- Will a manager need a bond?
- How will you handle salary changes?
- Who and how will checks be signed?
- When will manager and member meetings be held?
- Will you pay management a fee? If so, how will you calculate it?
- Can all members enter into contracts on behalf of the LLC?
- Are all members and managers expected to devote all their time to the business? What are provisions for possible conflicts of interest?
- What dispute resolution provisions will be enacted?
Dissolution of an LLC
In the event of a possible dissolution, you need to have a plan in place.
- What events can cause a dissolution?
- Are members expected to act as liquidators? Will the manager(s) select who will? Will liquidators be compensated?
- Are assets ones that can be distributed wholly or partially?
- Do any members require the return of specific property items they contributed?
- What is the distribution order for assets?
- Is there a way the LLC can be continued?
Other Important Topics
There are a number of other topics that need to be addressed when forming an LLC:
- Tax treatment (how will the LLC be taxed?)
- Life insurance (are members required to purchase, how much do they need, etc.)
- Admitting new members
- What constitutes a prohibited act?
If you have questions regarding Texas LLC formation checklist items, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts 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.