Texas LLC Information: Everything You Need to Know
Texas LLC information is readily available through the Texas Secretary of State website.3 min read
Texas LLC information is readily available through the Texas Secretary of State website. You must register by filing specific forms, paying all filing fees, and meeting all the requirements for naming and forming your LLC. They are generally easy to form, but Texas does set forth some specific requirements.
Creating an LLC in Texas
An LLC in Texas is formed by filing a Certificate of Formation with the Secretary of State. You can file this online through the SOSDirect website. An LLC is not a corporation or a partnership, but it's a distinct entity that enjoys the benefits of both a partnership and a corporation.
Owners of an LLC are called “members.” Members can be partnerships, individuals, corporations, trusts, or any other legal or commercial entity. Member liability is limited to their investment amounts, and they get the benefit of “pass-through” taxation, similar to a partnership. Before deciding on an LLC formation, it's still best to consult with an attorney and accountant to verify if this is the best business structure for your specific company.
LLCs have the option to be managed either by its members or by specific managers. The decision on management must be stated in the Certificate of Formation. The decision on how to manage your LLC is a personal one, to be made by the company's members. The Texas Secretary of State cannot provide guidance on which management type is best.
How to Start an LLC in Texas
To start the process, decide on a name for the LLC. You can choose any name that is not already registered to an existing business entity, but it must end with some variant of LLC or Limited Liability Company. You can reserve your intended name by filing Form 501. You must include the following:
- Intended LLC name
- Entity type
- Name and address of the person making the reservation
- Applicant's lawyer's or agent's signature
Texas requires you to name a registered agent for service of process. The person who will be the registered agent must complete Form 401-A, which is filed with the Secretary of State's office. This form includes the LLC's name and a personal statement from the intended registered agent confirming his or her consent, their signature, and the date of execution.
If you are forming a multi-member LLC, you need to file for a federal employer identification number (EIN) from the IRS. You need this even if you don't plan to have employees.
Next, you need to create an Operating Agreement. This is especially important for LLCs who have more than one member. It is not necessary to file this with the Texas Secretary of State, but it will be submitted when filing for your Texas tax license.
It's important to look at specific requirements in Texas that deal with LLCs. For example, Texas requires LLCs to pay franchise tax. The Texas Comptroller requires all business to submit an initial franchise report, which contains a public information report. LLCs will then file an annual franchise tax report every year thereafter. Reports are to be signed by an LLC manager or member, and the deadline for filing is May 15.
Adding Members to an Existing LLC
If you plan to add members to your existing LLC, you need to conduct a vote to authorize the addition. If you have an Operating Agreement, the agreement should address how membership transfers and the process of adding new members are handled. Without an Operating Agreement for direction, Texas requires you to follow the provisions set forth in the Business Organizations Code, which requires the unanimous consent of all members.
For an LLC with an Operating Agreement, it will need to be amended once the LLC agrees to add a new member. Texas doesn't require you to file an amendment to your Certificate of Formation to reflect any ownership structure changes. If the new member will have management authority, you will need to note the ownership change on your public information report when filing your annual Texas franchise tax return. Public information reports can be filed online with your yearly franchise tax returns; otherwise, you need to fill out the form and mail it to the State Comptroller's office. There is no associated filing fee for making a change in your company's public information report. However, there are associated filing fees for your yearly return, which vary based on company size, assets, and yearly income.
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