A Texas single-member LLC is a special business structure that provides you with limited liability protections in certain legal and financial situations. There are a number of advantages and disadvantages to consider when forming a company of this type, so it's important to understand exactly what a single-member LLC can do for you and what requirements the state of Texas imposes on this structure.

How to Form a Single-Member LLC in Texas

The name of a single-member limited liability company, or SMLLC, has certain special requirements and must contain one of the following:  

  • Limited Liability Company
  • Limited Company or Ltd. Co
  • LLC or L.L.C.
  • LC or L.C.

Your company name must also be easily distinguishable from any other names already on file in the Secretary of State's database. You'll want to ensure your intended name is available for use by running a business name search. This can be done by utilizing tools available on the Texas Secretary of State website, as well as the Comptroller of Public Accounts website. 

Once you have determined your intended company name is available, you can reserve the name with the state for up to 120 days. This is a simple matter of filing an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) and paying a $40 processing fee.

File a Certification of Formation

One of the first steps in establishing an LLC in Texas is to file a Certificate of Formation with the office of the Secretary of State. The following information must be included in this document:  

  • Your company's official name
  • The address and name of your registered agent
  • Whether your new company will be manager or member managed
  • The address and name of every member of the organization
  • The address and name of the company's organizer

A blank copy of Form 205, or Certificate of Formation, can be obtained from the Secretary of State's official website. It is also possible to file your certification online, 24/7. No matter which method you choose, there will be a $300 filing fee to submit this document to the state.

Prepare and Operating Agreement

The state of Texas doesn't require single-member LLCs to maintain an operating agreement, but it is still a good idea to do so. However, it's not necessary to file this operating agreement with the Secretary of State. This agreement will typically be made between you and the company and covers things such as the following:  

  • Your rights as the sole member
  • Your duties, obligations, etc. to the company  
  • Specific company management structure

By putting an operating agreement into play, you'll be taking steps toward ensuring liability protection and establishing yourself as a separate entity from your company. This can also be beneficial when conducting business transactions with other companies. 

As with most other states, in Texas, if you don't specify that your company will be manager-managed, it will be considered member-managed by default. This can be an important difference, so you'll want to ensure you seriously consider these options before deciding on the structure that best fits your specific business needs.

Obtain an Employer Identification Number

If your company keeps its tax status as a "disregarded entity" and doesn't have any employees other than yourself, you shouldn't have to worry about obtaining a Federal Employer Identification Number, or EIN. As an alternative, you can use your personal Social Security Number when reporting your company's losses and gains on your personal tax return. However, if your company does have employees, or you elect to have your single-member LLC taxed the same way as a corporation, you'll be required to obtain an EIN. 

Although some single-member LLCs aren't expected to obtain an EIN, many business owners still choose to do so because there are some advantages when you do. Some banks may not allow you to open a business account with your personal tax identification number, requiring you to have an EIN even when the state doesn't expect you to. Even some other companies may expect you to have an EIN to process financial transactions.

If you need help with starting a Texas single-member LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only 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.