The Ins and Outs of Creating an LLC in Dallas
Creating a limited liability company (LLC) is an important step for any business as it comes with a variety of benefits3 min read
Creating a limited liability company (LLC) is an important step for any business as it comes with a variety of benefits. The process of forming an LLC can initially appear overwhelming, but by taking steps in the right order, anyone can have their LLC registered and operational in no time.
LLCs offer firms protection against certain types of losses, increased flexibility with their taxes and simplified business structures. For individuals planning to start an LLC in Dallas, Texas, following this comprehensive guide will ensure a successful launch.
Step 1: Choose a Strong Name for Your Business
Choosing a name is the first order of business when starting an LLC in Dallas. There are a few rules to follow when selecting a corporate identity: it must contain “limited liability company,” “L.L.C.,” “LLC,” or “ltd”; it cannot include certain words (such as the words “bank” or “insurance”); it may not include any language that implies the entity is any other kind of business, such as a nonprofit; and it must be distinguishable from the products or services of any other business in the state.
Make sure to double and then triple check the name you have chosen as there is a large filing fee to change the business’ name down the line.
Step 2: Filing the Organization Documents with the State
To create a legally documented LLC requires several documents. The first is the Certificate of Formation — also known as the Articles of Organization — which is required before the LLC can begin operation. This document is filed with the Texas Secretary of State with the necessary information about the LLC — the formation date, the company’s name, the names and addresses of the managing members, and information about the registered agent.
The registered agent in Texas must be a permanent resident of the state or a business entity with a physical address inside the state. The registered agent is responsible for receiving notifications and documents on behalf of the LLC.
Step 3: Prepare an Operating Agreement
Although not required by law, an operating agreement is a very important tool needed to manage and protect the LLC. The document outlines the operations of the business, as well as the rights and obligations of the managing members. It should include information about the management structure of the business, the distribution of profits and losses, and the role of each officer.
In Texas, a written LLC Operating Agreement is not legally required, but is recommended. This document ensures that there is agreement between the members of the LLC, which minimizes the potential for disputes regarding the operations of the business. Operating agreements help to ensure that the LLC operates efficiently and is legally compliant.
Step 4: Obtain Optimal Tax Status
By default, the Internal Revenue Service (IRS) classifies mult-member LLCs as partnership entities for tax filing purposes. For single-member LLCs, the IRS classifies them as disregarded entities — meaning that the taxes are not separate from the owner’s personal taxes. If either of the members prefer a different type of status, they can file Form 8832 to elect a different tax classification.
It is advised to determine the corporate tax classification before filing taxes — for the first tax year and future years — as it could help to opt for a more favorable tax treatment.
Step 5: Register with the Texas Workforce Commission
In Texas, most LLCs must also contact the Texas Workforce Commission (TWC) in order to register to pay federal employment taxes. This process requires the employer identification number (EIN) assigned by the IRS. The EIN is required to hire employees and open a business bank account.
Step 6: Get a Local Business Permit and/or License
Many businesses, including LLCs, need to obtain local business permits or licenses before starting operation. Depending on the nature of the business, this could involve contacting the local zoning office or other city departments.
Step 7: Prepare an Annual Report
All LLCs in Texas are required to submit an annual report to the state. The report must contain the business’ name, mailing address, and the type of business entity.
The annual report is available on the Texas Secretary of State website, and it is important not to miss the annual filing deadline. The annual filing fee is set by the state, though it is usually under $50.
Final Thoughts on Establishing an LLC in Dallas
From choosing the business name and obtaining the proper permits to registering with the Texas Workforce Commission and filing the Annual Report to the state, there is a lot that goes into creating and maintaining a LLC.
Though the process can seem overwhelming, any individual can get started with an LLC if they set aside time to go through the steps outlined in this guide. And those located in Dallas are wise to seek out counsel from experienced local attorneys who understand the nuances of the Texas business environment.
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