How to Form a Texas LLC in 10 Steps
An LLC or Limited Liability Company (LLC) is a common business structure. It allows one or more individuals to own a portion of a given company. Profits earned by an LLC are passed through to its members, and the LLC does not file a separate tax return the way a corporation does. An LLC also reduces the owner(s) exposure to liability from company activities.
Forming a Limited Liability Company is a straightforward process, but there are several steps you'll want to follow.
1. Choose a Company Name.
It is crucial to ensure that your business has the right to use the name you’ve chosen for it. If you like, SunDoc can run your name search or reserve your LLC name for you. Your preferred name needs to be available in the State of Texas.
2. Understand the LLC Organizer Requirement.
An organizer is the person or company that drafts your LLC. By preparing on-line with us, SunDoc Filings will be your organizer. If you choose to prepare and upload your filing with SunDoc, you can name your own organizer.
3. Designate a Registered Agent.
All LLCs need to have either a person or firm as a Registered Agent. You’ll need a Registered Agent for your Articles of Organization (see step #6). To understand further why your company must have a Registered Agent and to learn more about this position, see our Registered Agent Service article.
4. Decide Your Ownership and Management Structure.
The Certificate of Formation form will demand to know whether your Texas LLC is going to be managed by one manager, multiple managers, or all of the members of your LLC. You need to make a decision on whether you would like to be a manager-managed or a member-managed LLC.
5. Create an Operating Agreement.
In the State of Texas, you are not required to have an LLC in order to have an Operating Agreement. An implied operating agreement is formed according to the default conditions specified in the law. Still, you should determine if the default conditions are in your best interest.
You need to create an Operating Agreement for your company records if your LLC will be manager-managed. Current Texas law states that a manager-managed LLC will only be valid when you declare it in both the Operating Agreement and Articles.
The Operating Agreement is the legal engine that drives your business. It manages your working capital, creates your business’ governance, and pays out its profits. Critical matters of money, voting, liability, and fiduciary constraints are at stake here. You may also wish to consult an attorney for advice.
6. File the Certificate of Formation.
In the State of Texas, you are required to file the Certificate of Formation, a one page form. This provides details for your company. When the Texas Secretary of State accepts your Certificate of Formation, your company will be created.
You need to have a name and address for your company in order to file your Articles of Organization. You also need to have an LLC organizer, a management method, and a registered agent. In Texas, it is not required that members’ names are filed. You also do not need to publish the creation of your company in a newspaper of record.
If you would like to have a filing service handle your paperwork or if filing yourself is an issue, SunDoc would be happy to file your Certificate of Formation on your behalf.
7. Obtain an EIN (Employer Identification Number) and Open a Business Bank Account.
Congratulations on having a newly registered Texas LLC! If you have more than one member of your LLC, it is required that you file with the Internal Revenue Service for an Employer Identification Number or an EIN. This is true whether or not your company has employees. SunDoc can file for you, or you can file with the IRS by yourself.
Keep in mind that Employer Identification Numbers are also needed in order to open business accounts with the most banks. Now is a good time to set up your first business account for your company, especially if you’ve been using a personal account to pay for business expenses up until now. It’s important to keep all receipts necessary for reimbursement no matter what accounts you’ve been using for payments in the past. It might also be wise to find a business accountant at this time.
8. Pay Texas State Taxes.
Every year, you will be required to pay state taxes in Texas on behalf of your LLC. Remember that you need to collect sales tax if you plan to sell goods in the State of Texas as well.
9. Determine Necessary Licenses and Permits.
Most Texas companies need to have one or more business licenses or permits to operate at the city or county level. You may be surprised to discover what’s required. Operating without the proper license or permit can result in expensive fines.
10. File a Public Information Report.
Each LLC must file a Public Information Report (PIR) to satisfy their filing obligation. The PIR is due on the date the franchise tax report is due. The report must be completed and signed by an officer, director or other authorized person. Even if the franchise tax report is filed and all taxes paid, the right to transact business may be forfeited for failure to file the completed and signed PIR.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
For additional learning, please visit our LLC FAQs.
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