Starting an LLC in Texas is quite easy, and affordable once you know the right steps to follow. Just like with other states, the State of Texas has some specifics that you have to follow.
Basic Requirements of Starting an LLC in Texas
On the whole, here are some of the necessary requirements for forming an LLC in Texas:
To start an LLC in Texas, you must file a Certificate of Formation (Form 205) with the Secretary of State. The form is to include some salient information like the name and address of the LLC, the name and address of the resident agent. A statement that identifies the type of management and by whom (I.e. member-managed or manager-managed), the name and address of the organizers. The purpose for which it was formed as well as the dissolution date, if applicable. Ensure you include the filing fee. You can either register online, by mail, or by tax.
Forms and Fees
All LLCs are expected to submit a completed Certificate of Formation, Form 205, with the Texas Secretary of State, along with the filing fee. Payments may be made through personal checks, money orders, LegalEase debit cards. Or credit cards (American Express, Discover, MasterCard, or Visa). Note all credit card payments are subject to a convenience fee of 2.7% of the total fees that are charged.
All forms and documents submitted for processing and filing are basically done within three to five business days upon receipt of the documents. Also, expedited processing services are available for an additional per-document or form fee and must be accompanied by a written request for expedited processing services.
Just like in other states, the usual LLC naming requirements exist in Texas, like ensuring the LLC name is distinct from other LLCs in the state. The LLC name must be approved by state agencies and must include certain words in order to qualify and be approved by the Texas Secretary of State. You may decide to have a preferred name checked for availability by calling the Secretary of State at (512) 463-5555 and dialing 7-1-1, or by emailing your queries to [email protected],tx.us.
An LLC with more than one member is to have a limited liability operating agreement among its members.
To serve as a registered agent, the individual or company must complete an acceptance of consent, Form 401-A, which must be signed by the registered agent and then filed with the Secretary of State.
How to Start an LLC in Texas
Here are the steps for starting an LLC in Texas:
Choose a Name for Your LLC
Under Texas law, an LLC name has to contain words like limited Liability Company’ or ‘Limited Company’ or the abbreviations “LLC.”., “LLC”, “LC”, or “L.C.” “Limited” may be abbreviated as “Ltd”. Or “LTD” and “Company” as “Co”.
Your LLC’s name must be different from the names of other business entities already on file with the Texas Secretary of State. Names can be checked for availability at the Texas Secretary of State SOSDirect website.
You can reserve a name for 120 days by filing an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the Texas Secretary of State. The reservation may be filed either online via the Texas Secretary of State SOSDirect website or filed by mail. The filing fee is $40.
Appoint a Registered Agent
All Texas LLC is expected to have an agent for service of process in the state. This happens to be an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it gets sued. The registered agent may be a Texas resident or a business entity, which is legally authorized to do business in Texas. The registered agent is expected to have a physical street address in Texas. Now the LLC may not be its own registered agent.
File a Certificate of Formation
A Texas LLC is created by filing a Certificate of Formation for a Limited Liability Company (Form 205) with the Secretary of State, and this Certificate is to include the following:
- Firstly, the LLC’s name, and also the chosen LLC designation.
- Secondly, the name and address of the LLC’s registered agent
- Thirdly, if the LLC will be member-managed or manager-managed
- Fourthly, whether it is member-managed, the name and address of each initial member
- Next, whether a manager-managed, the name and address of each initial manager
- General-purpose clause (as provided)
- The name and address of the LLC’s organizer
- The effective date of the certificate, and
- Lastly, signature of the organizer
This Certificate can be filed online via the Texas Secretary of State SOSDirect website or by mail. The filing fee is $300
Prepare an Operating Agreement
Even though an LLC operating agreement is not required in Texas, it is still highly recommended. This is because, without an operating agreement, state LLC law will govern how your LLC operates.
The operating agreement must include the following:
- Firstly, the member’s percentage interests in the LLC
- Secondly, member’s rights and responsibilities
- Thirdly, member’s voting powers
- Fourthly, how profits and losses are allocated
- The rules for holding meetings and taking votes, and
- Buyout, or buy-sell, provisions, which determine what happens if a member wants to sell his or her interest, dies or becomes disabled.
Comply With Other Tax and Regulatory Requirements
- You will need to get an Employer Identification Number (EIN) from the IRS. If there are two or more members in your LLC, your company will need to get an EIN from the IRS for tax purposes.
- Get business licenses, even though the State of Texas does not require a general “business” license. Howbeit, some types of businesses do require state-wide licenses.
- Comptroller of Public Accounts. In most cases, if you will be selling goods and collecting sales tax. You will need to register with the Texas Comptroller of Public Accounts.
Texas does not require LLCs to file annual reports with the Secretary of State. However, LLCs must file annual franchise tax reports. Since the details for computing the tax can be complicated, you can check the Comptroller of Public Accounts website for more information.