Forming an LLC in Texas: Step by Step Guide
Are you about to start your dream business in the second largest state of the United States- Texas? Or have you finally decided to incorporate your already existed business? Well, in both of the cases you require to understand the state-specific requirements for forming a Texas limited liability company (LLC). If you form an LLC in Texas, you would be protected from any kind of personal liability since it is legally separated from its owners.
Additionally, you can also enjoy other critical advantages like “pass-through” taxation and flexibility of profit distributions, ownership, and management. But, to grab these amazing LLC incorporation benefits and to increase your business’s credibility, you would have to follow the step-wise guide of LLC formation.
So, let’s have a closer look at the critical steps to understand the essential requirements of creating a flexible business structure or LLC formation.
1. Name Your LLC
The most critical and primary step to form an LLC in Texas is to choose a perfect name. The name of your LLC becomes the identity of your business. So, while choosing an apt name for your business, you have to abide by all the Texas laws. Here are a few key points, as per the Texas law, that you need to keep in mind while selecting the name for your LLC.
- Your LLC name should contain the words- “Limited Company,” or “Limited Liability Company.” You can even add the abbreviations instead of the words- “L.L.C., “LC,” “LLC.” In addition, “Limited” can be abbreviated as “LTD” or “Ltd.” and the “company” can be abbreviated as “Co.”
- If you are about to name your LLC, the second most important point to keep in mind is the credibility of your business name. To be more descriptive, you need to make sure that the name you are choosing to form an LLC in Texas, should be distinguishable from the existing names. Keep a check on the available names in State SOS (Secretary of State) Direct website.
- As a third step to choose an LLC name, you have to fill Form 501 or an application for entity name “reservation” or “renewal of reservation” of an entity name. You would be able to reserve the chosen entity name for about 120 days by filling this $40 form.
2. Fill Certificate of Formation
Now that you if you have chosen an LLC name, it’s time to file Form 205- Certificate of Formation Form. You have to fill this form with the SOS or Secretary of State, including the necessary LLC information. The filing fee for this form is $300. Here is the list of required information while filling the Certificate of Formation.
- You have to include LLC name in the Certificate of Formation.
- It is mandatory to mention the LLC name and address of the registered agent.
- Mention the name and address of the LLC’s governing person(s).
- It must include the LLC’s organizer name and address.
- You also require to mention the effective date of the certificate.
3. Appointing a Registered Agent
The third most critical step to form an LLC in Texas is to appoint a registered agent. This registered agent plays an essential role in providing service of process in the state. The agent would work as an entity or individual to accept all the legal and confidential documents on behalf of your LLC. In case, someone sues your business; the registered agent would always be available to receive the legal paper. As additional information, always remember to appoint the registered agent who has a physical street address in Texas or a Texas resident.
4. Operating Agreement Preparation
The fourth step to form an LLC in Texas is to prepare an operating agreement. Though in Texas, it is not required, but still, it would be an add on as it provides brand protection. It is a contractual agreement, which is done between all the owners of a company, who outlines fiscal and managerial responsibilities.
5. Regulatory and Tax Requirements
The fifth step to form an LLC in Texas is to comply with all the regulatory and tax requirements. And for that, you need to get an Employer Identification Number or EIN. It is a very critical step as it further allows you to have smooth tax dealings, hiring employees and even required for opening a bank account. It is similar to a social security number, which can be obtained by filing an online EIN application form, from the IRS Website at zero cost. Here are the additional requirements to form an LLC in Texas that you must know.
- You would require a business license based on the type of business structure, size, and location. You can gather the required information from— Texas Department of Licensing and Regulation.
- You would require to register with the Texas Comptroller of Public Accounts if you want to sell goods and collect the sales tax for the same. You may register online or via email.
6. Open A Business Bank Account
As a next step, you should set up a business bank account to separate your business finances from your personal expenses and savings. It does not matter that you are a single a multi-member or single member LLC, you should open a separate business bank account. By setting up a separate business account you would not have to face the tax issues, the risk to personal assets (in case LLC gets sued by someone) and difficulty in grabbing the perks of business expenses. Thus, it is a win-win situation for your LLC.
7. Business in Texas- By Foreign LLCs
If you are not the resident of Texas and want to do the business, you have to register your LLC with the Texas SOS or Secretary of State. You should hire a registered agent for this process, who must be either a Texas resident or carries an authorization certificate or work permit to do business in Texas.
To form an LLC in Texas is a complex task, that requires detailed attention to every step. And if you are a foreign LLC, you have to be more alert about the process. Most importantly, do not miss to apply for registering your Foreign Limited Liability Company. You have to file – Form 304 @ $750 and submit it online or via mail.
As a foreign LLC, you should also check for the availability of LLC’s name in the database( name database of Texas business). In case of non-availability of the name, you would have to adopt an assumed name. For this, you would require to fill Form 503- Assumed Name Certificate with the SOS. The filing fee for this form is $25.
Now, if you have understood the critical steps to the form an LLC in Texas through our step-wise-guide, you should start seeking the help of a professional. Since an LLC imposes various advantages over sole proprietorship or partnership, its formation requires detailed attention to every single step.
So, if you also want to incorporate your existing business or form an LLC in Texas, you should head toward the IncParadise. The professionals at IncParadise understands the value of your business and your emotions associated with it. So, they would never let you miss a single step that could be important to the LLC formation. To register and incorporate your business right contact us now!
Like what you're reading? Get fresh tips to start & grow your company.