A limited liability company (LLC) is a type of legal entity that is neither a corporation nor a partnership. An LLC is a business owned by one or more “members” who themselves can be individuals, corporations, or some other legal entity. The LLC itself protects members from personal liability for business debts. But the actual profits and losses from the LLC are “passed through” to individual members for purposes of tax reporting.
Forming an LLC in Texas is a relatively straightforward process. It is still a good idea to work with an experienced Texas limited liability company attorney at Structure Law Group who can advise you on the steps to take when getting your business started. Depending on the specific needs and goals of your business, we can tailor a structure for your new LLC that will help set you up for success.
The Certificate of Formation
The actual process of forming an LLC in Texas starts with filing Form 205 with the Texas Secretary of State. Form 205 is known as the “Certificate of Formation” for a Texas limited liability company. It is akin to an articles of incorporation filed by a traditional C-corporation.
The Certificate of Formation provides some basic information to the State of Texas on the LLC, including:
- the name of the LLC, which must contain the words “limited liability company,” “limited company,” or an abbreviation such as “LLC”;
- the name and business address of the LLC’s registered agent in Texas;
- whether the LLC will initially have managers;
- the initial mailing address of the LLC;
- the name and address of the person filing the Certificate of Formation; and
- the effective date of the Certificate.
There are a few things to note here. First, a “registered agent” is a person with a physical address in the State of Texas who is authorized to receive legal process on behalf of the new LLC. The registered agent does not have to be a member of the LLC or otherwise have any direct involvement with the business. Many Texas LLCs contract with a third-party service provider to serve as their registered agent. Ask your Structure Law attorney about this service.
Second, some LLCs are managed directly by its members (owners), while others are managed by professional managers hired by the members. Every Texas LLC should have an Operating Agreement–which is separate from the Certificate of Formation–spelling out the governing authority for the business, including who will handle day-to-day management. The operating agreement does not need to be filed with the Secretary of State.
Finally, the Certificate of Formation must state when the LLC actually takes effect. In most cases this will be the same day the document is filed with the Secretary of State. But the Certificate can be signed and filed up to 90 days in advance of taking effect. The Certificate may also provide for the LLC taking effect upon the occurrence of some future event or fact.
Contact Structure Law Group Today
Filing a Certificate of Formation is just one key step in launching a new Texas LLC. There are a host of other legal and financial details that must also be attended to and our Texas limited liability company attorneys will walk you through each stage of this process. Contact SLG today at (512) 881-7500 to schedule an initial consultation.