How to Start an LLC in Texas 2023 Guide

AdobeStock_180825526-300x184One of the first steps to starting your business is forming the business entity.  For a variety of reasons, a limited liability company (LLC) can be an attractive option. There are several benefits to creating an LLC, and an Texas LLC lawyer can help you take all of the necessary steps to help you take advantage of them.

If you are starting a business, one of the biggest advantages to an LLC is that it can limit your personal liability for debts the business incurs, meaning that your home and personal bank account cannot be used to pay business debts or any liabilities if you or a business partner are sued. Additionally, you may deal with less paperwork once the LLC is up and running, there may be certain tax advantages, and you have flexibility to make the LLC operate how you want it to when it comes to ownership, management, and how profits are shared and distributed amongst the owners.

Steps to Starting an LLC

When you are first starting an LLC, you need to begin with your business name. The name will have to include Limited Liability Company, Limited Company, LLC, L.L.C, LC, L.C., Limited, Company, Ltd., or Co., and it cannot have the same name or be deceptively similar to an existing business.

You can do a search on the Texas Secretary of State website to determine if a particular business name is in use. If you are planning on operating in states other than Texas, you should also check to see if the name is available in that other state on that state’s Secretary of State website. You should also check that your business name allows for URL availability for your website because you will presumably want your domain name to match the business name.

Choose a Registered Agent

Every LLC in Texas needs to have a registered agent. A registered agent will agree to accept legal notices and lawsuits on behalf of your business and must have a physical address within the state. A registered agent can be a Texas resident, including the LLC’s owners or workers, a Texas business, or a company registered to do business in Texas.

An LLC cannot act as its own registered agent, and a registered agent needs to be located on-site with availability to accept documents during regular business hours. There are many companies that offer registered agent services for a fee of roughly $100 to $300 each year.

Prepare and File Your Certificate of Formation

Form 205 is the Texas Secretary of State’s form for the Certificate of Formation that must be filed to create an LLC. You can download the certificate online, and the filing fee with the Texas Secretary of State will be $300.

The Certificate of Formation must include a variety of information, including:

  • The name of your LLC
  • Your registered agent’s name and address
  • The purpose of your LLC, or what business it will do
  • The length of time the LLC is going to exist, which can be indefinite
  • Whether the LLC will be managed by managers or members
  • When an LLC is member-managed, the names and addresses of all members
  • When an LLC is manager-managed, the names and addresses of all managers
  • The name and address of an LLC’s organizer, which is the person who files the Certificate of Formation
  • The effective date of the Certificate

After you file a Certificate of Formation, the Secretary of State reviews the filing. When the Certificate of Formation is approved, your LLC will become a legal business entity.

Create an Operating Agreement

An operating agreement, sometimes called a company agreement, will govern how your LLC will operate and how it goes about its business. While an operating agreement is not required by the state of Texas to form the LLC, it is an essential part of doing business as an LLC.

Because an operating agreement governs how the LLC operates, it becomes an important part of any conflicts that might arise between the LLC owners and in certain other conflicts that relate to the LLC. If the conflict leads to litigation, but there is no operating agreement in place, courts could make determinations based on the default state law, which may not be what in the best interest of an LLC or its members.  Make sure to consult with a Texas LLC attorney to draft an operating agreement that will protect you when conflicts arise without limiting your ability to run your business as you see fit.

Get an Employer Identification Number

The Internal Revenue Service (IRS) assigns nine-digit Employer Identification Numbers (EINs) for tax purposes. You can obtain an EIN either by mail or online.

An EIN can assist with filing and managing taxes at the state and federal level, opening a business bank account, and hiring employees.

File an LLC Franchise Tax and Public Information Report

All LLCs in Texas must file Franchise Tax and Public Information Reports with the Texas Comptroller’s Office each year. A Texas franchise tax and public information report will be due every year by May 15th, but the first report will not be due until the year after an LLC is formed.

Call Us Today to Speak with a Texas LLC Lawyer

If you are trying to form an LLC in Texas, make sure you have legal counsel. A Texas LLC lawyer can help ensure that you are taking all of the necessary steps to create a smooth operation.

Structure Law Group, LLP helps small businesses all over Texas get off the ground. Call (512) 881-7500 or contact us online to schedule a consultation with our Texas LLC lawyer today.