How to Form a LLC in Texas
A limited liability company (LLC) is a kind of business that allows its owner(s) to limit their liability to the assets of the company. If somebody sues the company then, the LLC owners (members) would not lose all their assets because they are just financially responsible for their investment in the company. Forming an LLC also offers a little flexibility in the way the company runs. When we speak of how to form an LLC in Texas, it is quite easy and inexpensive as Federal and state law delivers numerous tax benefits to LLCs. But first, business owners must understand the right way to form an LLC in Texas. So, why wait? Let’s get started!
Exploring the Primary Steps to Register and Set Up an LLC in Texas:
- Pick a Name for the LLC: As per Texas law, an LLC name should comprise the words “Limited Company” or “Limited Liability Company,” or comprise the abbreviations like “Company” as “Co.,” “LC,” “L.C.,” “Limited,” “L.L.C.,” “LLC,” “Ltd.” and “LTD”. Your LLC’s name has to be clear from other business entities’ names which are already filed with the Texas Secretary of State. Individuals planning to set up an LLC in Texas must check the LLC name availability at the Texas Secretary of State. The SOSDirect website can reserve a name for about 120 days by filing an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501). The reservation can be filed online via the Texas Secretary of State SOSDirect website or by postal mail by paying a minor Texas LLC filing fee of $40.
- File the Certificate of LLC Formation: A Texas LLC can be created by filing the Certificate of Formation (Form 205) with the Secretary of State. This certificate should include- the LLC’s name, the name, and address of the Texas LLC registered agent; whether your LLC would be manager-managed or member-managed; the LLC’s governing person(s) name and address; LLC organizer name and address; and the effective date of this certificate. The certificate can be filed online via the Texas Secretary of State SOSDirect website or through postal mail. The Texas LLC certification fee is $300. The entire paperwork and practical steps for setting up LLC in Texas online can be done quite simply by answering a few questions.
- Hire a Registered Agent in Texas: Each LLC in Texas should appoint an LLC registered agent for the service of process in the state. The LLC registered agent must be a resident or a business entity in Texas that is authorized to run a business in Texas. The registered agent for an LLC in Texas must have a physical street address in the state. The LLC cannot become its registered agent.
- Create the Operating Agreement: The LLC operating agreement is not needed in Texas, but it is highly recommended to have one. To get assistance in creating the LLC operating agreement properly, hire a reputed a licensed Texas lawyer.
- Abide by the Other Tax and Regulatory Needs: The additional tax and regulatory needs might apply to your LLC in Texas. These might comprise:-
- Employer Identification Number (EIN): If an LLC has more than one member then, it should acquire its own IRS Employer Identification Number (EIN), irrespective of the fact that they have no employees. If you set up a one-member LLC in Texas then, you must obtain your EIN for it only if it will have employees or you choose having it taxed as a corporation rather than a sole proprietorship. LLC owners can get an EIN by completing the online EIN application on the IRS website and there is no filing fee for it.
- Business Licenses: Considering the type of business you run and its location, your LLC might require getting other local and state business licenses. For more information, visit the Texas Department of Licensing and Regulation.
- Comptroller of Public Accounts: If your LLC sells goods and collects sales tax then you need to register with the Texas Comptroller of Public Accounts. You can register online through postal mail or in person at the Comptroller field office.
- No Need of Annual Reports: LLCs in Texas do not require filing the annual reports with the Secretary of State but the LLCs have to file the annual franchise tax reports. The details required to be filled for computing the tax could be complex so, visit the Comptroller of Public Accounts website to get more info about it.
- Foreign LLCs Running Business in Texas: For running a business in Texas, all LLCs controlled outside the state should register an LLC in Texas with the Texas Secretary of State. Foreign LLCs require appointing a registered agent for the service of process. The registered agent might be a Texas resident or an authorized business entity to run a business in Texas. File an application for the Registration of Foreign Limited Liability Company (Form 304) which can be filed online or by postal mail. The foreign LLC filing fee in Texas is $750.
So, now that you know how to form an LLC in Texas, make sure to abide by and follow all the aforesaid steps to set up your new company.