A Guide to Texas LLC Formation

While establishing a limited liability company — LLC formation — is less hectic and complicated compared to a corporation, it is a long and sometimes frustrating process here in the State of Texas. That’s one reason why we often suggest that our clients use a professional service designed to streamline the process.

Complete a Certification of Formation

Once you’ve determined that you want to move forward, you will need to fill out something called a “certificate of formation.” This form will include several elements:

The Name of Your Company. You’ll need to check with the Texas Secretary of State to ensure that the name you’ve chosen meets all of their requirements and isn’t currently in use. A service can check on the status of your company’s name quickly.

A Registered Agent and the Agent’s Address. Texas requires all LLCs filed in the state to have a “resident agent”—an individual who lives in Texas who is eligible to receive your legal mail. This agent can be an individual or another business located in the State of Texas. The registered agent is often the owner of the company, but not always. A lawyer located in the State of Texas may agree to be a resident agent, for example.

The Governing Structure of the Company. At this point, you’ll need to start making decisions about the company’s structure. That is, will your LLC be manager-managed, or member-managed? In a member-managed LLC, all members of the company contribute to decision-making. In a manager-managed LLC, you will have one or more members who are ultimately in charge, with other members having less impact on managerial decisions.

The Purpose of the Company. To file, you must indicate that your company has been formed for a legal purpose as defined by the Texas Business Organizations Code.

File the Paperwork

Next, you’ll need to print out two copies of the paperwork and send it to the Texas Secretary of State with the LLC filing fee. If it is approved, you receive a copy of Form 205.

Create an Operating Agreement

Technically, this is not a strict requirement in the State of Texas when registering an LLC, but we consider it a good practice. This document describes the structure and policies of your LLC.

Apply for an Employer Identification Number (EIN)

Eventually, you are likely to hire employees, and then you will be required to pay taxes on the income from your business. To do so, you will need an EIN. This number will also allow you to set up a payroll, pay federal payroll taxes, and apply for any necessary business permits. This number will also allow you, along with your proof of organization, to open your business banking account.

Obtain and Complete the Franchise Tax Accountability Questionnaire

All LLCs in the State of Texas must pay an annual state franchise tax. To set up the necessary franchise tax account, you’ll need to complete the Franchise Tax Accountability Questionnaire.

Research Additional Requirements

Either via your research or by consulting with a service provider, determine whether or not there are additional requirements related to your particular company. For example, some companies are required to have sales tax permits; others are not. Also, determine whether or not there are additional fees or taxes you’ll need to pay to the city, county, or state.

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