A Limited Liability Corporation or “LLC” is a popular business structure to select. It affords owners many benefits, including pass through tax benefits, flexibility, and personal liability protection. If you are an entrepreneur looking to form an LLC in Texas, here is an overview of the formation process.
Forming an LLC in Texas
In order to form your LLC, you must choose a name for it. Texas law requires that LLCs contain “Limited Liability Company,” “Limited Company,” or some form of the “LLC” abbreviation. The name of an LLC must be distinguishable from other businesses that have previously filed with the Texas Secretary of State. Your LLC name can be checked for availability through the Texas Secretary of State SOSDirect website.
If you plan to use an assumed name or a “DBA” for conducting LLC business, then you need to register an Assumed Name Certificate, Form 503 with the Texas Secretary of State and with the county clerk in the county of your LLC’s office location. A DBA, also non as a trade name or fictitious business name, is when a business uses a name different from its registered legal name on the Certificate of Formation when conducting business out in public.
Once you have selected and registered your LLC’s name and DBA, if applicable, you must appoint a registered agent who will be charged with accepting service of process in the state. This is required of every Texas LLC. The registered agent needs to either be a Texas resident or a business entity that is authorized to do business in Texas, have a physical street address in Texas, and agree to accept legal papers on behalf of the LLC if it is ever sued.
A Certificate of Formation for a Limited Liability Company, Form 205, must be filed with the Secretary of State in order to officially form the LLC. Form 205 must include the LLCs name, the name and address of the registered agent, and whether the LLC is to be member-managed or manager-managed. Should the LLC be member-managed, Form 205 must detail the name and address of every initial member. If manager-managed, Form 205 must detail the name and address of each initial manager. The Certificate of Formation may be filed via mail or online through the Texas Secretary of State SOSDirect website along with the $300 filing fee.
Once the Certificate of Formation for a Limited Liability Company has been filed, the LLC should seriously consider creating an operating agreement. Texas LLCs are not required to develop operating agreements, but it is a good idea, nonetheless. The operating agreement can set forth crucial operational details such as how the LLC will be run and how it will be managed as well as the rights and responsibilities of its managers and members.
A Texas LLC will also need to get an IRS Employer Identification Number (EIN) and this is true regardless of whether or not the LLC has any employees. A single member LLC needs to obtain an EIN if it will go on to have employees or if it has elected to be taxed as a corporation as opposed to a sole proprietorship. There is no filing fee associated with obtaining an EIN and it can be obtained via an online application on the IRS website.
Austin Business Law Attorney
To help set up your LLC the right way, talk to the trusted team at The Kumar Law Firm. We are here to help your business start off on the right foot. Contact us today.