How to Start an LLC in Texas
How to Start an LLC in Texas
LLCs in Texas are affordable and easy to form. As with other states, the State of Texas has some specific requirements that are idiosyncratic.
Interested parties must register with the Secretary of State by filing the necessary forms, paying the necessary fees and meeting all naming and formation requirements.
Overall, here are some of the essential requirements for forming an LLC in Texas:
Registration. People who want to start an LLC in Texas must file a Certificate of Formation (Form 205) with the Secretary of State. The form must include pertinent information such as the name and address of the LLC, the name and address of the resident agent, a statement identifying the type of management and by whom (i.e. member-managed or manager-managed), the name and address of the organizers, the purpose for which it was formed and the dissolution date, if applicable. Do not forget to include the filing fee. You may register online, by mail or by fax.
Forms and fees. All LLCs are required to submit a completed Certificate of Formation, Form 205, with the Texas Secretary of State, along with the filing fee. Payment may be made by personal check, money order, LegalEase debit card or by credit card (American Express, Discover, MasterCard or Visa.) All credit card payments are subject to a convenience fee of 2.7% of the total fees charged.
Timeline. All forms and documents submitted for processing and filing are usually done within three to five business days upon receipt of the documents. Expedited processing services are available for an additional per-document or form fee and must be accompanied by a written request for expedited processing services.
Naming requirements. The usual LLC naming requirements exist in Texas, such as making sure the LLC’s name is distinguishable from other LLCs in the state. The LLC name must be approved by state agencies and must include certain words in order to qualify and be approved by the Texas Secretary of State. You may opt to have a preferred name checked for availability by calling the Secretary of State at (512) 463-5555 and dialing 7-1-1, or by emailing your queries to email@example.com.
Formation requirements. An LLC with more than one member is also strongly advised to have a limited liability operating agreement among its members.
In order to serve as a registered agent, the individual or company must complete an acceptance of consent, Form 401-A, which must be signed by the registered agent and then filed with the Secretary of State.
Starting an LLC in Texas
Before you begin the registration process for a Texas LLC, it’s important to know what an LLC is and whether or not it is a viable business structure for your company, so be certain to read up on the definition and benefits of an LLC.
Here are some tips for helping you put together what you need to begin the registration process with the Texas Secretary of State:
1. Decide on a name for your business. You can choose any name as long as it ends with “Limited Liability Company” or any variant of its abbreviation—LLC or L.L.C. The name must also be approved by certain state agencies and departments.
A name may be reserved by filing Form 501. This is usually done online or by mail and has a nonrefundable filing fee. You must include the requested entity name, entity type, name and address for whom the reservation is made and the signature of the applicant’s lawyer or agent.
2. Assign an agent for service of process. This is also referred to as the resident agent.
You must submit an acceptance of appointment and consent, Form 401-A, to serve as a registered agent with the Secretary of State. The form must include the name of the LLC, a statement by the person designated to be registered agent consenting to serve as such, the name and signature of the registered agent and the date the agreement was executed. There is a small fee for processing that must accompany your form upon submission.
3. Get an Employer Identification Number (EIN) from the IRS. If there are two or more members in your LLC, your company will need to obtain an EIN from the IRS for tax purposes.
4. Create an operating agreement. If your LLC has more than one member, make sure you have a limited liability company operating agreement. Although this document is not included in the filing agreements with the Texas Secretary of State, the LLC operating agreement must be submitted when filing for your Texas tax license.
5. Familiarize yourself with the LLC’s continuing legal obligations. LLCs are subject to the Texas franchise tax. The Texas Comptroller requires that LLCs submit an initial franchise report with a public information report in their first year, and then an annual franchise tax report with a public information report every year thereafter. All reports must be signed either by an LLC member or manager. The filing of annual reports must be done before May 15.
Filing an LLC and Fees
Following are the forms and fees that are required when starting an LLC in Texas:
1. Forms. First, you need to fill out a Certificate of Formation (Form 205). Do not forget to include:
a) LLC name that meets state requirements and its registered address
b) Name and address of its registered agent
c) Written or electronic signed consent form of the registered agent
d) A statement identifying whether the LLC will be member-managed or manager-managed
e) The names and addresses of the organizers of the Certificate of Formation
f) The purpose for which the LLC was formed
g) A dissolution date, if applicable
h) Names, addresses and initials of members or managers
i) Payment of the necessary fees
2. Cost of setting up an LLC in Texas. The primary cost of setting up an LLC in Texas is the nonrefundable fee for filing the Certificate of Formation (Form 205), which is $300. If you want expedited processing, there is an additional $25 fee. The fee for filing the Acceptance of Appointment and Consent (Form 401-A) is $15 for a for-profit LLC and $5 for a nonprofit LLC. Filing a Name Reservation (Form 501) will cost $40.
3. Limited liability company operating agreement. Although not required in the state of Texas, it is highly advisable to have an operating agreement among members. This should be kept on file by the resident agent.
4. Taxes. LLCs in Texas can be treated as corporations, limited liability partnerships or single-member LLCs and are subject to federal income tax classifications. Depending on the type of taxation you opt to have for your LLC, you will have different federal tax responsibilities.
With regards to state taxes, your Texas LLC will be subject to the Texas franchise tax. To comply, you will have to make an initial franchise tax report and submit it with a public information report to the Texas Comptroller. Later on, you will have to comply with this annually by submitting an annual franchise tax report along with a public information report. Annual reports are due every May 15.
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