Starting a business in Texas is exciting and lucrative, but you need the correct legal framework. LLC formation is prevalent. LLC owners benefit from minimal liability and easy administration. This page details the legal procedures and documents for forming an LLC in Texas.

What is an LLC?

LLCs are versatile and popular company structures that combine the liability protection of a corporation with the convenience and tax advantages of a sole proprietorship or partnership. LLC members or owners are not individually accountable for corporate debts or legal responsibilities. Their assets are safeguarded if the firm has financial or legal challenges.

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Small firms, startups, and entrepreneurs choose LLCs for their benefits:

Limited Liability

Members' assets are usually insulated from business debts and liabilities.

Simplified Management

LLCs need less administration and are more flexible than corporations.

Tax Flexibility

LLCs may opt to be taxed as sole proprietorships, partnerships, S corporations, or C corporations, depending on their requirements.

Pass-through taxation

The LLC's revenues and losses usually flow through to members' tax returns, eliminating double taxation.

Steps to Get an LLC in Texas

Texas LLC formation needs multiple stages and required documents. A complete guide to Texas LLC formation:

Choose a Name for Your LLC

The first step is to choose a name for your LLC that is distinctive and easily identifiable. You must use "Limited Liability Company," "Limited Company," or one of the acronyms "LLC," "L.L.C.," "LC," or "L.C." in your name choice. You shouldn't use a name that is too close to or identical to an already-existing Texas corporate organization.

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You may use the Texas Secretary of State's website to do a name search to confirm if the name you've chosen is available. Making sure your selected name isn't already in use is aided by this step. You may pay a nominal amount to reserve the name of your choice, if it is available.

Appoint a Registered Agent

LLCs are required by Texas law to name a registered agent. The person or organization in charge of accepting court cases and state notifications on behalf of the LLC is known as the registered agent. A real street address in Texas is required for the registered agent.

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As the registered agent of your LLC, you may represent the company or choose another person to do so. As an alternative, you may choose a seasoned registered agent agency. What matters is that crucial paperwork must be consistently received by your registered agent on behalf of the LLC.

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Prepare and File the Certificate of Formation

The official document that creates your LLC with the Texas Secretary of State is the Certificate of Formation, which is also referred to as the Articles of Organization in certain jurisdictions. In order to submit this document, you must provide the following data:

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  • Name and address of LLC
  • The registered agent's name and address
  • The LLC's mission (often a broad declaration like "engaging in any lawful activity")
  • Organizational structure (managerially or by members)
  • The LLC's duration (perpetual or for a certain amount of time)
  • The organizer of the LLC's name and address
  • Date on which the Certificate of Formation becomes effective (if not immediately)

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The Texas Secretary of State's website allows you to submit the Certificate of Formation online, or you may send a paper copy of the form. There are filing fees, which might change depending on how and how quickly the application is processed. Online filing is usually more convenient and quicker.

Create an Operating Agreement

Although it's not legally necessary in Texas, creating an Operating Agreement for your LLC is strongly advised. This document describes the key elements of your LLC's activities, including the internal management structure, member duties and responsibilities, voting rights, profit and loss distributions, and more.

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An operating agreement aids in laying out precise rules for how the company should be managed and how members should make choices. It may also help in averting disagreements and miscommunications among participants.

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Obtain an EIN

For the majority of LLCs, a Federal Tax Identification Number, or Employer Identification Number (EIN), is required. The Internal Revenue Service (IRS) issues this special nine-digit number, which is used for filing taxes. If your LLC employs staff, has more than one member, or chooses to be taxed as a corporation, you will want an EIN.

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Form SS-4 or an online application on the IRS website are the two ways you may apply for an EIN for your LLC. The procedure of acquiring an EIN is simple and does not require payment of any kind.

Comply with State and Local Permits and Licenses

To do lawful business in Texas, you can need a number of licenses and permissions, depending on your industry and region. These may include licenses particular to a certain sector, health permits, municipal approvals, and more. Look into and confirm the state, county, and local regulations that apply to your company.

Pay the Texas Franchise Tax

Texas LLCs must pay the franchise tax levied by the state. The yearly income of your business is used to compute the franchise tax. Important to remember is that you could still need to submit a "No Tax Due Report" to the Texas Comptroller if your LLC is not making any money during its first year of existence.

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Every year on May 15th, the franchise tax report and payment are due. Penalties and interest charges may apply if this deadline is missed.

Conclusion

If all the legal procedures and paperwork are followed, forming an LLC in Texas may be a simple process. You may create a solid legal basis for your company by choosing a distinctive name, appointing a registered agent, submitting the Certificate of Formation, creating an Operating Agreement, acquiring an EIN, and adhering to local and state laws. Seeking legal and financial counsel is advised to make sure you understand all of your duties and responsibilities as a Texas LLC owner. Remember that keeping your LLC in good standing in Texas depends on your continued compliance with state laws, such the franchise tax. You can help your Texas LLC succeed by making the necessary arrangements and paying close attention to details.

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Resource 

https://www.legalzoom.com/articles/how-to-start-an-llc-in-texas

https://www.legalzoom.com/business/business-formation/texas/llc-overview.html

https://www.marketwatch.com/guides/business/start-llc-texas/