Filing a Texas LLC

On August 26, 1991, Texas become one of only either states to recognize a Limited Liability Company as a new form of business organization. The state of Texas and the limited liability company (LLC) both embrace business-friendly principles. The LLC offers entrepreneurs the benefit of liability protection without the burdensome corporate structure.

That's why by 1996, the Limited Liability Company became a very popular business formation type in the United States, and every jurisdiction formed LLC statues. The LLC is popular in the state of Texas and elsewhere due to its flexibility and personal liability protection.

Here are the LLC formation requirements in the state of Texas:

Choose a Name for Your LLC

The first step in forming an LLC in Texas is choosing a name for your business. The name must be distinguishable from other registered businesses in Texas and must include "Limited Liability Company" or an abbreviation such as "LLC."

Appoint a Registered Agent

Texas law requires LLCs to appoint a Texas registered agent who can receive legal documents and official notices on behalf of the business. The registered agent must have a physical address in Texas.

File Certificate of Formation

The next step is to file a Certificate of Formation with the Texas Secretary of State. The certificate includes the name and address of the LLC, the name and address of the registered agent, and the names and addresses of the LLC's members or managers.

The filing fee for a Certificate of Formation in Texas is $300. Expedited processing is available for an additional fee.

Operating Agreement

Although not required by Texas law, it is recommended that LLCs have an operating agreement in place. The operating agreement outlines the management structure, ownership percentages, and operating procedures of the LLC.

Obtain an EIN

An Employer Identification Number (EIN) is required by the IRS for LLCs that have more than one member. The EIN is used to identify the LLC for tax purposes. LLCs can obtain an EIN for free from the IRS.

Obtain Necessary Licenses and Permits

Depending on the type of business, LLCs may need to obtain licenses and permits from federal, state, or local government agencies. For example, certain industries such as healthcare and food service may require additional licenses and permits.

File Annual Reports

Texas LLCs are required to file annual reports with the Texas Secretary of State. The annual report includes the LLC's name, registered agent information, and information about its members or managers.

The filing fee for an annual report in Texas is $0. Expedited processing is available for an additional fee.

In Texas, the requirements for naming an LLC are as follows:

  1. When choosing a company name it must contain the words "Limited Liability Company" or the abbreviation "LLC".
  2. The name must not be the same or too similar to any other LLC or corporation name registered in Texas.
  3. The name must not imply that the LLC is engaged in any illegal or unethical activities.
  4. The name must not contain any restricted words such as "bank" or "insurance" unless the LLC is licensed to operate in that industry.

It is important to note that the Texas Secretary of State's office will reject any LLC name that does not meet these requirements.

Before selecting a name, it is recommended to conduct a name search on the Texas Secretary of State's website to ensure that the name is available. Additionally, it may be helpful to consult with an attorney or business advisor to ensure that the name complies with all legal requirements and effectively represents the company's brand.

The Texas Secretary of State may reject business names that do not meet the following requirements:

  1. The name is already in use: If the proposed name is already being used by another entity registered in Texas, the Secretary of State will reject it. The name must be unique and distinguishable from all other business names registered with the state.
  2. The name is too similar to an existing name: If the proposed name is too similar to an existing business name, the Secretary of State may reject it. The test for similarity is whether the proposed name creates confusion or deception among the public.
  3. The name includes restricted words: If the proposed name includes words that are restricted, such as "bank," "insurance," or "college," the Secretary of State may reject it unless the business is authorized to use those terms.
  4. The name implies illegal or unethical activities: If the proposed name suggests illegal or unethical activities, the Secretary of State may reject it.
  5. The name is offensive: If the proposed name contains profanity, obscenities, or derogatory language, the Secretary of State may reject it.

It is important to note that the Texas Secretary of State has the final say on whether a business name is acceptable or not, and there is no guarantee that a proposed name will be approved. It is recommended to conduct a thorough search of existing business names and consult with an attorney or business advisor to ensure that the proposed name complies with all legal requirements.

Pro Tip 1: Time is not your friend. Register your desired entity name before someone else does before you! 
Pro Tip 2: Be mindful of URL availability!

Is Texas a Good State to Form a Business?

Absolutely! According to the Texas Secretary of State's website, there were over 2.6 million active businesses registered in Texas as of 2021, and a significant portion of them are LLCs. Of these companies, 4.9 million people are employed. It is worth noting that this number includes all types of businesses, including corporations, partnerships, sole proprietorships, and LLCs. The exact number of LLCs in Texas may vary depending on various factors such as the economic climate, business trends, and state regulations.

Texas is a popular state for forming LLCs (Limited Liability Companies) due to several factors, including:

  1. Low taxes: Texas has no state income tax, which can be a significant advantage for business owners looking to save money on taxes.
  2. Business-friendly laws: Texas has a pro-business legal environment that makes it easy and straightforward to form an LLC. The state's laws also provide a high degree of protection for LLC owners.
  3. Flexibility: Texas offers LLC owners significant flexibility in how they structure their businesses. For example, there are no restrictions on who can be a member of an LLC, and LLCs can be managed by either the members or a designated manager.
  4. Strong economy: Texas has a strong and diverse economy, making it an attractive location for businesses in many different industries.
  5. Access to resources: Texas has a wealth of resources for businesses, including top-rated universities, a skilled workforce, and access to capital.

Overall, these factors make Texas an excellent state for forming an LLC, and many entrepreneurs and business owners choose to do so to take advantage of the benefits that the state offers.

Does Texas Offer Startups Access To Capital?

Yes, Texas offers entrepreneurs access to capital through a variety of sources, including:

  1. Banks and financial institutions: Texas has a robust banking and financial services sector, which provides access to loans and other forms of financing for entrepreneurs and business owners.
  2. Venture capital firms: Texas has a growing number of venture capital firms that invest in startups and early-stage companies. These firms provide funding, expertise, and resources to help entrepreneurs grow their businesses.
  3. Angel investors: Texas is home to many angel investors who are interested in investing in new and innovative businesses. These investors typically provide funding in exchange for equity in the company.
  4. Government programs: Texas offers a range of government programs that provide funding and support to entrepreneurs and small businesses. These programs include grants, loans, tax incentives, and other forms of assistance.
  5. Business incubators and accelerators: Texas has a number of business incubators and accelerators that provide funding, mentorship, and other resources to help entrepreneurs launch and grow their businesses.

Overall, Texas offers a range of options for entrepreneurs to access capital, and the state's strong economy and pro-business environment make it an attractive location for startups and small businesses.

Ready to Form an LLC in Texas?

In conclusion, forming an LLC in Texas is a straightforward process with relatively few requirements. However, it is important to ensure compliance with all state and federal regulations to avoid any legal or financial issues down the line. Entrepreneurs who are considering forming an LLC in Texas should consult with a legal or tax professional to ensure that all requirements are met.

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