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LLC Formation in Texas: Everything Worth Knowing

LLC Formation in Texas

Current research shows that there are 2.4 million small businesses in the state of Texas. 98.6% of all businesses in this state are considered small businesses, according to the U.S Small Business Administration.

When starting a new business there are two aspects that one should consider: the business model and the state where you want to form your business.

Below we will discuss the steps to forming an LLC in the state of Texas. Texas LLC laws lay forth the regulations for forming and operating a limited liability company (LLC).

Choose LLC Name

When creating an LLC In Texas, a business owner must take the following steps for naming, filing, and operating. The first and most important step in starting a business is deciding on a name for your limited liability company (LLC).

In the state of Texas, an LLC name must adhere to the following guidelines:

  • Include the words “limited liability company” or an acceptable acronym in the title.
  • Certain words, such as university, bank, or attorney, require additional paperwork to be utilized in an LLC name. You may also require a licensed professional, such as a lawyer or a doctor, to be a part of the company to qualify.
  • Treasury, FBI, Secret Service, and other words that could be confused with a government entity are prohibited from being used in an LLC name.

Next, check to see if the name you want is available in Texas. You’ll have to come up with a new name if another company already existing with a name that is too similar or identical to the one you desire. To do so, follow these steps:

  • On the Secretary of State’s website, create an account.
  • Look up existing company names.
  • Use this account to submit required business forms and pay any required filing costs online.

Make sure the URL for the business name you desire is available as well. Even if you don’t intend to create a website right away, you should register the domain name before registering your business name to ensure that it is not taken by someone else.

A professional email address is also required for your LLC. G Suite is a professional email system from Google that includes business applications like spreadsheets and word processing. It’s free to trial and comes with amazing security to safeguard your business data.

Choose a Registered Agent

A registered agent is a business or individual that is in charge of receiving and processing legal paperwork on behalf of the company. Filings and serving of process of legal action are two frequent legal documents that will be given to your company if it is sued.

To be a registered agent, a company or individual must meet the following criteria:

  • If you name someone, he or she must reside in the state of Texas.
  • If you choose a business to act as your registered agent, it must be licensed to do so in your state.
  • The registered agent can be an LLC owner or employee, but the business itself cannot be the registered agent.
  • Registered agents must accept their appointment in writing or electronically.

Make that the agent’s acceptance of the appointment includes the correct language by using form 401-A. This form does not need to be filed with the Secretary of State.

File the Certificate of Formation

The certificate of formation is the next step in forming an LLC. This paper should be filed to the appropriate state, in this case, Texas. Decide whether the business will be managed by members or management before filing the certificate.

You must pay a $300 non-refundable filing fee to the Secretary of State’s office when you file the certificate of formation. It’s worth noting that if the LLC is expanding into Texas from another state, it’s classified as a foreign LLC.

Create an Operating Agreement

Although having an operating agreement on file isn’t required to incorporate an LLC in Texas, it’s a good idea to have one. The LLC’s operational methods and ownership will be outlined in the operating agreement.

Obtain an EIN

In Texas, nearly every limited liability company (LLC) will require an employer identification number (EIN), also known as a federal tax identification number. It serves the same role as a person’s social security number in identifying the company.

Final Thought

Overall, an LLC business structure can bring lots of new advantages to its members; reduced liability, tax advantages, and greater ‘’prestige” have made it a preferred option for long-term success.

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