How to start a Texas LLC

An LLC is a type of business that helps protect its owners (called members). This means that if the business owes money or gets sued, the members’ personal assets, like their house or car, are usually safe. 

In the state of Texas, an LLC is defined as “a domestic limited liability company subject to this title” (Sec. 101.001(3)). That means an LLC in Texas is a company created within the state or a company that becomes subject to Texas’ state regulations surrounding LLCs (Title 3 Chapter 101).

If that sounds like a lot of legal jargon – that’s because it is! What you need to know is that LLCs are popular with business owners because they are simple and flexible to run. They have fewer rules compared to comportations and the owners can choose if they want to manage the business themselves or appoint managers to do it. 

Another benefit is how taxes work: LLC owners can pay taxes through their own personal tax returns, or they can choose to have the business pay taxes separately, like a corporation. This gives owners more choices in how they handle taxes as their business grows.

Why should I register for an LLC in Texas?

You may want to register for an LLC in Texas when:

• You own or want to start a business in Texas, or want to expand an existing business into Texas, and want to stay legally compliant. 
• You own or want to start a business, and want more flexibility on how you will manage the business or pay taxes than a corporation would provide.
• You want to protect your personal assets from potential liability resulting from business you conduct in the state of Texas. 
• You own or want to start a business, and want to register in Texas to open accounts, lease or buy property, secure funding, or hire employees.

Do I need to file my LLC in Texas if I live in another state?

Any LLC that does business in Texas must register with the State of Texas. LLCs based in Texas are called "domestic LLCs," and out-of-state LLCs are called "foreign LLCs." If your LLC was organized and operates outside of Texas, establishing a foreign LLC within Texas will allow for you to conduct business there.

Foreign LLCs and domestic LLCs may have different filing and compliance requirements -- Rocket Lawyer can help you navigate foreign LLC registration, regardless of where you live.

How to start an LLC in Texas

1. Find a unique name for your Texas LLC

The state of Texas requires that the names of all LLCs in the state:

• The name of a limited liability company or a foreign limited liability company doing business in this state must contain: the phrase "limited liability company" or "limited company"; or an abbreviation of one of those phrases.
• They are not too similar to existing LLCs in the state. You can search the state of Texas's database of business entities in the state to ensure your business' name is unique.

Rocket Lawyer can help you determine whether your business' name is eligible for registration in Texas and may be able to help you reserve the name before you file your LLC.

2. Include your other LLC members (if any)

In Texas, you can in fact form as a one-person LLC. In this case, the LLC would be referred to as a single-member LLC (SMLLC), whereas if there is more than one owner, the LLC may be called a multi-member LLC. 

The main difference between single-member and multi-member LLCs lies in ownership structure and management. With a single-member LLC, you have full control over the business. In contrast, a multi-member LLC has multiple owners, each with a specific percentage of ownership as defined in the operating agreement. This means that in a multi-member LLC, owners share profits, losses, and tax responsibilities based on their ownership percentage.

3. Provide a Texas address

This will be used as your official LLC address. The address that you list may either be your home, an office, or another physical location, but it cannot be a PO box.

4. Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It's important that every business has one. You can either serve as your own registered agent (if you have an Texas address) or choose one to do that service for you (if you are not located in Texas or would like an extra layer of privacy).

5. Register your LLC with the state of Texas

Once you have a business name and registered agent, you can register your business as a Texas LLC with the state of Texas by filing your Certificate of Formation. In other states, this document may be called a "Certificate of Organization," "Certificate of Filing," or "Articles of Organization."

6. Get an Employer Identification Number (EIN)

Texas LLCs are required to have a Federal EIN tax number. Think of your tax ID as the social security number for your company. It will be important for business contracts, tax filings, and all manner of documents down the line. Every company should have one to remain in good standing.

7. Pay the state filing fee

Every state has different fees for forming an LLC, which can also vary from one year to another.

Congratulations! After you have completed all these steps, you have formed your Texas LLC.

What to do after forming an Texas LLC

There are a few steps you need to take to maintain your Texas LLC:

1. Create an Operating Agreement: while not mandatory, this is very advisable. We can help you create your Texas LLC Operating Agreement online.
2. Hold a meeting: a first meeting with members of an LLC is not required by law, but it is highly suggested in order to get organized. Also, unlike corporations, LLCs are also not required to maintain Meeting Minutes, but these documents are also recommended as they provide records for important decisions made.
3. Pay taxes according to how you chose to be taxed: traditionally, LLCs are "pass-through entities." This means that you pay your business taxes on your personal tax form. That said, you can elect to be taxed like a corporation, if you choose to do so.
4. Submit an Annual Franchise Tax Public Information Report: this is due by May 15th each year and is filed with the Comptroller of Public Accounts.

What is needed to keep records for my Texas LLC

The State of Texas requires the following current information to be kept:

• The percentage or interest owned by each member of the LLC.
• The names of the members of each specified group or class, if applicable.
• Copies of the company's federal, state and local income tax returns for the last six years.
• A copy of the company's certificate of formation and any amendments or restatements put forth.
• A copy of the written company agreement, if applicable.
• An executed copy of any powers of attorney.
• A copy of any document that establishes classes or groups of members.
• A written statement of:
  • Any cash contributions made or agreed to be made by members.
  • A description and statement of the agreed value of contributions made or agreed to be made by members.
  • The dates of any contributions that are to be made by members.
  • Any events that would lead to the dissolution of the company.
  • The date each member became a member.
  • Books and records of accounts.
  • Minutes of proceedings held by owners or managers and members.
  • Names and addresses of all members of the LLC.
  • Any event that would require a member to make further contributions.

Still have questions? Rocket Lawyer can help you with the process of forming a Texas LLC. Get started today!

  

Key takeaways Registering an LLC in Texas can give you a lot more flexibility than a corporation, as well as protection for your personal assets from potential liabilities. Even if you live in another state, you must register your LLC in Texas if you do regular business there, like selling things or having employees. After starting your LLC, it’s advisable to create an Operating Agreement and hold a first meeting. You will also need to file an Annual Franchise Tax Public Information Report. Keep records of your Texas LLC, like the names of all members, tax documents, and your business rules. These help you stay organized and follow the law.

Additional resources

Learning how to enforce a contract is just one step. Explore these additional topics to learn more and take the next steps.

• What is an LLC
• How are LLCs taxed
• How to start an LLC
• Do I Need a Registered Agent?
• How and when to file an Annual Report