Texas is one of the most business-friendly states in the country. It offers many tax benefits and incentives.
LLCs provide owners personal liability protection and flexibility. They can also avoid the double taxation that corporations face.
To start an LLC in Texas, you will need to file a Certificate of Formation and an operating agreement. You will also need to obtain a registered agent and an Employer Identification Number (EIN).
Choosing a Company Name
A new business needs a name to identify itself. It must include the words Limited Liability Company or LLC and be different from any other name on file with the Secretary of State. The LLC will also need an EIN number (Employer Identification Number) from the IRS, which will act like the business’s social security number.
You will also need to decide whether your LLC will be member-managed or manager-managed. The management type will need to be specified in your Certificate of Formation.
You will need to choose a registered agent for your LLC, who must be an individual or entity with a physical address in Texas and be available during regular business hours to receive service of process. You should also check URL availability before choosing a name, as you will probably want to have a website in the future.
Filing for Incorporation
When you form an LLC in Texas, the state requires you to file a Certificate of Formation. This legal document includes important information about your company, including whether the business will be member-managed or manager-managed and how you will distribute profits and losses among the owners.
You will also state the initial capital contribution and how you plan to raise additional funds. You will also include how your LLC will manage and vote on company matters. Additionally, you will create an operating agreement, which helps settle disputes and prevents conflicting legal interpretations in the future.
You must also apply for a nine-digit Employer Identification Number, or EIN, through the IRS. The EIN Responsible Party is the person the IRS will contact when they need to verify any financial information about the company.
Designating a Registered Agent
When you file the official paperwork with the state, you must designate a Texas registered agent. This can be an individual or a business entity. It must be available during regular business hours to receive legal documents and notices on behalf of the LLC.
The address for the registered agent and the governing person and/or organizer are publicly listed in the Certificate of Formation. You can avoid this by hiring a professional registered agent service that will keep your personal information private and still be available to accept service of process.
It’s also a good idea to create an operating agreement, which isn’t required in Texas but can help preserve your limited liability by showing that your LLC is truly a separate business entity. It should include buyout and other provisions that reflect how the company will be run.
Opening a Business Bank Account
If you plan to open a business bank account, you will need to provide your registered agent’s name and address (it must be a physical address in Texas, not a P.O. box). You also need to indicate the LLC’s management method, whether it will be “member-managed” or managed by a manager.
If the LLC will have employees, it must obtain an Employer Identification Number (EIN) from the IRS, which is a nine-digit number that functions as the company’s “social security number.” The EIN can be used when opening bank accounts, filing taxes, and obtaining employee payroll services.
If you want to use a different name for your LLC when doing business, you must file an Assumed Name Certificate (Form 503), which is often referred to as a DBA, trade name or fictitious name.
Filing for Taxes
In order to begin doing business in Texas, your LLC must file for state taxes. This can be done through the online form or through a paper filing. You can also choose to hire an accountant or tax professional to do this for you.
While the State of Texas does not require an LLC operating agreement, it is highly recommended. This internal document sets out procedures for running your company and preserves the separation between your personal and business assets. It may include buyout, or buy-sell, provisions that determine how an LLC is sold or dissolved.
If you want to use a name that differs from your legal LLC name, you must file an Assumed Name Certificate (or DBA) and pay a fee. The same goes for using a name that is already registered to another business entity.