Last Updated on September 13, 2020

The Limited Liability Company (LLC) is a popular business entity choice structure for many businesses starting in Texas The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Texas without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting for the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration and management flexibility.

Forming an LLC in Texas is fairly straightforward, but it’s nice to have some support in case you have questions or get stuck.  IncFile and Inc Authority provide LLC formation guidance for only the cost of the state fees!

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

To form a Limited Liability Company in Texas, file the Certificate of Formation with the Texas Secretary of State.  The LLC filing fee is $300.

Approval for the LLC is typically around one week.

If you have questions, contact the Texas Secretary of State.
Phone: 512-463-5555
Email: corpinfo@sos.texas.gov

 

HOW TO FILE THE CERTIFICATE OF FORMATION AND FORM A TEXAS LLC

Begin by creating an account on Texas Secretary of State’s website to file online or download the Certificate of Formation (Form 205).

 

Article 1: Name the LLC

Enter the name you want for the LLC.  The name of the LLC also has to differ from other entity names registered with the Secretary of State.  Be sure to check on the available LLC names in Texas to be sure the one you want is available.

The name of the LLC must also include a designator at the end of the business name.  A designator describes what type of business entity it is. Available designators include:

  • Limited Liability Company
  • Limited Company
  • L.L.C.
  • LLC
  • L.C.
  • LC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

Before settling on a name, you may want to do a domain name search to try and match your business name and website address.

Article 2: Registered Agent

To have an LLC in Texas, a Registered Agent must be identified.  The Registered Agent can either be a Registered Agent service or provider like an accountant or attorney (Select “Organization”) or an resident of Texas (Select “Individual).  The agent must have a physical address in the state (PO Boxes are not allowed) and will act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc on behalf of the LLC.

Even though the business owner can be the registered agent, their name and address become public record and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when they are doing business from home.

Article 3 – Governing Authority

This article is asking if the LLC is Member-Managed or Manager-Managed.

  • Manager-Managed LLCs are hired by the members to run the LLC, similar to a CEO of a corporation.  This is generally used when there are passive members in the LLC and the members do not actively manage or operate in the affairs of the business.
  • Member-Managed LLCs have an active involvement in the management and have authority to act on behalf of the LLC.

Most LLCs are member-managed.

Related: What is the Difference Between a Member-Managed LLC and Manager Managed LLC?

Enter the name for each of the governing persons.

 

Article 4: Purpose

This article allow to provide some basic information about what the business does.  Sticking with the standard language “The purpose for which the company is formed is for the transaction of any and all lawful purposes for which a limited liability company may be organized under the Texas Business Organizations Code.” keeps the business purpose open-ended and allows an LLC to operate in any type of business as long as it is legal.

Related: How to Answer the Business Purpose Statement.

 

Supplemental Provisions/Information

This is an optional section and not used by most LLCs.  Here you would include additional rules for the operation of the LLC.

Organizer Information

An LLC Organizer is someone involved with the formation of the Certificate of Formation.  The Organizer may or may not become a member, such as a mentor, attorney or accountant, but any of the initial members can be listed as an organizer.

 

Effective Date

If you want the LLC to start immediately, choose

  • A.  This document becomes effective when the document is filed by the secretary of state” which many people choose.
  • B. This document becomes effective at a later date, which is not more than ninety (90) days from the date of signing”
  • C. This document takes effect upon the occurrence of the future event or fact, other than the passage of time.

The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year and the business isn’t going to have any activity until the start of the year.  By delaying until the following year they will reduce the number of end-of-year filings.

Execution

Have an organizer accept the terms and conditions and sign.

Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed and more.

Most states do not require an LLC to have an operating agreement but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit
  • Member’s personal liability protection may be diminished
  • Members may not have a full understanding of their roles and responsibilities which could lead to costly disputes in the future

Related: Texas operating agreement template

Obtain an EIN

The EIN or Employer Identification Number is a unique 9-digit number for a business. Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.  

The EIN will be needed in order to open a bank account, register for business licenses and permits, file tax returns, pay payroll taxes and more. 

Related: How to Apply for an EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Depending on the age of the LLC, a Texas Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be a variety of business licenses and permits to register for before starting. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start. In some cases, even home-based businesses must have licensing in order to legally operate. 
  • Professional License – Certain services such as barbershops, accountants, salons and others must be licensed.
  • Sales Tax Permit – In order to sell products and certain services, registration with the Texas Department of Comptroller will be necessary.

Related: What Business Licenses are Needed in Texas?

File the Annual Public Information Report

LLCs are required to file a public information report with the Texas Comptroller each year.  The annual report updates ownership information and other details.