To start a new LLC in the state of Texas, follow the guide below. Texas, with its outstanding workforce, no corporate and personal income taxes, and a predictable regulatory environment, has become an attractive state for business relocations and the creation of new businesses. According to SBA data, the state had 3 million small enterprises in 2021, making up 99.8% of Texas businesses.
Starting a New Texas LLC in 5 Steps
Starting a Texas LLC is easy, and you can get a Certificate of Formation by applying by mail or online. Here are the 5 steps required:
Step 1: Give Your LLC a Name
Naming your company is always the first step because you must provide its name when registering the LLC. Remember to follow the naming requirements for the state, check for the name availability, and make it easy enough for your potential customers to find you.
The state offers several guidelines for naming your business. For example, a Texas LLC must always include the words “limited liability company” or any of their abbreviated forms. In addition, some words referring to professions remain restrictive, so you can’t use them unless you are licensed. Therefore, you can’t use words like Attorney, Bank, Doctor, University, etc. Furthermore, you also cannot use words referring to government agencies.
Always run a name search for your LLC name availability in the state because you can’t use one already in use by another business entity.
Finally, check your business name availability in its URL form on the web domain. You might not want to create a website yet, but by buying the URL, you ensure no one else can use it.
Step 2: Decide on Your Registered Agent
In Texas, you need to appoint a registered agent for your LLC. Registered agents are responsible for receiving official correspondence for the business, ensuring you never miss any important deadlines for your taxes, licensing, and in case of a lawsuit notification.
You can appoint yourself or another individual as your registered agent. However, you must know that the person is available to receive correspondence during regular business hours and must reside in the state. Since this is often difficult for you or individuals, it’s best to consider using a registered agent service.
When appointing a registered agent, you must receive written or electronic consent from them. The consent statement must include your Texas LLC name, that they consent to their designation, their name, signature, and date signed.
You need to keep this agreement in your files, but you don’t need to file it with the Secretary of State.
Step 3: File Your LLC Certificate of Formation
In Texas, you need to file Form 205 – Certificate of Formation with the Secretary of state by taking it in person, mailing it, or online. The state has a $300 filing fee payable with the application and is non-refundable.
You must state whether your LLC will function as a member-managed or manager-managed enterprise.
When conducting your business in the state, you must create a domestic Texas LLC; otherwise, if your existing LLC expands to Texas, you must file for a foreign LLC.
Processing times will vary according to how you file the Certificate of Formation but expect to wait three business days for online filing and seven days by mail.
Step 4: Draw Up Your LLC Operating Agreement
You don’t need to file an operating or company agreement with the state of Texas. It is also not a legal requirement like in some states. However, a comprehensive operating agreement outlines several things about your LLC, like its ownership and operating procedures, so file one at your business for future reference in case of any conflict.
Step 5: Obtain Your Texas LLC EIN
An EIN or Employer Identification number is your company social security number. Every LLC with more than one member needs one. It is a nine-digit number acquired from the IRS and needed to open your LLC’s bank account, for state and federal taxes, and to hire employees.
Getting your LLC’s EIN from the IRS is straightforward and bears no cost. You either do it online or send the required form by mail. You can download the form from the IRS.
When applying for the EIN, you also choose your tax classification. Most LLCs opt for the default tax status of their legal formation. However, you can also elect S corporation status if your business meets the requirements. If unsure, consult an accountant.
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Conclusion
It takes these five simple steps to start your Texas LLC. Once completed, your company is ready to operate with this popular legal business formation’s personal liability protection and pass-through taxation.
