Are you looking for the freedom that comes with owning your own company? An LLC is a popular choice for many new Texas business owners. In the Lone Star State, business owners can take advantage of several tax benefits, strong asset protection and flexible profit choices—in a state with one of the fastest growing economies. Here’s how to start your LLC in Texas.
The first step in forming a new LLC in Texas is to create a name. The name you choose for your Texas LLC has to be different from other Texas business or LLC names. Here are a couple of laws unique to Texas that will impact naming your LLC:
What you can’t do: The name can’t contain words or phrases that could give the impression that the LLC has been organized for some purpose other than that specified in its articles, or one that’s not allowed by state law.
What you must do: The LLC name must end in one of the following terms or its abbreviations: “Limited Liability Company;” “LLC” or “L.L.C.;” “Limited Company;” “LC” or “L.C.”
Once you have a name, Texas law states that you must write up and file articles of organization for your new LLC. The articles of organization must list:
Texas LLCs must each have a registered agent in Texas — someone designated to receive official correspondence from state administrative or legal agencies. A registered agent for an LLC in Texas can be an individual resident, a Texas LLC or corporation, or an out-of-state (“foreign”) corporation or LLC with an office in Texas. The LLC must keep a business office at the same address as its registered office, and it must be a street address, not just a post office box or answering service.
If you need a registered agent in Texas, Incfile can provide that service.
Your LLC is “organized” when an original and one copy of the articles of organization are given to the Texas Secretary of State’s office along with the filing fee, and their office confirms that they comply with state requirements. Incfile will submit these forms for you.
The Secretary of State endorses both copies, keeps the original, and returns the signed copy. The articles of organization are effective as of the date and time they are filed unless a later date and time are specified.
After you’ve filed your articles of incorporation, your LLC needs an operating agreement. This isn’t required by state law, but it’s a critical internal document that officially explains how the LLC will operate. It lists:
A typical operating agreement also includes requirements mandated by the state of Texas, and can be amended or repealed as specified by the agreement or applicable law.
Texas LLCs must have at least one member, and each member must be a natural person (as opposed to a corporate entity). To become a member, an individual usually has to make a contribution, pay money, or transfer property to the LLC, or else assume an obligation to do so or render some kind of service.
A member can resign from an LLC, but only in the way specified in the articles of organization or operating agreement. These documents also usually specify a minimum period of time a member can be a member before being allowed to resign. LLCs have the option of penalizing a resigning member for damages suffered by the LLC due to his resignation.
Texas LLCs are required to file an annual report with the Texas Secretary of State including the following:
The Texas Franchise Tax filing requirements state that you must file an annual Franchise Tax Report, and an Information Report. You must file additional forms if you take any credits on your report, file as a tiered partnership, or file as a combined group.
When you form your LLC with Incfile, we’ll send reminder emails about Texas’ ongoing requirements as the due dates approach.
An LLC has some tax advantages when compared to a corporation, including the availability of more deductions. However, there is no requirement for an LLC to be a separate tax entity like a corporation. Instead, an LLC can be a “pass-through entity” when it comes to taxes, so that the LLC owner or owners report business losses or profits on their personal tax returns, in the same way that a partnership would.
The IRS treats single-member LLCs as sole proprietorships for tax purposes unless you choose for your LLC to be taxed as a corporation. This means the LLC itself does not pay taxes and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes, unless you choose for your LLC to be taxed as a corporation. This means that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.
When starting a new LLC in Texas, you may need to obtain a federal tax identification or employment identification number (EIN). In most cases, you won’t need a separate EIN for your LLC if you are the sole owner and the LLC has no employees. However, if you are not the sole owner of the LLC, or if the LLC has employees, the LLC will need a separate EIN to open a bank account and to meet tax filing requirements.
A Texas LLC is dissolved when any one of the following events occurs:
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