How to Form a Limited Liability Company (LLC) in Texas

A Limited Liability Company (LLC) is one of the most popular business structures for entrepreneurs in Texas due to its flexibility, limited liability protection, and favorable tax treatment. Forming an LLC in Texas involves several key steps that ensure legal compliance and optimal structure for your business needs. This guide will walk you through each step, from choosing a business name to obtaining necessary licenses, to help you successfully launch your LLC in the Lone Star State. Call our office if you need help with your LLC.

Step 1: Choose a Name for your LLC

Choosing the right name for your LLC is not only an important branding exercise but also a legal necessity in Texas. The name you choose must be distinguishable from other business names already registered with the Texas Secretary of State and must include “Limited Liability Company,” “Limited Company,” or abbreviations like “LLC” or “LC.”

What are the requirements for naming an LLC in Texas?

HOW TO FORM AN LLC IN TEXASYour LLC name must not include words that could confuse your company with a government agency (FBI, Treasury, State Department, etc.). It should also avoid restricted words that could imply an unauthorized business purpose, such as “bank,” “lawyer,” or “university” unless you have the necessary licenses for such services.

To ensure your chosen name is available, conduct a name search on the Texas Secretary of State’s website. If the name is available, you can reserve it for a period of time until you are ready to file your formation documents. This reservation can prevent other entities from registering your chosen name while you prepare the necessary paperwork.

Step 2: Appoint a Registered Agent

A registered agent is legally required for every LLC in Texas. This agent is responsible for receiving official communications, including legal documents and government correspondence on behalf of your LLC.

Who can be a registered agent for an LLC in Texas?

A registered agent in Texas must be a resident individual or a business entity authorized to do business in Texas. The agent must have a physical street address in the state (P.O. boxes are not acceptable) where they can receive documents during normal business hours.

Choose a reliable registered agent who is consistently available at the registered office during business hours. This could be yourself, another member of your LLC, or a professional registered agent service. If choosing a service, ensure they have a good reputation and can handle legal and tax documents competently.

Hailey-Petty Law Firm can help with all of your estate planning needs.

Step 3: File the Certificate of Formation

Filing the Certificate of Formation officially registers your LLC with the State of Texas. This document lays the foundation for your business’s legal structure.

What information needs to be included in the Certificate of Formation?

The Certificate of Formation must include the LLC’s official name, the registered agent’s name and address, the LLC’s mailing address, and the names of the organizers. You can also specify whether the LLC will be managed by members or managers.

You can file your Certificate of Formation online through the Texas Secretary of State’s website, or you can mail in the completed form. There is a filing fee associated with this document, which must be paid at the time of filing. Ensure all information is accurate and complete to avoid delays.

Step 4: Create an Operating Agreement

Though not legally required in Texas, creating an operating agreement is highly advisable for any LLC. This internal document outlines the governance structure and operational procedures of your LLC.

Is an operating agreement required in Texas?

No, Texas does not require LLCs to have an operating agreement, but having one is beneficial. It can help ensure all members are clear about their roles and responsibilities and provide for smoother resolution of disputes.

Draft an operating agreement that covers capital contributions, profit distributions, member responsibilities, and procedures for adding or removing members. Consulting with a lawyer to help draft or review this document can prevent future legal issues and ensure that the agreement meets all members’ needs.

Texas LLC Formation FAQ

How much does it cost to form an LLC in Texas?

How much a Texas LLC costsIn Texas, the cost to form an LLC primarily involves the filing fee for the Certificate of Formation, which is $300. This fee is paid to the Texas Secretary of State when the formation documents are submitted either online or by mail.

Additional costs may include fees for reserving your LLC’s name if you choose to reserve it before filing the Certificate of Formation, which is $40. Also, if you decide to hire a registered agent service, this will incur extra fees, which can vary depending on the service provider.

It’s also wise to consider potential costs for legal consultation or the drafting of an Operating Agreement, though these are optional and vary based on the complexity of the agreement and the rates of the attorney or service used.

Can a single person form an LLC in Texas?

Yes, a single person can form an LLC in Texas. Texas allows for the creation of single-member LLCs, where only one individual owns and operates the business. This structure is popular among solo entrepreneurs because it provides the liability protection of a corporation with the simplicity and flexibility of a sole proprietorship.

Forming a single-member LLC in Texas follows the same process as forming a multi-member LLC. You will need to choose a business name that complies with Texas naming requirements, appoint a registered agent, file the Certificate of Formation with the Texas Secretary of State, and potentially create an operating agreement (though not legally required, it is recommended for clarifying the business structure and operations). This structure allows you to benefit from limited liability, protecting your personal assets from business debts and claims.

Do I need a lawyer to form an LLC in Texas?

No, you are not legally required to have a lawyer to form an LLC in Texas. Many business owners successfully complete the process on their own by filing the necessary documents with the Texas Secretary of State and complying with all relevant state guidelines.

However, there are several reasons why you might consider hiring a lawyer when forming an LLC:

  1. Complexity: If your LLC has multiple members, a complex management structure, or unusual profit distributions, a lawyer can help draft an Operating Agreement that addresses these complexities effectively.
  2. Legal Advice: A lawyer can provide valuable advice on the legal implications of the decisions you make during the formation process, such as the effects of different management structures or the implications of member roles and responsibilities.
  3. Compliance: An attorney can ensure that your LLC complies with all federal, state, and local regulations, which can prevent costly legal issues down the road.
  4. Customization: A lawyer can help tailor the LLC to your specific business needs, offering customized solutions that a generic online service might not provide.

While it’s possible to form an LLC without legal assistance, consulting a lawyer can provide peace of mind and ensure that all legal bases are covered, especially for more complex setups or if you have specific legal questions or needs.

Do You Need to Form an LLC as Part of Your Estate Plan?

Forming an LLC in Texas involves careful consideration and thorough preparation. By following these steps, you can ensure that your LLC is legally compliant and structured to meet your business needs. Each step, from naming your LLC to drafting an operating agreement, plays a crucial role in laying a strong foundation for your business.

Find an LLC Lawyer Near Me

If you are considering forming an LLC in Texas and need further guidance or have specific questions, consider consulting with a business attorney who specializes in Texas corporate law. They can provide personalized advice and ensure that your LLC formation goes smoothly and meets all legal requirements.