How to Form an LLC in Texas: Easy Steps to Take

When you decide to form a Texas LLC you will be expected to follow certain guidelines to maintain your business's good standing. To do this, there will be a set list of things you will need to complete to set your LLC up correctly. It is usually helpful to have a checklist to make sure there is nothing you forget to do. Typically, this checklist will include:

1. Choosing a business name - Your LLCs name will need to be unique and distinguishable enough for other active businesses in the state. Also, you'll need to include a designator such as "LLC" in the official business name.

2. Appoint a registered agent - All LLCs will need a registered agent, which is someone who receives service of process and important notices sent to them by the state or courts.

3. Submit your Articles of Organization - This is the official document that will formally create your LLC in the state of Texas.

4. Draft an operating agreement - Operating agreements will be what details the roles and responsibilities of the business owners and processes for how your LLC handles decision making, voting, and more.

5. Obtain an EIN - Issued to your business by the IRS, this will act as a social security number for your business and be needed when filing taxes, hiring employees, and opening a business bank account.

6. Open a business bank account - A separate bank account specifically used for your business funds. This is used to keep person and business finances separate and give more credibility to your business.

7. Maintain ongoing good standing - This will include completing tasks each year to make sure your business is operating legally and has all information updated with the Secretary of State.

This guide will give new business owners a step by step guide on how to form an LLC in Texas, as well as tips for how to complete these steps correctly. You can choose to either do this on your own, or you can hire a service like Firstep handle this for you. If you decide to handle this yourself, then this guide will aim to give you the tips needed to form your business and keep it in good standing.

Step 1: Choosing a Business Name

The first step of forming a new LLC in Texas will be to choose a business name. You will need to choose a name that is unique and distinguishable enough from the other active businesses in the state of Delaware. This is a crucial step in the business formation process as our business name will be the first thing customers see when they interact with your business. It is helpful to have a name that is related to the products or services you offer so customers are more likely to remember your business name and be repeat customers. Brainstorming business names allows you to come up with a few different names so when you go to form your business you will have some options. While you are brainstorming, you can use the Texas business entity search to make sure the names you are picking from are available and not currently in use. Keep in mind the Texas Secretary of State will charge $1 per entity search. If you want to reserve a name, you are able to reserve a name for 120 days by paying a fee of $40.

LLCs that are formed in Texas are required to have a designator in their business name, such as "LLC" or "Limited Liability Company". Also, as mentioned before, your business name will need to be distinguishable enough from other active businesses that are registered in the state. The state does not hold business names for any reason, so if a business has been administratively dissolved or dissolved on their own the business name will be available right away. Regardless of what name you end up choosing, be sure to enter it exactly how you would like it to appear on your business records including the designator.

Step 2: Appoint a Registered Agent

All LLCs that are formed in Texas are required to maintain a current registered agent for their business. A registered agent will be responsible for receiving any service of process and important notices that are sent to your business by the Secretary of State. You can choose to appoint anyone in this role as long as they meet certain requirements that are set for registered agents. The requirements include:

• Be at least 18 years old

• Have an active physical address in the state of Texas

• Be at your listed address during regular business hours (Monday-Friday 9am-5pm)

Your registered agent can be anyone you choose from yourself, a trusted friend or family member, or you can hire a registered agent service to act in this position. It's important to be aware that your registered agent's address will be listed on your Articles of Organization which is public information. If you value privacy and do not want your address listed then hiring a registered agent service like Firstep can be useful as they will be able to list their own business address for your registered agent information. It can also be useful if you are a mobile business owner or have multiple locations as this will make it difficult to be at your listed address during business hours each day. To stay in good standing with the Secretary of State, you will need to maintain an active registered agent and keep all information up to date in case the state needs to get in touch with your business or if there is any service of process sent to your LLC.

Step 3: Submit Your Articles of Organization

Forming a Texas LLC can be expensive when compared to other states, so it's extremely important to make sure you are filling out the Articles of Organization form correctly and submitting accurate information for your business. You are able to choose to fill this form out via PDF from the Secretary of State website and mail it in, or you can use their online filing portal which will speed up the processing times. You will need to have the following information ready to enter:

• The official name of the LLC

• The registered agent and registered office information

• Manager managed or member managed

• The initial governing person or members that will be involved with the LLC

• Initial mailing address

• Name and address of the organizer of the business

• Check if you would like the effective date to be the day the filing is processed

• Signature of an organizer of the business

Once you have filled out the information for the Articles of Organization and submitted the document all you need to do is wait for the Secretary of State to process and review your submission. You are able to either do this on your own or you can hire a Firstep to handle the formation process for you. If you do choose to do this on your own, you will also need to pay the filing fee of $300 for submitting this document.

Step 4: Draft an Operating Agreement

Once you have set up your Texas LLC your next step should be to draft an operating agreement. Although these are not legally required in Texas, they are highly suggested due to the advantages they provide to business owners. An operating agreement will detail the roles and responsibilities of the business owners, including the ownership percentages, voting rights, and processes for decision making within the business. This document will also outline the process for members joining and leaving the business, how members will contribute to the business, and the management structure that will govern the LLC. Operating agreements are very helpful for new businesses to have in order to avoid disputes between members and ensure your LLC is operating legally.

You will not need to file an operating agreement with the Secretary of State since they are not legally required, so these documents will be stored as internal documents. You may be required to present this when working with outside vendors or investors to show your business processes and how it is managed, and it's important to save these documents in a safe place.

Step 5: Obtain an EIN (Employer Identification Number)

After you have formed your business you will also need to obtain an EIN, or employer identification number, from the IRS. This document will be extremely useful as it will be used for business activities such as hiring employees, filing taxes, and opening a business bank account. Your EIN will be issued to your business by the IRS and act as a social security number for your LLC. Each business will only be issued one EIN so it's very important to save your documentation and EIN number to avoid having to retrieve this number from the IRS.

If you do end up forgetting your EIN, you are still able to get these documents resent to you although it can be a lengthy process. This is a separate process than initially getting your EIN, but it is still done through the IRS and you will need to provide your business information such as your name, home state, address, and members of the business. This will then typically be reviewed by the IRS which can vary in how long it takes based on how busy the IRS is at the time.

When you fill out an application to get your EIN issued to your business, it's important to make sure you are entering your business information exactly as it appears on your Articles of Organization to ensure this will be issued to the correct business. Since businesses are only issued one EIN, they do not need to be renewed or expire. Whether you are getting a new EIN or obtaining an old number you have forgotten, Firstep can handle this process for you so you do not need to deal with the IRS or track the long processing times.

Step 6: Opening a Business Bank Account

With your LLC officially formed you will more than likely need to open a business bank account. This will be required typically to keep your personal and business finances separate and continue to operate legally in the state of Texas. LLC owners will be granted liability protection which protects the owners personal assets and ensures any debts incurred by the business will not affect their personal savings, retirement, or assets. However, there are certain things you must do to ensure this protection is continued such as keeping your finances separate between your personal assets and business assets.

Another advantage of having a business bank account is that it gives your business more credibility when working with outside vendors and partners as opposed to using your personal bank account. This is because you are able to have payments made out to your actual business instead of to yourself which is both more professional and easier for you to track. The separation of your finances allows you to have a clear understanding of your business's available money and ensure you do not overspend or accidentally use business finances for personal use. Doing this can lead to the piercing of the corporate veil and the loss of your liability protection, which puts your personal finances at risk.

From the protection of your personal finances, the added credibility when working with outside vendors and partners, and being able to easily track your business cash flow are all important reasons for starting a business bank account. Especially once your business grows and is generating a significant amount of money, a business bank account becomes even more important for tax purposes, being able to track your profits easily, and keeping your personal and business finances separate.

Step 7: Maintain Ongoing Good Standing

After you have officially formed your new LLC in Texas you will be required to keep the business in good standing which includes filing a Public Information Report (PIR) and registering for any required business licenses that are required by your industry. Keeping your information up to date helps ensure you will stay in good standing while operating within the state of Texas.

Public Information Report (PIR) and Franchise Tax Report

Each year your LLC will be required to submit a Public Information Report to update your business information, as well as a franchise tax report. The public information report will include information such as:

• Legal entity name

• Filing number

• Registered agent information

• Business information

• Names and addresses of managers or members

LLCs in Texas are not required to file annual reports like most states, but these public information reports are required for LLCs. They are due by May 15th each year and are done through the Texas Comptroller site. Firstep currently does not handle any tax filings, so you must handle this filing on your own.

Business Licenses

Depending on the industry or location your business is in you may be required to register for certain business licenses. These will typically be done at the local government level and will need to be renewed to stay in compliance. Most businesses that will need to register for specific licenses will be specialized services such as healthcare, insurance, law, construction, and other professional services.

FAQs on Texas LLCs

How much does it cost to form an LLC in Texas

To submit the Articles of Organization in Texas you will need to pay a fee of $300

What if I don't have someone to appoint as my registered agent

If you don't have an active physical Texas address you can choose to hire a registered agent service to act as your agent for your LLC. They will meet all requirements set by the state for this position and make sure you do not miss any documents or notices sent to you.

Am I able to form an LLC in Texas even if I don't live in the state

Yes, you can still form a Texas LLC if you don't live in the state you will just need to make sure you have a registered agent who meets the state requirements.

Does Texas have annual report requirements

Texas does not require LLCs to file an "annual report" however you will be expected to submit a franchise tax if you exceed total annual revenue of $2.65 million. You'll also need to file a Public Information Report (PIR) that gives information on the members of your LLC regardless if you have hit this threshold or not.

When is the due date for the franchise tax and Public Information Report for Texas LLCs

The due date for these reports will be May 15th each year.