If you're starting a limited liability company (LLC) in Texas, you've chosen a great state for business. Texas has a strong and diverse economy and a large workforce and has become home to large companies, including Amazon and Tesla.
Choosing an LLC for your business is also wise, as an LLC offers personal liability protection, pass-through taxation, and other benefits. Starting an LLC in Texas involves several steps, which are detailed in this convenient guide.
If you've already chosen a name for your LLC, you'll need to make sure it follows the Texas LLC name regulations. Texas has quite a few rules when it comes to business entity names, including:
You can read the full list of regulations here.
Once you know that your LLC name follows the Texas rules, you'll need to do a business name search to make sure the name is available. You'll also want to make sure the name is not trademarked by checking the United States Patent and Trademark Office's website.
In Texas, you're required to have a registered agent for your LLC and name that registered agent on your LLC formation documents. Your registered agent is a person or company that will accept official correspondence and documents for your LLC. You, as an individual, can be your own registered agent but the LLC cannot be its own registered agent.
However, if you elect to be your own registered agent, you're required to be personally available at your registered office during normal business hours. This can be restrictive for a new business owner, so many choose to elect a registered agent service. Such services will receive your correspondence and documents, notify you, and make documents available to you online on a private dashboard.
These services generally cost between $100 and $300 annually.
Regarding what expenses you can claim back in an LLC, it is important to note that tax laws vary by jurisdiction, and it is recommended to consult with a tax professional or accountant to understand the specific rules applicable to your situation. However, generally speaking, some common deductible expenses for an LLC may include:
Again, it is essential to consult with a tax professional or accountant who can provide specific guidance based on your individual circumstances and the tax regulations in your jurisdiction.
One of the benefits of an LLC is the management flexibility it offers, but you do have to decide whether your LLC will be member-managed or manager-managed.
In a member-managed LLC, all members are involved in the management of the business – the key word being all. In a manager-managed LLC, some members may be appointed as managers while others are not involved in management.
Non-members also may or may not be hired as managers.
In Texas, you must specify your management structure and the names and addresses of managers or members on your LLC formation documents.
The fee to file is $300 in Texas.
Alternatively, you can print the form and mail it to:
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
One last option is to hire a business formation service to handle the filing for you. Most business formation services also offer registered agent services, as well as other services that can help you to launch and maintain your business.
The state of Texas does not require LLCs to have an operating agreement, but having one is crucial. An operating agreement defines the ownership of members, profit distributions, voting rights of members, how disputes are resolved, and more.
Without an operating agreement, if issues or member disputes arise, Texas laws will apply; however, these laws often do not have the clarity to resolve certain situations, which forces the parties to go to court if they can't reach an agreement.
An operating agreement is a legal document that is binding on members, so having one can help you to avoid court action.
Many of the business formation service companies that we've mentioned offer an operating agreement template that you can customize for your business. However, you may want to consider having an attorney draft your operating agreement, particularly if your LLC has multiple members. It can be worth the cost of legal fees to ensure that the rights and interests of all members are protected.
If you choose to use a template, you should at least have your customized version reviewed by an attorney.
In any case, it's wise not to skip this step to protect the future of your business.
An employer identification number (EIN) is a tax identification number for your business.
You're required to have an EIN if your LLC has multiple members or if it will have employees. Banks also sometimes require one when you open a business account or apply for a business loan.
You can apply for free on the IRS website.
Depending on your industry and location, you may need various business licenses and permits.
For example, if you sell goods or services that are subject to sales tax, you'll need a sales tax permit, which you can apply for on the Texas Comptroller's website.
Texas offers a comprehensive guide to industry-specific license and permit requirements.
You'll need to check with your local governments as well to see what may be required in your county and municipality.
Starting an LLC in Texas is a multi-step process, and doing it correctly is important so that your business gets off to a good start.
If it seems overwhelming, you might want to consider a business formation service that can help you with most or all of the steps.
It will cost a few hundred dollars, but it will save you the time and hassle of handling it all yourself.
When choosing a service, be sure to check their customer reviews to make sure that you'll get what you pay for and receive excellent support.
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