How to Set Up an LLC in Texas
You may have come across the term "LLC" when finishing some type of transactional work. But what is an LLC? And how do you set one up? This brief article will discuss how to form an LLC in Texas.
Before You Create an LLC in Texas
Before you form an LLC, there are several things you should do. First and foremost, you should know whether or not you will be working alone or with other people. If you are going to be working with others, you should discuss the decision to form an LLC and each person's role in the LLC.
In addition, you should make sure the name of your LLC is available for use in Texas. You can check availability by conducting a name search in the Texas Secretary of State's records. Let us discuss all the other steps involved before forming an LLC in Texas.
Check That Your Preferred Name Is Available
Before you form an LLC, you should make sure the name of your LLC is available to use. You can conduct a search at the Texas Secretary of State website. If your desired name is not available, you will have to request a substitute business name. For example, if your LLC's name is "The Super Group," you should search the Secretary of State's records to see if that name is available. If it is taken, you will have to provide another name for your LLC, such as "Super Group, Inc."
Buy the Website Domain
If you plan to promote your business online, it is best to buy the website domain name you want before you form an LLC. You can buy a website domain at sites such as GoDaddy, hostOsite or Sedo.
Hire a Registered Agent
Texas does not require you to hire a registered agent, but it is recommended. A registered agent is an individual or business that agrees to accept your business documents for safekeeping. Hiring a registered agent is one way to prove service of process in the event an LLC lawsuit is filed and the plaintiff wants to serve the defendant with a court order.
You or one of your employees can act as a registered agent, but there are several advantages to hiring a registered agent. For this purpose, you can appoint a business such as LegalZoom to act as your registered agent. A registered agent can receive mail on behalf of your LLC. Additionally, a business may be able to serve as registered agent in the event you are sued.
How to Set Up Your LLC in Texas
After you have decided upon a name, checked to see that it is available, and appointed a registered agent, you are ready to form an LLC in Texas. Here are the steps involved:
Reserve Your LLC Name
If your desired name is available, you must reserve it with the Texas Secretary of State. You can complete a Reservation of Name application to reserve the name of your LLC. The application must be filed online or by mail.
After you complete the form, print it and use the name of the person who completed it on your LLC. For example, print "Reserved for John Doe by Jane Doe" if you are reserving the name on behalf of John Doe.
When naming your business entity, you must, by law, include "Limited Liability Company" or the abbreviation "LLC" on the name. You may also use a name that describes what your business does or sells. For example, "Property Management, LLC" or "Texas Auto Dealership, LLC."
Additionally, you must not use certain names. These names include state or federally protected people and entities, such as the "United States," "Texas," etc. You cannot use a name that is misleading or deceiving. For instance, you cannot call your business "XYZ Drinks" if the company actually sells software or any other items like microscopes.
File Your Articles of Organization
The next step is to file your Articles of Organization, the document that establishes your LLC. The Texas Secretary of State provides a blank form which you can fill out and file online. You can also complete the form by hand, have it notarized, and mail it to an office in Austin.
As soon as you file your Articles of Organization, your LLC is considered legally established.
After Forming Your Texas LLC
After you establish your LLC, you must keep the Texas Secretary of State's records updated with your personal information, as well as maintaining a registered office and agent. This information will be crucial in the event you are sued.
Get a Certificate of Good Standing
When your LLC is created, it is not considered a legal entity. A separate document called a Certificate of Good Standing must be filed with the secretary of state. This document states that your LLC is recognized as a legal entity and can now conduct business in the state of Texas.
You can request a Certificate of Good Standing from the secretary of state either by mail or online. A fee must be paid when requesting the certificate, and you will need to provide an LLC number.
Create an LLC Operating Agreement
An LLC operating agreement is a legal contract that states the rights and responsibilities of members or managers. You should create an LLC operating agreement as soon as your LLC is official.
An LLC operating agreement clarifies issues such as how business decisions are made, how much money members must pay in order to join, and how much authority managers hold.
This agreement cannot be changed without the consent of all members or managers. For this reason, you should consider an LLC operating agreement as a crucial step in establishing your LLC, rather than an optional task.
Get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a nine-digit number that must be used for tax purposes by all business entities. This allows the IRS to identify a business' financial transactions. An EIN can also be referred to as a Federal Tax Identification Number.
You will need an EIN if you plan on hiring employees or opening a bank account (You can get more help on opening a bank account from Businessfinancearticles.org) for your LLC. To get an EIN, file Form SS-4, Application for Employer Identification Number. You can complete the form on paper or online, and you will need to provide your business name, address, employer identification number, and your contact information.
In the event your LLC is not recognized as a legal entity, you can still obtain an EIN for tax purposes.
File Your Annual Report
After your LLC is established, you must file an annual report on the anniversary of its formation. You can submit this form online or by mail. The fee to file your annual report varies based on the number of members in your LLC. If you do not file your annual report, however, it is possible your LLC's business license will be suspended or revoked.
Pay Your Taxes
After you establish your Texas LLC, it is necessary to pay the income tax you owe to the state. All LLCs in Texas are required to pay a franchise tax, which is equivalent to 4 percent of your LLC's net taxable income. If your LLC is based in a different state but conducts business in Texas, you will be exempt from the franchise tax if your LLC's home state imposes a similar tax.
As for federal taxes, your LLC will have to pay self-employment taxes if it has made at least $400 in profits. Your LLC can be taxed as a corporation or as a partnership if you wish, but the default is an LLC that is taxed as a sole proprietorship.
Forming an LLC in Texas can be done easily and quickly with LegalZoom, but you should always contact a Texas attorney to ensure that your formation complies with local and federal laws.
For more information on how to form an LLC in Texas, visit our website.
The information provided in this article is not legal advice. The content is educational in nature and should only be used as a starting point in your research.
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