Texas LLC Formation

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What does Texas LLC mean?

An LLC stands for Limited Liability Company that possesses a similar power as the Corporation or the Partnership Sole-proprietorship firm, hence establishing its business operations in Texas by filling out the application to obtain the certificate of formation. A Texas LLC is a legal business entity distinct from a Corporation or a Partnership firm and provides a scope for the protection of limited liability and debts of its members after its formation. An LLC is a form of flexible business organization that is generally owned by the members and regulated by the operating agreement and the articles of organization responsible for its formation.

There are a variety of options if looking forward to the Texas LLC formation, as provided

  • Series LLC, is a framework of a single umbrella LLC having multiple numbers of series LLCs working and managing its business operations distinctly on the set pattern similar to the umbrella LLC.
  • Professional LLC, also known as PLLC, is a form of LLC for professional services established after obtaining a license from the state of Texas such as attorneys, doctors, architects, dentists, physicians, engineers, etc.
  • Single-member LLC is a form of LLC established by only one owner responsible for sole control over the business operations.
  • A multi-member LLC is also known as a member-managed LLC, an LLC with 2 or more members to control and manage the business operations. Hence, the LLC is said to be managed by its members.
  • A foreign LLC is an LLC formed and running its business operations in another state of the United States, also termed an out-of-state LLC.
  • Domestic LLC is a form of LLC defined by the State where the first LLC to be established is known as Domestic LLC.
  • Parent LLC is a form of LLC establishing one or more subsidiaries and hence referred to as the holding LLC for all the subsidiary LLCs.
  • Subsidiary LLC is sometimes referred to as a child limited liability company as it is owned and controlled by other entities.

Benefits for Texas LLC formation

The laws of Texas provide a wide space for the Limited Liability Companies to easily grow their business within the State of Texas. Some of the key areas targeted by the laws of Texas offering a smooth environment for the Texas LLC formation are

  • Provides a provision governing personal asset protection like car, home, etc., from the liabilities of the business
  • Simplified process of Texas LLC formation
  • protection of personal, limited liability of the members of the LLC
  • Diverse legal benefits and other tax incentives like no personal income tax and low business taxes
  • Easy access to open a bank account
  • To establish contractual relations
  • Increase in hiring of employees
  • Obtain necessary business licenses
  • Offers a flexible management system
  • No requirement to keep timely records of the minutes of the meeting
  • Easy to gather customers in the State of Texas
  • Easy access to investors
  • Accessible to the foreign investors as well
  • Even a non resident is free for the Texas LLC formation.

As per the database, the Texas LLC formation is a preferred option for the residents and foreign investors to incorporate an LLC based in Texas with the help and assistance of our experts and attorneys, ensuring all the State requirements.

Person(s) authorized for the formation of Texas LLC

You must be thinking about who are the persons authorized or responsible to apply to the Texas LLC formation. The answer to this question attracts several qualifications for the formation of an LLC in Texas, namely

  • A person who is a resident of the nation
  • A person who is not a resident, hence considered a foreigner in the State
  • A sole-proprietorship business either already exists or is about to start the process of its formation
  • A partnership firm is also eligible to apply for Texas LLC formation.

Rate card required for the Texas LLC formation

The rate card defines the cost and taxes applied during and after the completion of the formation of Texas LLC. The breakups of the rates specifying the Texas LLC formation are

  • The state filing fee of $300 (in person)
  • The state filing fee of $308.10 (online or in the mail), where $8.10 is the cost of convenience
  • The professional registered agent is hired at a fee of $120 annually
  • The fee for registration of every trademark is $50 per class
  • The fee for filing a certificate of correction is $15 (optional)
  • The fee required for reserving the name of the LLC is $40 (optional)
  • The rate of state franchise tax, or annual and state business privilege tax for a business entity generating a greater amount of revenue (i.e., above $1,230 000) between 0.375% and 0.75% for both retail & wholesale business units and other business entities
  • The rate of sales and use tax (including the 11 Surcharge and Fees and the Sales Tax Surcharge on Diesel Equipment) is 6.25% for any business activities for the sale, lease, goods renting, or other services of the LLC
  • The rate of the Self-employment tax (including the Social Security and Medicare taxes) for employees who work for themselves is 15.3%
  • The rate of payroll tax paid to the government by the LLC for the engagement of the employees in the business is 0.10% of the wages paid by the employer.

What is the process for the Texas LLC formation?

It is very important to do your research if you are willing to start the procedure for the formation of the Texas LLC formation. The formation and establishment of an LLC in Texas attracts a simplified, smooth, and fair process starting from the filling of the application form (i.e., form no. 205) for its formation with the principal business office located in the State of Texas. The basic steps that are needed to be followed for the Texas LLC formation are

Name of the LLC

The first step in attracting the formation of a Texas LLC is deciding and reserving the name of the LLC with the Texas Secretary of the State. The name identifying the LLC must contain certain characteristics

  • Distinct and unique name idea, not confusing the business ideas
  • The name must include LLC, Ltd. Co., Limited Company, or Limited Liability Company as the organizational identifier
  • Check whether any trademarks are registered under that name
  • No use of words like corporation or incorporated, bank, university, doctor, state department, insurance, trust, disabled, or any other official or governmental terms
  • Business and domain name availability must be checked on the Texas Business Entity Search Page, or a Taxable Entity Search must be conducted through the Texas Comptroller of Public Accounts website.

After the selection of the name, it must be reserved and trademarked with an application to the Secretary of the State of Texas for at least 120 days. The names reserved are also further entitled to their registration for an additional fee of $50. After you file for the reservation of the name of the business entity, there is yet another requirement to reserve the right to buy the domain name for the LLC, providing an available URL to the business entity.

Appointment of a registered agent

Every LLC formed in Texas is required to appoint a registered agent who is an individual entity entitled to maintain and forward all the formal and legal conversations like notices, lawsuit services, tax forms, or other official documents on behalf of the Limited Liability Company. The registered agent must be above 18 years of age, residing in Texas, and hence appointed before applying for the certificate of formation. The registered residential address of the registered agent will be considered the registered office address where all business communications will be carried forward. Once the registered agent is appointed during the Texas LLC formation, certain formalities are required to be covered, such as signing of the consent form (under Form 401-A) for being appointed, either online or offline (not mandatory).

The reasons that best suit the appointment of a registered agent during the Texas LLC formation are

  • Maintains confidentiality of the business
  • Aids in maintaining the privacy of the personal address used as the corporate address
  • No workload on one person and hence leads to timely completion of the work
  • Keeps an online backup of all the necessary documents
  • Acts as an in-house counsel
  • Easy to expand the services across various jurisdictions.

Framing the relevant documents

The relevant documents required for the Texas LLC formation are provided below

Certificate of Formation

An application must be filed to obtain the Certificate of Formation or the Articles of Organization through Form No. 205 under the purview of the Secretary of State of Texas. It is the most crucial step for completing the procedure either online or offline with a processing time of approx. 7-10 business days are required for the Texas LLC formation. The fee for filling out, as provided above, is mandatory to comply with.

The contents that are needed to be covered in a Certificate of Formation are

  • Name & address of the corporate registered agent
  • Legal and registered name of the limited liability company (including designation)
  • Business structure or model governing the operations of the LLC
  • Details of the members, directors, and the managers responsible for operating the LLC
  • The keen motive of the LLC
  • Signature and seal of the organizer (including E-signature)
  • Duration of the LLC operating
  • Any additional information or provision required before filing the application

The certificate of formation is effective within 90 days of signing the application for the Texas LLC formation, depending on a specific event or on a later date.

Operating Agreement

Drafting the operating agreement, which is a legal, internal document required for regulating the operations of the business and deciding how the LLC will internally conduct business, is yet another crucial step required for the formation of Texas LLC. The LLC formation agreement, also known as the Business Operating Agreement, should enlist the following clauses

  • The details defining the management in the LLC responsible for making decisions
  • Taxation policy of the LLC
  • The share in ownership and profit distribution
  • Total investments in the legal business entity
  • The voting power of the members in the LLC
  • The rules describing the conduct of the meetings
  • The rights and obligations of the members in the LLC
  • The clauses explaining the indemnification in case of any dispute between the members
  • The process for dissolution of the LLC
  • Details with respect to the Certificate of Formation or the Articles of Organization.

The agreement drafted need not be filed with the Secretary of the State of Texas but must be in written form and kept secure as further records. Creation of the Business Operating Agreement is optional, ensuring the rights of the members and avoiding any legal disputes if they arise.

What are the post-formation steps needed to incorporate an LLC?

What are the relevant steps that need to be followed after the formation of Texas LLC? It is the most demanding question that needs to be answered urgently. The answer to this question is explained below

Apply for EIN/TIN

It is mandatory to fill out the W-9 form free of cost with the Internal Revenue Service (IRS) for receiving the Employers’ Identification Number or the Federal Tax Identification Number (similar to the Social Security Number) of the Limited Liability Company required for filling

  • The tax returns
  • Opening a corporate bank account
  • Application for receiving business licenses and permits
  • Signing contracts and pacts with vendors
  • Apply for corporate loans and
  • Hire employees.

File Beneficial Ownership Information Report (BOI)

The next step needed to be followed within 1 month of the Texas LLC formation is the filling of the Beneficial Ownership Information Report (BOI) free of cost with the Financial Crimes Enforcement Network (FinCEN), which is obligatory under the purview of the Corporate Transparency Act (CTA) of 2021. The BOI shall contain all the relevant data and certain information with respect to the LLC and its beneficial owners, members, and directors who formed the legal entity. The period for filing the BOI has increased to 90 days from the date of the Texas LLC formation for the Limited Liability Companies formed in 2024.

File annual Reports

The next step that you must follow once the Texas LLC formation is complete is to file the annual reports containing the franchise tax report and public information report with the Texas Comptroller of Public Affairs by 15th May each year, free of cost. The necessity to file the annual report lies behind the fact that the State has the right to have key updates on the managerial and operational activities of your legal business entity. Missing out on the filing of the annual report may lead to severe consequences like forfeiture or dissolution of the business entity, or worse, penalties may be imposed.

Apply for Other Business Licenses and Permits

After the approval of all the documents filled at the time of Texas LLC formation, the next step requests the inviting of applications for obtaining other relevant business licenses and permits like federal, state, and local professional, regulated, and environmental licenses required for smoothly carrying the business operations according to the varying requirements as observed in various States, industries, and local jurisdictions.

Open Business and Tax Account

Opening a separate corporate bank account for a separate legal entity, i.e., an LLC, is the crucial step to be followed post-formation of the Texas LLC for enhancing the business affairs, option for the protection of liability, applying for corporate loans and credits, and easy to file the corporate tax returns. The documents required to submit before the bank for operating a corporate bank account are

  • The facsimile of the certificate of formation or the articles of organization
  • The federal identification number or the employers’ identification number
  • The facsimile of the operating agreement governing the LLC
  • The facsimile of the business licenses or permits obtained

Apply for Business Insurance

The next step that you will need to follow is to obtain the corporate insurance certificates issued for the LLC formed in Texas to insure the company from any contingency of unexpected events. Some of the common types of insurance offered to the businesses formed in Texas are

  • Professional Liability Insurance
  • Commercial Liability Insurance
  • General Liability Insurance
  • Workers’ Compensation Insurance (not mandatory for private businesses)

Hiring of Employees

After the Texas LLC formation procedure is complete, you must start hiring professionals like certified accountants, company secretaries, and other relevant employees to delegate business operations smoothly.

Get HUB Certification

Applying for the HUB is not a mandatory task for all the LLCs formed in Texas, but the certificate of historically underutilized business (HUB) must be obtained by the Women and minority-owned legal business entities in Texas free of cost.

Invite Funding

Inviting funds for the Texas LLC formation through different ways like extracting loans and grants, crowdsourcing, pitching the business entity in front of venture capitalists, micro-financing, etc., is also a crucial step required to be in the interest of the LLC incorporated in Texas.

Expanding the LLC incorporated in Texas

In order to grow the roots of the incorporated business, there is a need to expand the area of operations of the LLC incorporated in Texas. The expansion can be possible through

  • The formation of a Foreign LLC in Texas with the prior approval of the Secretary of State of Texas
  • Registering the Subsidiary LLCs in other states with the prime LLC registered in Texas
  • Employing appropriate methods of marketing and networking the business in Texas
  • Expanding the business on online portals to build a strong brand name.

What services Enterslice can offer for the Texas LLC formation?

Our business services not only aid in checking the points for the formation of Texas LLC but also provide a clear and concise roadmap for the pre and post formation procedure to be fulfilled in compliance with the laws and regulations established by the State of Texas.

The services that Enterslice offers to simply the procedure for the Texas LLC formation are

  • Aids in depicting the business structure
  • Provides long-term professional support
  • Provides guidance for gathering resources for the Texas LLC formation
  • Simplifies the filling of documents
  • Access to our local and business support team
  • Assists in tracking the compliance of the LLC formed in Texas
  • Provides cost efficient and effective services like instant business presence
  • Aids in renewing the business licenses and other relevant permits, etc.

Frequently Asked Questions

The total time for processing an application for the Texas LLC formation varies from 4-6 weeks. But this time, it decreases to 10-12 business days if you pay the charges for expedient services of $25 per document.

The cost of setting up a domestic LLC in Texas is $300, and a foreign LLC is $750.

The licenses and permits required for the formation of Texas LLC are contingent upon the industry requirements under which Texas LLC is incorporated. Some of the business licenses and permits that are necessary for the Texas LLC formation are

  • Federal, state, and local professional licenses
  • Federal, state, and local regulated licenses
  • Federal, state, and local environmental licenses
  • Texas sales and use tax permit
  • Sales tax permit, etc.

Yes, it is necessary for all the LLCs operating in the State of Texas to obtain the Employers' Identification Number, also known as the Federal Tax Identification Number.

There exist various types of LLCs that can be incorporated in Texas, namely

  • Series LLC
  • Professional LLC
  • Single-member LLC
  • Multi-member LLC or Member Managed LLC
  • Foreign LLC
  • Domestic LLC
  • Parent LLC
  • Subsidiary LLC.

Yes, filing the documents for the formation of an LLC in Texas is possible through e-fillings, including in-mail services and online portals.

A foreigner who is a non-resident of Texas is free to form a Foreign LLC in Texas under form no. 304 with a filing fee of $750 under the purview of the Secretary of the State of Texas.

The reasons for the Texas LLC formation are

  • offers various incentive policies for the formation of an LLC in Texas
  • simplified tax exemption policies attract various LLCs to incorporate their business in Texas
  • easy to attract the investors
  • a simplified and easy process of the formation of an LLC based in Texas
  • Even a non-resident is free to incorporate an LLC in Texas.

No, an LLC incorporated in Texas does not expire as it exists perpetually (i.e., carries its operation even after the death of the owner). Hence, an LLC can cease its operations only after filing the Certificate of Termination (i.e., Form No. 651) with the Secretary of the State of Texas for the dissolution of the LLC.

No, there is no need to file the corporate operating agreement with the State of Texas as it is created only to regulate the legal business entity internally.

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