If you are like most new business owners, you already know you need a Texas LLC but you are not sure how to go about making sure it is done properly.
Texas limited liability companies are “legal” entities and as with anything legal, they can be complicated and the underlying rules and laws are incredibly boring and technical.
This Article provides the key requirements for starting an LLC in Texas.
Step #1 – Coming Up with an Available Texas LLC Name
Texas imposes some pretty onerous requirements when it comes to accepting a name for a new LLC entity. As with most states, Texas does not allow names that are the same as or too similar to another name on record.
But, they also have an additional laundry list of conditions for names. For example, Texas has what is known as the infamous two name rule which sometimes invalidates most names that use the same two words as another name despite having other words and there are certain “troublesome” words that cause name rejections (examples: insurance and trust).
If you have a name in mind, we offer one free Texas LLC name search or if you purchase our services, our specialists will check your proposed name as a priority matter and if needed will work with you and the State until you get a name you want and that is acceptable with the state.
Step #2 – Determining the Ownership of the LLC
After arriving at a name, you should write down who will own what interests in the Texas LLC. If you are the only business owner, this is simple. It will just be you.
However, if there will be others, it is important that you determine who will own what interest and what amount of money (or other property) each will be required to contribute to the business to obtain the ownership.
Please note that the ownership of the LLC is not established in the formation filing with the state but in the LLC Operating Agreement which is a private document. For LLC formation purposes, Texas requires the disclosure of members and member addresses (but not ownership percentages) for member managed LLCs so make sure you get this information.
Step #3 – Filing for a new Texas LLC in Compliance with Texas LLC Formation Requirements
A Texas LLC is only properly formed if a set of documents is filed with the Texas Secretary of State and those documents contain all the required disclosures and information required by the rules and regulations.
For example, in addition to meeting the numerous name rules and disclosing member or manager names and addresses, every new LLC is required to appoint a Texas registered agent and office within the state.
Texas provides an annual legislative update presentation each year that explains and discusses the changes in its requirements and regulations.
Because strict compliance with these rules and regulations are necessary to ensure you have a seamless formation and that you are not unknowingly lacking compliance (which could place you at risk for liability or for unintended tax consequences), it is really important you take the time to learn exactly what is required or you hire an attorney or a professional formation service to handle this for you.
Texas LLC Formation specializes in Texas rules and backs each and every formation with a 100% compliance guarantee so you know your LLC will meet the formation requirements. Learn more about our 3 Business Day Texas LLC Formation Service.
Step #4 – Adopting an Operating Structure for your Texas LLC
After your Texas LLC has been properly formed, you need to give it a set of rules and procedures for how it will be run. This is typically done by adopting a Texas LLC Operating Agreement.
While LLC formation does not require the services of an attorney, any Texas LLC that is going to have a complex ownership or governance structure should hire a lawyer to help prepare or customize an LLC Operating Agreement for their particular business. This is money well spent especially if you have investors or partners.
On the other hand, if your LLC is only owned by you or by you and some close family members and you want to adopt a standard set of rules, you can purchase a professional LLC operating agreement form as your starting point and customize it yourself for your business.
Step #5 – Gaining a Basic Understanding for Operating and Maintaining an LLC
After your LLC is formed and an operating agreement is in place, you should invest some time to learn the basics about an LLC and how to operate one. There are many books available at the bookstore or in your local library that provide a good baseline education.
This is needed for several reasons. One, to help you maintain your LLC so it can do business with others. But, two, and most importantly, to ensure you do what is needed to ensure you do not place your personal liability protection at risk by not properly doing business as an LLC or maintaining the LLC.
If you purchase our Texas LLC formation services, your order comes with an eBook that teaches you how to properly preserve LLC protection in six simple steps. It is an invaluable book for those just starting out.
Starting an LLC in Texas can be very intimidating, but the benefits of using an asset protection entity outweigh the time needed to invest in learning how to start one. You can hire a lawyer to form the limited liability company but if cost is an issue, your next best option is to hire a professional and experienced Texas LLC formation service.
While you can spend the time to do it yourself, you will have to go through the pain and hassle of reviewing laws, regulations and forms and because this subject is technical and ever-changing, you may never be able to get rid of the uncertainty of whether you missed something.
Gain peace of mind and free up your time to focus on your business by using our Texas LLC formation service. We have formed thousands of Texas LLC entities for business owners just like you and offer affordable services to get you started with operating your business properly through an LLC.