The state of Texas offers numerous business incentives and tax benefits. In order to take advantage of these, your LLC in Texas must be properly registered with the state.
This includes obtaining an EIN number (also known as an Employer Identification Number), paying franchise taxes and filing public information reports. It also requires having a reputable registered agent with a physical address in the state.
Selecting a Company Name
You must choose a name for your company that complies with Texas naming requirements and is not identical or confusingly similar to an existing business entity in the state. You can use the online business name search tool on the Texas Comptroller website to explore available names.
You should also determine whether the chosen name violates any trademark laws. Deceptively similar names could create a branding challenge and cause confusion for potential customers.
Once your LLC is approved by the state, it must obtain a federal Employer Identification Number (EIN), also known as an EIN or FEIN. This is a unique number that identifies your company to the IRS for tax purposes. You will need your EIN to open a bank account, hire employees and file taxes.
In addition to federal requirements, an LLC must pay various state taxes, depending on its industry. For instance, Texas LLCs that sell products subject to sales tax must collect and report those taxes. Texas LLCs are also responsible for paying franchise taxes and filing a PIR, or Public Information Report, each year.
Choosing a Registered Agent
When you set up a Texas LLC, the state requires you to provide a registered agent. This person is responsible for accepting service of process and other legal notices on behalf of the company. A good registered agent service will keep your private information secure and offer mail forwarding, compliance alerts and other valuable services. BetterLegal is the industry leader in providing these essential services for less than $40 per year.
The final step in forming a Texas LLC is to file the Certificate of Formation with the state. This document is the equivalent of what other states call the Articles of Organization. The filing should include the company name, the names of the organizers (owners) and their addresses. It should also specify whether the LLC will be manager-managed or member-managed and describe decision-making procedures.
It is also a good idea to create an operating agreement. The Texas LLC operating agreement does not need to be filed with the state, but it should provide important details such as the company’s financial contributions, owner percentages and how profits and losses will be distributed among the members.
Organizing Your LLC
The LLC is an increasingly popular structure for small businesses. It combines the liability protection of a corporation with simpler formation and flexible tax and management policies.
When forming an LLC, it is important to follow legal requirements. An experienced business attorney can help you make sure your documents meet state and federal standards.
Texas requires LLCs to file annual franchise tax reports and public information reports. These reports are based on the LLC’s profits and losses. The state also has other fees, such as a name reservation fee and an assumed name fee.
All Texas LLCs must have a registered agent. The registered agent must have a physical address in the state and be available during business hours to receive personal service of process. You must also choose a business bank account for your LLC. Using your own personal bank account for an LLC can lead to legal problems. Having a separate business bank account prevents commingling of assets and makes record keeping easier.
Opening a Business Bank Account
Entrepreneurs are starting up small businesses in record numbers across America — including many new companies that choose to organize as LLCs in Texas. Before you open a business bank account, check with state authorities to make sure your company name hasn’t already been registered or used in another way. If it has, you can usually reserve the name for a small fee.
You should also get a federal Employer Identification Number (EIN), referred to as an EIN or FEIN, for your LLC. This is like a company’s Social Security number and helps the IRS identify your LLC for tax purposes.
Your LLC should create an operating agreement, which sets out internal company procedures and ownership structure. This isn’t required by Texas law, but it’s a good idea for all LLCs to have this in place so that there’s something to refer back to should a dispute or lawsuit arise. For example, the agreement can clarify whether your LLC is member-managed or manager-managed.
