How to Start an LLC in Texas

The first step will be to decide on a name for your business. Choose a name that is memorable and unique, easy to understand and pronounce, and accurately represents your business. You'll want to search your name choices on the web to quickly find out if they are already taken. It's also best to jot down one or two alternatives, in case the name you settle on is not available for registration in Texas.

There are a few rules that Texas Limited Liability Companies must follow in order to register a name.

• The name you choose must be unique and not "confusingly similar" to the name of any other Texas business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states. You can find out whether a name is available in Texas by searching the Texas Secretary of State Opens in a new window taxable entity search through the Texas Comptroller of Public Accounts for possible conflicts. Be sure to check variations or alternate spellings as well, otherwise your filing may be rejected.

  In a pinch, you can use MyCorporation's business name search service, where we will conduct a more thorough search on your behalf and report back our findings. Plus, MyCorporation includes a business name search for free when we complete your LLC filings on your behalf!

• Your business name must include the words "Limited Liability Company," or "LLC."
• Please note that you do not need to publish a notice before incorporating a business. Filing a Certificate of Publication for an LLC is a common requirement for LLCs in several states throughout the United States. However, the requirement that a business need to publish its intent to incorporate in a local newspaper for four consecutive weeks was repealed in 2003 by the Texas Secretary of State.

You can learn more about business name filing FAQs through SOSDirect Online Searching and Filing provided by the Texas Secretary of State.

There are two options to choose from when it comes to setting up your LLC in Texas. "Member managed" or "manager managed". The first thing you need to know is that owners of any LLC are referred to as "members". A single member LLC has just one owner, while a multi-member LLC is an LLC owned by 2 or more members. Pretty simple, right?

Texas LLCs also must also designate one or more individuals to manage the day to day operations of the business. This can be handled by one of the members of the business (member managed, the most popular choice and the default in most states), or a professional manager appointed by the members to act on their behalf (manager managed).

While the differences are subtle, what you really need to know is that each member in a member managed LLC has the power to make decisions for the business. However, in a manager managed LLC, the members choose who will manage the business and relinquish all of the decision making to the manager chosen. The person chosen can be one of the members of the business as well, or it can be someone else entirely.

Most states require that you designate a registered agent for your business, and Texas is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

A registered agent can be anyone you wish, with one small caveat. The registered agent must have a physical address in Texas Opens in a new window. In other words, a P.O. Box is not allowed as a registered agent address. This means a member of the limited liability company can act as the registered agent if desired, or a third-party registered agent service like MyCorporation can be used.

Why designate a third party to act as my registered agent?

It should be noted that registered agent information is made publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent. In the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

You will need to file Articles of Organization in Texas Opens in a new window to order to form an LLC. Articles of Organization may be filed online or by mail. They include basic information about the Texas LLC including the company name, business address, mailing address, registered agent name and address, the LLC's purpose, effective date of the LLC, and signature of at least one individual acting as an authorized representative.

What information should be included in the Articles of Organization?

As noted above, information required in the Articles of Organization covers basic information as it pertains to the Texas LLC. . For more information about fees, please review Form 806 Fee Schedule (PDF)(43.7 KB) for Texas filing fees.

After formation, the state of Texas requires an LLC to create an operating agreement. This agreement needs to be written, and should be kept with the company's records. In order to open a bank account for your business, you will often be required to submit both your operating agreement, and your EIN number.

What kind of information needs to be included in a Texas operating agreement?

Operating agreements are required in Texas and are important to laying the foundation of a properly run business. An operating agreement sets guidelines for the way your business operates now and into the future. Common details in an operating agreement include the following:

• Basic contact details: The name of the LLC, the address of the principal business location and often, the registered agent address.
• The business purpose: This is a basic one sentence description of what kind of business your LLC will do, and is often a very general description, which creates a bit more flexibility as the business matures.
• Tax structure: Often this indicates the way the LLC will choose to be taxed. The main options are to be taxed as a sole proprietor or a partnership ( both pass through options ) or to be taxed as a corporation ( which requires an S Corp Election to be filed )
• Ownership and management: This section lays out the general rules about how the business will operate day to day. This refers to step 3, where you determined whether your business would be "manager managed" or "member managed". As mentioned before, member managed is the default and the most common choice. If you are unsure, member managed is a pretty safe bet.

In Texas, most small businesses require a combination of business licenses and permits at the federal and agency levels. The SBA outlines the process for how to apply for licenses and permits in the state of Texas Opens in a new window. Additionally, consider checking in with the Texas Department of Licensing and Regulation Opens in a new window. This website provides a thorough look into types of licenses businesses may need to obtain and file with the county or state.

You can learn more about the specific licenses applicable to your business by checking with the city offices where you will conduct business, or by using MyCorporation's business license compliance package. Our skilled professionals will do the work for you. We identify all of the licenses required by your business and provide you with the information you need in order to file.

An EIN (also called a Federal Tax Id) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is far less sensitive. It is important to wait until the LLC has been approved by the state before applying, and for that reason, filing for an EIN is one of the last things to do when you are setting up a business.

Like a social security number, the EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, as well as "build credit" for your business
• Apply for applicable business licenses when required.

You only need a few pieces of information to file including your mailing address and legal business name. You can apply online with the IRS by downloading IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.