Texas LLC
Starting a limited liability company in Texas can be a smart choice for entrepreneurs. By filing a certificate of formation with the Secretary of State, you can officially form your LLC in the Lone Star State. The following steps will guide you through the process.
$200
Filing fees
358k+
Active Texas LLCs
0%
State income tax
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What is an LLC?
Limited Liability Company
LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.
Limited liability
Personal assets are protected for people with limited liability when they are sued.
Corporation
A business entity that can issue shares and give limited liability to shareholders.
Members
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Sole proprietorship
Where an individual engages in business activity without formal organization.
Types of LLC
Depends on the number of members and whether it has elected to change its IRS classification.
Single-member LLC
Has only a single member. IRS considers it as a sole proprietorship for tax purposes.
LLC as C-corp
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Multi-member LLC
Has two members. IRS considers it as a partnership for tax purposes.
LLC as S-corp
A special election for a maximum of 100 US shareholders.
Actions
Here is an overview of some common actions in a Texas limited liability company.
How to add a Texas LLC member?
Follow these 7 steps:
1. Check your operating agreement
If you have an operating agreement, check the procedure for adding a new member. Follow the voting and transfer procedures accordingly.
2. Default Texas provisions
If you do not have an operating agreement, you will have to follow the Texas’ default rules as mentioned in Texas Business operations code
According to the default provisions, all the existing members of the LLC must vote and consent to add a new member.
3. File Annual Public Information Report
When it is time to file your annual public information report with the Texas Comptroller’s office, you can mention the changes in the members.
4. File Certificate of Amendment (optional)
Submit Form 424 in duplicate with Texas Secretary of State via mail or fax. Include the names of the new member. However, this is just an optional step.
Filing fees
$150
Address
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
Fax: (512) 463-5709
5. Get EIN if necessary
Some single-member LLCs don’t require an Employer Identification Number (EIN) from the IRS. If you were one of these, now you will require one after you add a new member. If you already had one, you don’t have to do anything now
6. Update Responsible party with IRS
If you want the new member to be the responsible party with the IRS, then you have to file Form 8822-B with the IRS within 60 days of the change. However, if you’re not changing the responsible party, you don’t have to file this.
Notify within
60 days
7. Update your operating agreement
Amend your operating agreement to include the names and details of the new member.
Entity name
Every LLC should have a unique name in Texas. Texas maintains a list of names of entities in the state. Go through it to check if your chosen name is available.
Search for names
Go to the official website of the Texas taxable entity search tool to see if the name you want is available.
Searching fee
Free
Reservation
You can reserve a name for your LLC for a specific duration by paying reservation fees to the Texas corporations section. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.
Reservation fee
$40
Reservation period
120 days
LLC naming guidelines
The name you choose for your LLC must the official naming guidelines.
Texas Business Organizations Code §5.054
Visit
Here are some of the guidelines in simple language:
- 1
Must contain: the phrase "limited liability company" or "limited company"; or an abbreviation of one of those phrases.
- 2
Don’t include terms that indicate that you are doing an activity that you are not authorised to do.
- 3
Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.
- 4
Don’t use words that makes it seems like you are a governmental entity or has an affiliation.
Operating agreement
Operating agreement is an internal business document that outlines the general rules and policies of the LLC.
Importance
It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.
Format
There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:
Basic Business information
Contains name, address, names and details of members, purpose
Member relationship
Contains membership interest, decision making process, powers, duties.
Membership transfer
Contains details on how to add or remove members and managers.
Accounting and tax
Contains details on how company records and distributions are maintained.
Dissolution
How to dissolve, wind up and terminate, due process to follow and exceptions.
Annual report
Every taxable entity in Texas must 2 reports: franchise tax report and a public information report.
Public Information Report (PIR)
Information reports are used to make details about your LLC public.
Filing fee
$0
Yearly filing due date
annually by May 15
Franchise tax report
Depending on how much franchise tax is to be paid, an LLC file one of these forms:
Filing fee
$0
Yearly filing due date
annually by May 15
No tax due form
Texas LLCs don't have to pay tax if :
LLC doesn't conduct business in Texas
Sole proprietor
Total revenue is below threshold
Tax threshold
Exemptions from franchise tax
Exemptions
EZ computation form
File this form if the revenue of the LLC is between the threshold and $20 million. That is, file the EZ computation form if :
Total revenue above threshold
Tax threshold
But, total revenue below $20 million
Long form Texas franchise tax
Texas LLCs that have a total revenue more than the EZ computation threshold of $20 million have to file the long form franchise tax.
Note
Texas charges a $50 penalty for failure to file on time (whether or not you have tax due). Additionally, a late tax payment is subject to a 5% penalty fee, which increases to 10% if you pay after 30 days.
Registered agent
A registered agent is an agent of your LLC on whom any notice, process or demand may be served. Every LLC in Texas needs to have a registered agent located in the state.
Requirements
According to Texas Business Organisations Code § 5.200:
- 1
Registered agent can be an individual or an authorised organisation.
- 2
Registered agent must have a street address where they can personally receive service of process.
- 3
Office of Registered agent cannot be just a mailbox service of a telephone answering service.
- 4
Registered agent must give a documented consent to serve as your LLC's agent, but filing is not mandatory
Form
Failure to maintain registered agent
If you fail to appoint or maintain a registered agent, it can lead to involuntary termination or revocation of registration to transact business in Texas
Certificate of Formation
In Texas, Certificate of Formation is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.
EIN
An Employer Identification Number, also known as Federal Tax Identification Number, is used to identify a business entity.
Who must have an EIN?
Single member LLC elected to be taxed as C-corp or S-corp
Single member LLC with an employee
All multi-member LLC
LLC Public Information Report
Every LLC has to file this report annually in Texas to stay compliant with the state laws.
Filing Public Information Report
Texas LLC is expected to file this report annually by May 15
File it online on Texas Comptroller website
Visit
Online fee
$0
Business license
Some businesses need to get business licenses to operate in Texas. Most commonly, sales tax permit.
Sales tax permit
Sales tax permit, also known as a seller’s permit is the only state-level license issued in Texas. Only businesses involved in physical products and conduct business in Texas need to get this permit.
How to get sales tax permit?
You can apply for it through Texas Comptroller of Public Accounts website
Fee
Free
Permit validity
Lifetime
Texas trademark
Texas trademark registration helps protect a business name, logo, or slogan from being used by another business in the state of Texas.
Difference between trademark and service mark
Trademark identifies goods or physical products.
Service mark identifies tangible services.
Requirements for Texas trademark registration
- 1
You should be using the mark in connection to your goods or services in Texas before registering it.
- 2
Your mark must be different from other trademarks registered with Texas and with USPTO.
LLC in Texas
Texas has a reputation for being business-friendly. As with LLCs, the popularity of other entities among entrepreneurs is increasing.
Texas Business search
Texas LLC add member
Texas LLC remove member
Page sponsorWhy we like StartGlobal?
My genuine thoughts
Willy Justin
Founder, Statepedia
StartGlobal: Legal + Taxes + Bookkeeping for solopreneurs
Product
For small businesses, managing taxes, accounting and everything legal is just a pain. Nobody wants to do it, but they have to. Instead of working with CPAs, attorneys and others separately, Start brings all of them under a single subscription. It’s just smooth.
Team
I know the team behind StartGlobal very well. It’s a very hardworking group of individuals who are genuinely passionate about small businesses. They are backed by successful founders like Balaji Srinivasan, Biz Stone(Twitter) and others.
Price
Getting a CPA or attorney is a matter of thousands of dollars. It’s just unfair to pay so much when you’re a small business. Start has a single subscription that covers it all. It is a definite money saver.
$599 one-time