HOW TO START AN LLC IN TEXAS
You are ready to start your new Texas business and you’ve decided that you want to form an LLC, or “limited liability company”. What’s next? The setup process is multi-step, but this article will give you the steps you need. We also provide links to important sites and give you things to think about along the way.
Naming the LLC
- It might seem easy, but this is a challenging aspect for some people. They’ve thought about their new business, but naming it just hadn’t entered the picture. If that’s you, get your thinking cap on and come up with your perfect name. If already have that perfect name, great! You’re ready for the next steps in this part:
Naming guidelines for Texas
- Texas law does not allow company names to be duplicated or to be “deceptively similar” to the name of any other corporation, partnership or limited liability company. Also, only numbers, letters and symbols present on a standard keyboard used here in the U.S. and other symbols specifically authorized are allowed.
Is the name available?
The easiest way to see if a name is available is to do a search to see if the name is already in use.
- You will need to access the SOS Direct site. You call follow the directions there to use the temporary login feature.
- Be sure to record the session number issued for your temporary access. This will be needed later to check on the status of and retrieve any orders you place. [Note: if you want to file documents online, you will need to subscribe to SOSDirect.]
- The Name Availability Search allows you to compare your selected name to the business entity database. If the name you have selected is already taken or reserved, you will need to think of a new name.
Is the domain name available?
- Once you have determined that your LLC name is available from the Texas Secretary of State, you next want to make sure that the domain name that you want is available for your new website.
Select a Registered/ Statutory Agent
- According to the Texas Secretary of State, “every domestic or foreign filing entity” is required “to maintain a registered agent and office in Texas.” But, what is a “registered agent”? This is basically a person or company that can receive documents or correspondence for the LLC, especially as it relates to legal filings. Incfile offers FREE Registered Agent service for the first year with every package or as a $0 standalone service.
Who can be a registered agent?
- Generally, an individual Texas resident or business may serve as the registered agent. Your LLC may not act as its own registered agent, but one of the LLC owners may be the agent for the LLC. Also, the LLC can contract for the registered agent services from another business, such as a service company. The secretary of state, or other governmental agency or authority, cannot serve as an entity’s registered agent.
Filing Articles of Organization
- A Texas limited liability company is created by filing a certificate of formation with the Texas Secretary of State. The Secretary of State provides a form that meets minimum state law requirements. Online filing of a certificate of formation is provided through SOSDirect. You can file a certificate of formation online. This is completed through SOS Direct and requires a fee of $300.
Create Operating Agreement
- While an operating agreement is not required by the Texas Secretary of State, you should consider having one for your LLC.
RUNNING YOUR BUSINESS
Getting Your EIN
- An EIN is an employee identification number, issued by the Internal Revenue service. Sometimes it is also called a Federal Tax Identification Number. It’s a unique number issued to each business. You’ll need an EIN to open a business bank account; file Federal and State Taxes; and hire employees.
- Before you get your EIN make sure your new business has been properly formed before applying and be wary of paid sites. EINs are free direct from the IRS.
- The easiest way is to apply online for an EIN. Note, the IRS website has office hours, and is only available Monday through Friday, 7am to 10pm. Yes, we also agree this is one of the most ridiculous things we’ve ever seen. You can call 1-800-829-4933, between 7am to 7pm of your time zone, Monday to Friday. Snail mail: You can download the form and mail it in.
Keeping Business and Personal Accounts Separate
- Get a business bank account for your business. This will help you protect your personal assets from potential creditors and lawsuits, and will also make life a lot easier come tax time.
- Get a business credit or debit card. This will help you keep your expenses separate and easier to track.
- No matter what business you run, accounting software and processes is a must for any small business. If you have an accountant, ask them which software they work with and recommend. A good accounting system is necessary to track income and expenses, so you can easily see if you’re making money and make filing income taxes so much easier.
- Always try and find something that will: sync with all of your bank and credit card accounts automatically – not just downloads, but auto sync; auto-match vendors, customers and other accounts; and let you accept credit cards and ACH drafts with ease. This can be applied for online, as can unemployment.
If you have employees, you will need to register for an unemployment tax account with the Texas Workforce Commission. Before completing this application, gather the following items from the list provided in their FAQs:
- Email address of business contact
- Payroll information, including when the business first hired an employee, when the first wages were paid, and total quarterly wage payment amounts paid by the business for all locations
- LLC members’ SSNs/EINs/ITINs and residence addresses
- The current U.S. mailing address for the registering entity
- The trade name and physical address of each business location in Texas
- Knowledge of the principal activities or products of the business
Note: first time users will need to sign up via the sign up for a User ID.
- Since there is no personal income tax in Texas, there is no state withholding tax
- This is another tax managed by the Texas Comptroller. This is a “privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.” Texas LLCs are generally liable for this tax. In order for the Texas Comptroller to determine if your Texas LLC needs a franchise tax account, a Franchise Tax Accountability Questionnaire must be completed. For a newly-formed Texas LLC, this questionnaire must be completed online. Using the sign-in information obtained when you applied for the sales tax number for the LLC, you can complete the Questionnaire. Before completing the questionnaire, make sure that you have the following information available:
- 11-digit Comptroller’s Taxpayer Number
- WebFile number for the account
KEEPING YOUR LLC COMPLIANT
- Public Ownership Report
- Ownership Information Report
FILING A FOREIGN LLC IN TEXAS
- According to the Texas Secretary of State, “Whether an entity is domestic or foreign does not depend on the location of the principal business office. Instead, it depends on where the entity was formed and what law governs its internal affairs. If an organization was formed under, and the internal affairs are governed by, the laws of a jurisdiction other than Texas, the organization is a ‘foreign entity.’ We sometimes refer to foreign entities as out-of-state entities to reinforce the concept that entities formed in other U.S. states are foreign entities, as well as entities formed outside of the United States.” If your LLC is already formed and it was setup somewhere other than Texas, but you want to use it for your Texas operations, you will need to register your LLC with the Texas Secretary of State.
ABOUT HOW TO START AN LLC
I'm an entrepreneur myself. When talking to others who want to start their own business, they often get wrapped up in the nitty gritty of paperwork and forming the company. They forget that what really matters is customers, sales, and profit. That's why I created How to Start an LLC.org: a simple resource and guide so you can spend less time on forming your company, and more time on building it.
My lawyers want me to remind you that I'm not a lawyer and that I'm completely unqualified to offer legal advice. This site is meant to serve as a reference for you on your journey. If you have questions or concerns, please contact a qualified lawyer (or accountant) to help you. Also, as a general rule, never take random legal advice on the internet.