Do you want to purchase or start a business with the perfect business structure or Forming an LLC in Texas? Then, you are in the right place.
There are diverse business structures available like Corporations, LLCs, Limited partnerships, General partnerships, and S Corps.
However, LLC is the right business structure to choose. LLC is the most popular business structure.
In the United States of America, there are roughly 21.6 million LLCs.
Also, as of 2021, it was stated that LLC members grew to 10.2 million. These statistics show the popularity and usage of LLCs.
In the subsequent sections, I will inform you about LLCs, their types, and the easy steps you can apply for or form an LLC in Texas, etc.
The benefits you will get from this article are worth the time.
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So, don’t get tired, just continue reading.
What is LLC?
LLC stands for ‘Limited Liability Company.’ It gives an overview of the easiest way to structure your business and also protects your business assets.
LLC is an entity that is separate from its owners.
Here are a few features of LLC:
- Establishes credibility and other benefits for a new business.
- Members can be individuals, partners, trusts, or corporations.
- Members or management groups can manage the LLC.
- Fewer state compliance requirements, etc.
The most common types of LLC include:
- Domestic LLCs.
- Foreign LLCs.
- Professional LLCs.
- Series LLCs.
Why Choosing Forming an LLC in Texas?
Here are a few reasons why you should decide on forming an LLC in Texas:
1. Personal Asset Protection
LLC separates your personal assets from your business.
For instance, if your business faces financial challenges or lawsuits, just know that your personal assets, like savings, and house, are generally protected.
Forming an LLC in Texas helps to safeguard your personal wealth.
2. Tax Flexibility
LLCs are simply treated as pass-through entities for tax purposes.
This implies that the losses and profits of the LLC go through the owner’s individual tax returns.
Hence, this results in tax savings and more favourable tax remains compared to other business structures.
3. Credibility and Growth
Forming an LLC in Texas can enhance your business credibility and professionalism. Thus, attracts more business opportunities and clients.
A Texas LLC grows trust between you and your clients. Your clients will be convinced that your business can protect their investments.
Other reasons why you should decide on forming an LLC in Texas include:
• Limited liability for partners.
• Flexibility and profit distribution.
Note: The benefits you will get from forming an LLC in Texas depend on your specific business industry and financial situation.
How to Form a Texas LLC in Just 10 Minutes
Forming a Texas LLC is a straightforward process.
You can either hire the services of an agent or DIY (do it yourself).
However, if you plan on forming an LLC in Texas by yourself, there are five key steps to take.
These steps include:
- Name your Texas LLC.
- Choose a Registered Agent.
- File your Articles of Organization.
- Get an EIN.
- Create an Operating Agreement.
Step 1: Name your Texas LLC
There are certain rules you must follow when it comes to naming your Texas LLC. These rules are:
- You must have either a ‘Limited Liability Company,’ ‘Limited Company,’ ‘Ltd. Co.,’ ‘LLC,’ or ‘L.L.C.’ at the end of the name you choose.
- The name you choose should not create confusion with a government agency, for instance, CIA, FBI, and other official terms.
- The name you choose must be original. However, you can search “bizee.com/form/business-name-search’ to see if the name you choose is already taken.
Tip: You can make use of a third-party service like Bizee powered by IncFile to complete forming an LLC in Texas. IBizee powered by IncFile offers a one-year free service.
Step 2: Hire A Resident Agent with a physical office address in Texas
A resident agent is a business or person who will manage to receive and send important legal documents to and from the government on your behalf.
Qualifications of a Resident Agent
- Must have a physical Texas address.
- Must be an individual Texan or an entity allowed to carry out business in Texas.
- Must be on-site and available to accept documents during regular business hours.
- Receives all information and legal documents from the State of Texas.
Step 3: File Certificate of Formation or Article of Formation
Filing your article of organization is the next step in forming an LLC in Texas.
These include giving information on:
- LLC’s name.
- Purpose of LLC formation.
- Registered agent’s name and address.
- Effective date of filing of the articles.
- Management structure (name and address of either the members or managers), etc.
Tip: These are the different forms with filing fees (from $300 and above) you need to know and can decide to fill depending on your business industry.
- Form 205: For companies that want to form an LLC in Texas.
- Form 206: This form is for companies outside of Texas that want to conduct operations in the state.
Also, these are a few ways to file an LLC Certification of Formation in Texas:
- File online.
- File by mail.
- File by courier.
- File via fax.
Step 4: Obtain EIN from the IRS
An LLC Employer Identification Number (EIN) is also your ‘Federal Tax Identification Number.’
It is a social security number of a business that allows the Internal Revenue Service (IRS) to identify and keep records of your business’s tax status.
Here is why EIN is important:
- For opening a business bank account.
- For hiring employers.
- For filing and managing Federal and State Taxes.
Step 5: Create an Operating Agreement
Creating an operating agreement is the last step in forming an LLC in Texas. Although, it’s not required but it is good that you have one.
- It will help you and your co-founders structure the financial relationships with each other with their profits, losses, shares, and duties.
- It helps to let everyone know what to expect from your company.
Also, an operating agreement entails:
- Members’ rights and responsibilities.
- Joining and leaving.
Best LLC Formation Services in Texas
Here are a few best LLC formation services in Texas:
- Bizee powered by IncFile.
- Swyft Fillings.
- Inc Authority.
LLC is the perfect structure for your business. After taking these steps on forming an LLC in Texas, you must separate your personal and business assets, build a business website, get your business insured, and make a press release.