Texas limited liability companies (LLC) provide a flexible business structure that blends aspects of partnerships and corporations. This legal business entity provides tax advantages while limiting the tax and paperwork burden associated with the corporate structure.
If you're ready to create an LLC for your Texas business, this simple guide will get you on the right track.
4 Steps to Start an LLC in Texas
You only need 4 simple steps to start a Texas LLC. Follow this guide to establish your brand-new business entity in the Lone Star State.
1. Name Your LLC
First, you'll need a unique name for your new business. If you choose a name that's too similar to an existing Texas company, the state will reject your LLC application. The state maintains a database called the Texas Taxable Entity search where you can check potential LLC names to see if they're taken. You may also want to make sure the corresponding domain name is available.
Texas regulations require the inclusion of Limited Company or Limited Liability Company in the business name. You can also use one of these abbreviations instead: Ltd. Co., LC, L.C., L.L.C., or LC.
The state also restricts LLCs from using certain words. You need documentation to use terms describing a financial institution (credit union, bank) or legal services (attorney, lawyer). The LLC name can't include names that reflect government agencies, like FBI or CIA.
When you land on the right name, you can reserve it for 120 days while you prepare your registration documents. You'll need to submit Form 501, Reservation or Renewal of Reservation Form, along with a $40 fee, to the Texas Secretary of State office. It's easy to do online through the state's SOSDirect portal.
If you want to do business under a name other than the legal LLC name, you can also register an assumed name, or "doing business as" (DBA) name. You'll submit Form 503, Assumed Name Certificate, to the SOS along with a $25 fee.
2. Select a Registered Agent
You must designate a registered agent to accept service of process and other legal documents for your business. The registered agent must be available during normal business hours at a physical Texas address.
One of the LLC owners or employees can serve this role as long as they have a Texas mailing address other than a PO box. You can also hire a professional registered agent service with a Texas location, which can cost up to $300 per year.
3. Submit the Certificate of Formation
Next, you'll complete Form 205, the Certificate of Formation for a Limited Liability Company. The form requires the following information:
- The selected name for your LLC
- The LLC's management structure, whether you decide to have the owners (members) manage the business or hire professional managers for this purpose
- The name and contact information for each member and manager
- The name and contact information for your registered agent
- Details about the general purpose of your new business
- The date you want your LLC registration to take effect
- The signature of the member who prepared the form (organizer)
Form 205 requires a $300 registration fee. When the state approves your application, you'll receive a copy of the certificate in the mail.
You can complete your Certificate of Formation online through the state's SOSDirect portal. You can also fax your documents to (512) 463-5709 or mail them to Corporations Section, PO Box 13697, Austin, TX 78711-3697.
4. Create an Operating Agreement
You don't legally need an operating agreement for your Texas LLC, but having one can help prevent conflicts in the future. This document establishes policies and procedures, such as how to handle financial disagreements, to guide operation of your LLC. If you don't have an operating agreement, the court will use Texas law as the default to settle disputes that arise among members.
A basic operating agreement should cover:
- Name and address of your LLC
- Name and contact information for your registered agent
- Details about the purpose of the business
- List of members and how each will contribute to the LLC (financially and operationally)
- When the business agreement will expire if you plan for your LLC to have an end date
- How you'll divide profits and losses among members
- What happens when a member wants to leave or the group wants to admit a new member
- Details about LLC management, whether you opt for a member-managed or manager-managed structure
- Clauses covering liability and indemnification
The Next Steps After Forming an LLC in Texas
Once your LLC is in place, it's time to begin building out the rest of your business infrastructure. These are the next steps to tackle.
Sign Up for an EIN
Once you have your official Texas LLC Certificate of Formation, you can use it to obtain an employer identification number (EIN) from the IRS. This nine-digit code identifies your LLC for tax purposes. You'll also use it when you establish new bank accounts and apply for business credit cards and loans.
Set Up LLC Bank Accounts
To maintain the limited personal liability you get from your LLC, you'll need to keep your business finances completely separate from your personal accounts. At minimum, you should have a designated LLC checking account and a credit card for company expenses.
You can use the bank you already use for your personal accounts, but it makes sense to shop around also. Factors to consider include the interest rates you'll earn on your checking and savings accounts, the interest you'll be charged for a company credit card, transaction fees and other charges, and incentives and bonuses you'll receive for opening a new account.
Obtain Necessary Business Licenses and Permits
Your company doesn't need a general business license to operate in Texas. However, you might need specific licenses and permits depending on the type of LLC, the industry, the municipal location, or other factors. You can get more information about the documentation your individual business may need from the Business Permit Office within the Texas Economic Development and Tourism Office.
Select a Payment Services Provider
You'll also need to set up a payment system so your LLC can accept credit cards and other forms of payment from your customers. Pay.com makes it easy and affordable to set up your customized online platform, whether you're creating a legal entity for an existing business or starting a new LLC from scratch.
We comply with the highest level of Payment Card Industry Data Security Standards (PCI DSS) to protect sensitive business and customer data from interception and fraud. Your LLC will benefit from high-tech security measures like tokenization to hide stored credit card numbers and 3D Secure 2.0 to verify customer identity.
The Bottom Line
Starting a separate legal entity for your business provides important protection for your personal assets. It can also raise your profile among potential customers, vendors, lenders, and other key stakeholders. Texas has an easy online portal where you can fill out all your details and establish an official LLC.
Once you've completed the four steps to create a Texas LLC, partnering with Pay.com gives you robust payment services at an affordable price. You can accept many methods of payment with multiple ways to pay, from a branded online checkout to secure Pay Links.
We'll help you cater to customer preference and provide the streamlined system they expect from their go-to businesses. Click here to get started now!