Starting a business is an exciting venture, but it’s important to choose the right business structure for your needs.
One option to consider is a limited liability company, or LLC.
In this blog post, we’ll outline the steps for starting an LLC in Texas and discuss the advantages and disadvantages of this business structure.
We’ll also compare it to other common business structures, such as sole proprietorship, partnership, and corporation, to help you make an informed decision.
Let’s dive in!
1. Choose a business name
One of the first steps in starting an LLC in Texas is choosing a business name.
It’s important to choose a name that accurately represents your business and sets you apart from competitors.
In Texas, there are a few rules to keep in mind when naming your LLC:
- The name must be distinguishable from any other registered business entity in the state.
- The name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- The name cannot include certain restricted words, such as “bank,” “insurance,” or “university,” unless you have written consent from the relevant state agency.
Once you have a few potential names in mind, you’ll need to check their availability and reserve your chosen name.
You can do this by searching the Texas Secretary of State’s online database and filing a Name Reservation Request form.
This will ensure that your desired name is held for you while you complete the LLC formation process.
Keep in mind that you may need to come up with a few backup options in case your first choice is already taken.
It’s also a good idea to conduct a thorough online search to ensure that your chosen name doesn’t conflict with any existing trademarks or domain names.
With a little bit of planning and research, you’ll be well on your way to choosing the perfect name for your new LLC!
2. File articles of organization
After you’ve chosen a business name and reserved it with the Texas Secretary of State, the next step in starting your LLC is filing articles of organization.
This is a legal document that formally creates your LLC and sets out its purpose, members, and management structure.
In Texas, the articles of organization must include the following information:
- The name of the LLC and the address of its registered office.
- The names and addresses of the LLC’s organizers.
- The name and address of the LLC’s registered agent, who is responsible for receiving legal notices on behalf of the LLC.
- The purpose of the LLC.
- The names and addresses of the LLC’s members.
- The term of the LLC’s existence, if it is not to be perpetual.
Once you’ve gathered all of this information, you can file your articles of organization with the Texas Secretary of State.
This can typically be done online or by mail, and you’ll need to pay a filing fee.
It’s important to note that the articles of organization are a public document, so be sure to include only information that you are comfortable being made public.
After you file your articles of organization, your LLC will be officially formed, and you can begin the process of setting up and operating your business.
3. Create an operating agreement
Now that you’ve formed your LLC and taken care of the necessary paperwork, it’s important to create an operating agreement.
This is a legal document that sets out the rights and responsibilities of the LLC’s members and how the business will be run.
An operating agreement is important for a number of reasons.
First, it helps to ensure that your LLC is run smoothly and efficiently by outlining how decisions will be made, how profits and losses will be distributed, and what happens if a member leaves the LLC.
It can also protect your personal assets in the event that your LLC is sued, as it clearly defines the separation between the LLC and its individual members.
So, what should be included in your operating agreement? Here are some key components to consider:
- The roles and responsibilities of the LLC’s members.
- How profits and losses will be distributed among the members.
- The process for adding or removing members.
- The process for amending the operating agreement.
- Provisions for handling disputes among the members.
- A plan for dissolving the LLC.
Your operating agreement doesn’t have to be lengthy or complicated, but it should cover these essential topics.
It’s a good idea to work with an attorney or professional service to ensure that your operating agreement is complete and legally sound.
With an operating agreement in place, you’ll have a clear plan for running your LLC and can focus on building your business.
4. Obtain any necessary licenses and permits
Now that you’ve formed your LLC and created an operating agreement, it’s time to obtain any necessary licenses and permits.
This will vary depending on the nature of your business and where you are located, but there are a few key things to keep in mind:
- Federal licenses and permits: Depending on your business, you may need to obtain federal licenses or permits from agencies such as the U.S. Food and Drug Administration, the U.S. Department of Agriculture, or the Federal Aviation Administration. It’s a good idea to check with the appropriate federal agency to determine what licenses or permits you may need.
- State licenses and permits: In addition to federal licenses and permits, you may also need to obtain state licenses and permits. These can include professional licenses for occupations such as healthcare, law, or engineering, as well as permits for specific business activities such as selling alcohol or operating a food establishment.
- Local licenses and permits: You may also need to obtain local licenses and permits, such as a business license from your city or county. These licenses are typically required for businesses that operate within a specific jurisdiction, such as a city or county.
In addition to obtaining any necessary licenses and permits, you’ll also need to register for state taxes. In Texas, this includes sales tax, use tax, and franchise tax. You can register for these taxes through the Texas Comptroller’s office, either online or by mail.
Obtaining the necessary licenses and permits and registering for state taxes can be a time-consuming process, but it’s an important step in setting up your LLC.
By taking care of these tasks, you’ll be able to operate your business legally and avoid any potential issues down the road.
5. Ongoing Compliance
Starting an LLC is just the beginning – there are ongoing compliance tasks that you’ll need to take care of to keep your business running smoothly. In Texas, one of these tasks is filing an annual report.
An annual report is a document that provides updates on your LLC’s business activity and confirms that your business is in good standing.
In Texas, LLCs are required to file an annual report with the Secretary of State each year.
The report must include the names and addresses of the LLC’s members and registered agent, as well as the name and address of any person authorized to manage the LLC.
In addition to filing an annual report, it’s important to maintain accurate records and documentation for your LLC.
This includes keeping track of financial records, meeting minutes, and any other documents related to the operation of your business.
Maintaining good records will not only help you stay organized and on top of your business, but it will also make it easier to file your annual report and keep your LLC in good standing.
By staying compliant with annual report filing requirements and maintaining accurate records and documentation, you can ensure that your LLC continues to operate smoothly and efficiently.
Don’t neglect these important tasks – they are essential for the long-term success of your business.
6. Consider Professional Assistance
Starting an LLC can be a complex process, and it’s not uncommon for business owners to seek professional assistance to ensure that everything is done correctly.
Working with an attorney or professional service can provide a number of benefits, including:
- Expertise: An attorney or professional service has the knowledge and experience to guide you through the LLC formation process and ensure that all necessary steps are taken.
- Time savings: Forming an LLC can be time-consuming, especially if you are unfamiliar with the process. Working with a professional can help to save you time and allow you to focus on other aspects of your business.
- Peace of mind: Knowing that you have a professional on your side can provide peace of mind and help you feel more confident in the formation of your LLC.
If you do decide to seek professional assistance with your LLC formation, it’s important to choose a reputable and experienced professional.
Here are a few tips for finding the right person or service:
- Get referrals: Ask friends, colleagues, or other business owners for recommendations.
- Check credentials: Make sure that the professional you choose is qualified and licensed to practice in your state.
- Read reviews: Look for reviews or testimonials from past clients to get a sense of the professional’s reputation.
- Ask about fees: Get a clear understanding of the professional’s fees and services before you commit.
Forming an LLC is a big step, and working with a professional can help to make the process smoother and more stress-free.
Don’t be afraid to seek out expert guidance – it can be an invaluable resource as you get your business up and running.