Texas LLC Formation

July 7, 2022

A limited liability company (LLC) is a business structure that is permitted by individual state statutes. In Texas, the Business Organizations Code allows for the creation of LLCs. An LLC is formed by filing a certificate of formation with the Texas Secretary of State. Generally, an LLC is owned by its members. The LLC is a separate legal entity from its members, therefore providing liability to its members (except in the case of piercing the corporate veil, etc.). An LLC can serve many purposes, such as for your small business, or if you are a real estate investor, it can hold your rental properties. There are advantages and disadvantages to forming an LLC: 

To name a few advantages: 

  • Offers some asset protection, 
  • Tax advantages,  
  • Succession planning opportunities, 
  • Separation between yourself and your business, 
  • Anonymity, and 
  • Credibility as an established business.

However, there are also disadvantages: 

  • Requires maintenance/upkeep,  
  • Costs, 
  • Individuals are responsible for paying self-employment taxes,
  • LLC does not fit all business criteria (ex. LLC are not eligible for Section 1202 Gain Exclusions, pass through investment, complex capital raising etc), and
  • If the LLC is formed for rental properties, you may run into lending issues, etc. 

Within the LLC formation there is also the series LLC. To learn more about series LLCs click here. Additionally, there are other types of businesses that you can form in Texas, including partnerships, sole proprietorships, corporations, etc. To learn more about other business entities, be sure to check out our articles and resources tab. After you have done your research and you decide that an LLC is the best choice to suit your needs, the steps are: 

  1. File a certificate of formation with the Texas Secretary of State,
    1. Be sure to check the name availability of your LLC first. If a name is already in use, you have to come up with another name, 
    2. Also, consider whom you want to name as your registered agent (typically you can name yourself. There are also registered agent services you can find online. The advantage of using a registered agent is that you can use their physical address instead of your own. This is especially important if you do not have an office address and plan to use your home address. Additionally, Walter & Truong PLLC offers this service. Reach out to a Walter & Truong LLC attorney to find out more),  
  2. This step is optional, but recommended, file for an employment identification number (EIN) with the Internal Revenue Services (IRS),
  3. Create an operating agreement (and other necessary documents such as resolutions if needed),  and 
  4. If you have more than one member, plan your initial meeting with all the members. 

Although the steps are fairly straightforward, if it is your first time creating a business entity, you may have additional questions about proper procedure, forms, documents, and other concerns. For a flat rate Walter & Truong PLLC can take care of the whole process for you. Contact us to schedule consultation here to get started.

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