You need to understand that only veterans can get an LLC in Texas for free. Note that the Texas Secretary of State charges a filing fee of $300, coupled with an additional state-mandated 2.7% convenience fee to file an LLC Certificate of Formation.
Also, note that it will cost $40 to file a name reservation application if you intend to reserve your LLC name before filing the Certificate of Formation. However, if you are a veteran and you are forming a 100% veteran-owned business, the Secretary of State will waive this filing fee as long as you file directly by mail, in person, or by fax.
Either way, starting an LLC in Texas is one sure way to become your own boss and create a legal structure that gives you breathing space. This business structure gives you some of the benefits and protections accorded to a corporation, without the accompanying administrative stress and cost.
Although a sole proprietorship can be easier to form, it doesn’t safeguard your assets from liabilities like lawsuits and debt collection. LLCs are meant to keep your assets separate from your business assets. If you intend to start a business that includes employees, it is recommended you consider establishing your business as an LLC.
Note that a new LLC that is being formed in Texas will have to file a Certificate of Formation with the Texas Secretary of State, and pay a $300 filing fee. If you need a certified copy of the Certificate of Formation, there is a $30 fee. Additionally, if you need a Certificate of Status, it comes with a $5 fee.
If you intend to reserve a name for your LLC for 120 days before registering, you may file an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501), and pay a $40 fee. If you formed an LLC in another state, and intend to carry out business in Texas, then you have to register with the Texas Secretary of State as a foreign LLC.
Steps to Form an LLC in Texas in 2023
Truth be told, every state in the has well-stipulated filing requirements and related fees when it comes to filing or forming an LLC. Owing to that, if you intend to file an LLC in Texas, you must understand the specific steps and requirements unique to the state. These steps include;
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Select a Name for Your Texas LLC
When choosing a name for your Texas LLC, you have to ensure that the name can be differentiated from the names of other business entities already on file with the Texas Secretary of State. You are advised to check for name availability at the Texas Secretary of State SOSDirect website. Under Texas law, an LLC name is expected to contain one of the following:
- Limited Liability Company
- Limited Company
- Ltd. Company
- Ltd. Co.
- LC, or
Also, note that you may have to reserve a name for 120 days by filing an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the Texas Secretary of State. Note that you can file the reservation online via the Texas Secretary of State SOSDirect website, or by mail.
Choose a Registered Agent
Also, note that every Texas LLC is expected to have an agent for the service of process in the state. This agent is an individual or business entity that concurs to receive legal papers on the LLC’s behalf in case the company gets sued. The registered agent will have to be a Texas resident or a business entity legally registered to do business in Texas. The registered agent is also expected to have a physical address in Texas.
File a Certificate of Formation
Note that to create a Texas LLC, you will have to file and submit a Certificate of Formation for a Limited Liability Company (Form 205) with the Secretary of State. The certificate is expected to include:
- The LLC’s name, including the suffix
- The name and address of the LLC’s registered agent
- Whether the LLC will be member-managed or manager-managed
- If member-managed, the name and address of each initial member
- If manager-managed, the name and address of each initial manager
- A general purpose clause
- The name and address of the LLC’s organizer
- The effective date of the certificate, and
- Signature of the organizer.
In the state of Texas, you can carry out this process online through the Texas Secretary of State SOSDirect website, or by mail. The filing fee is $300.
Put Together an Operating Agreement
Although an LLC operating agreement is not mandatory in Texas, you should create one for your LLC. This is more or less an internal document that notes how you intend to run your LLC. It also stipulates the rights and responsibilities of the members and managers, including how the LLC will be managed.
Also, note that it can help preserve your limited liability by proving that your LLC is genuinely a separate business entity. If you fail to create an operating agreement, note that the state LLC law will stipulate how your LLC operates. Howbeit, your operating agreement is meant to include the following:
- The members’ percentage interests in the LLC
- The members’ rights and responsibilities
- The members’ voting powers
- How profits and losses will be shared
- Rules for holding meetings and taking votes
- Buyout, or buy-sell, provisions, which explain actions or events that will take place when a member wants to sell his or her interest, dies, or becomes disabled.
Obtain an EIN
Have it in mind that an LLC in the State of Texas is expected to obtain its own IRS Employer Identification Number (EIN). If you form a one-member LLC, you will have to get an EIN for your LLC once you start seeking employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). All these can be done by completing an online EIN application on the IRS website.
Unlike a good number of states in the United States, Texas does not mandate LLCs to file annual reports with the Secretary of State. However, LLCs are expected to instead file annual franchise tax reports. Note that the information and details for computing the tax can be complicated.
Owing to that, it is recommended you check the Comptroller of Public Accounts website and Texas LLC Annual Filing Requirements every year before you file the annual franchise tax reports in Texas.
Just as it was noted above, only veterans can get an LLC in Texas for free. Have it in mind that setting up a simple single-member LLC in Texas could cost several hundred dollars or more. If your LLC will need licenses and permits, then you should expect to spend at least $1,000.
Establishing an LLC in Texas can take a month or longer to complete. Depending on where your LLC is based in the state, it could also take longer if you require other forms of licenses and permits.