Yes. An LLC can expire in Texas. Limited liability companies are established or created by individual members, and they can have one or more owners. The members have the right to decide when and whether an LLC will continue indefinitely or expire on a particular date.
LLCs are also expected to comply with filing requirements in the state of Texas to maintain active and good standing statuses. Texas LLCs are business entities that safeguard your personal assets from business-related debts. It also provides a flexible management structure with certain tax advantages.
To form an LLC in Texas, you will have to submit a Certificate of Formation and pay a $300 filing fee to the Secretary of State. However, you will first have to choose a name and registered agent for your LLC. It will take up to 40 business days to form your LLC unless you pay an extra $25 for expedited processing (4-5 days).
When forming an LLC in the state of Texas, note that the owner(s) can stipulate its lifetime in the Article of Organization. After the stipulated date, if the company still decides to carry on with its business activity, a new date can be set and the Texas government will be notified.
If no date is stated, the LLC will not expire but rather continue existing. In addition, Texas does not require an annual report so the expiry date can be set at the owner(s)’ leisure. There are also situations where the owner(s) can decide to end the LLC not by a specific date but by a specific event. Occurrences that can make an LLC expire include bankruptcy or a member’s death, and these can be agreed upon.
If the members cannot agree on fundamental decisions affecting the LLC’s operations, they may agree to dissolve the LLC. It should be noted that the reason for dissolving the LLC is unimportant to the actions required to terminate the LLC as long as all members are in agreement.
Possible Reasons Why an LLC Can Expire in Texas
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Articles of Organization
If you want to form a limited liability company in Texas, you will need to file a document called an Article of Organization. Articles of organization, just as an article of incorporation, provide all the details necessary to register your company with the Texas secretary of state.
This document allows its members to stipulate the duration of the company. Articles can outline a date upon which an LLC will expire.
If no expiration date is stated, the company continues perpetually. Members can also outline events in this business document that can instigate an LLC to terminate, such as bankruptcy or a member’s death. Owing to that, specific occurrences noted by members can cause a perpetual LLC to end.
Active and Good Standing Status
LLCs are mandated to comply with their states’ requirements in order to sustain active and good standing statuses. For instance, taxable entities such as LLCs and corporations are expected to file an annual franchise tax report. This report validates or updates company information (such as your principal mailing address, registered agent, and company officers, owners, or members).
Your entity will also pay franchise taxes, if any are owed, as part of the filing. Your inability to meet filing deadlines will result in an LLC being deemed not in good standing, and if corrective actions are not taken, it may be classified as inactive.
Business Purpose Completed
An LLC in Texas can be created for a lawful business purpose, which in some circumstances might have a limited duration.
For instance, the members can choose to form the LLC as part of their aim to develop a housing tract. This entails that the completion of the housing tract and sale of the homes would mean the end of the LLC’s business purpose. At that point, it would become necessary or even wise for the members to voluntarily dissolve the LLC.
Generally, LLCs in the United States are formed under state law, and each state is known for its own formation requirements.
In Texas, you will have to file a certificate of formation with the secretary of state. Same as in most states, the Texas Secretary of State provides a pre-printed form that includes a section that allows the LLC members to decide on the expiration of the LLC. The expiration can be stated as a particular date or the occurrence of an event.
Regardless of the good intentions of the members, disagreements about the operation and maintenance of the LLC may originate a problem that the members are unable to resolve.
Disagreements may arise over the number of hours each member devotes to the business, how profits and losses are allocated, or what new business opportunities the LLC should pursue. In any of these situations, the only viable or reasonable resolution for the members can be to voluntarily dissolve the LLC.
Indeed, an LLC can expire in Texas. The reason might vary depending on the peculiar situation of the LLC. Reviving an expired LLC in Texas can be a very challenging and daunting task. You will have to fix the issues that led to the expiration of your LLC and obtain a tax clearance letter from the Comptroller of Public Accounts.