According to studies, the Texas Secretary of State’s office formed 91,578 new business entities, including for-profit corporations, professional corporations, professional associations, limited liability companies, and limited partnerships. This is a ten-percentage-point rise.
For business owners, there are many benefits to starting an LLC in the lone star state of Texas. Forming an LLC limits your personal liability by allowing you to separate between your business assets and debts and your personal ones. Texas is also renowned for its generous income tax laws, allowing you to retain more of the money you make. The simple business structure and straightforward administrative processes of having an LLC are also advantageous.
What is an LLC?
A Limited Liability Company (LLC) is a particular type of business structure that allows business owners to separate their personal liability from their business and that is not subject to corporate taxation. Instead, the profits of the business go to the owner without being taxed at a corporate level and are instead taxed only on the owners’ tax return.
Step 1: Name Your LLC & Choose a Texas Registered Agent
Start off by deciding on a unique name for your business that has not been utilised by any other business in Texas. Searching the Texas company registry to ensure that your intended name is not in use and familiarising yourself with Texas naming restrictions and requirements are important parts of this process. After this, an appropriate Registered Agent (RA) needs to be selected. RAs accept correspondence on your business’ behalf and carry the responsibility of filing all necessary forms and documentation for the company with the Texas Secretary of State. Various excellent registered agent services options exist for small business owners forming an LLC or corporation, such as those listed in this useful guide to Texas LLC formation by The Really Useful Information Company (TRUiC). Some of the top registered agent services have found innovative ways to incorporate artificial intelligence (AI) features in order to provide a seamless customer experience for their users. This is one of the major reasons it may be worth investing in a paid registered agent service as opposed to acting as your own registered agent.
Such a service can assist new and small business owners in cutting down on some of their administrative workload and avoiding costly non-compliance errors. Making use of a paid registered agent service that has invested much time, money, and research into the smooth running of this process on behalf of those forming an LLC or corporation can be an absolute game changer given how busy small business owners often are figuring out smaller functions they may be unable to outsource for now. As this is an unavoidable step in the establishment of an LLC, corporation, or non-profit corporation, it is worth investing in ensuring that it is done well.
Step 2: File Your Texas Certificate of Formation
Once all the information and administrative details have been tended to, the next step is to submit your form with the Secretary of State in order to create your Texas Certificate of Formation. This form requires various details of your business such as information on your RA, your business name and address, and the purpose of your business. It can be done online or in person and will set you back roughly $300 in Texas.
Step 3: Create a Company Operating Agreement & Get an EIN
Next, you will need to protect yourself and your business by creating an operating agreement that aligns with Texas business law. This document outlines your ownership and operating structure and clarifies matters such as who takes on what role in the company (even if you are the sole owner), how new members would join and what would happen should a member leave. You will also need to obtain an Employer Identification number (EIN) to be used in matters such as opening a business bank account and filing taxes. The IRS will use this number to keep track of your business’ activities, including how you compensate staff members or contractors. This process is fairly simple and can be done in a number of ways, as laid out by the IRS.
With the right resources and support, starting an LLC in Texas need not be a mammoth task. Following the three steps outlined above will see you well on your way to having a registered LLC and participating in the thriving Texan economy as an entrepreneur and business owner. Make use of the multitude of tools and resources at your disposal to form an LLC and enjoy the benefits that this business structure affords.