When setting up an LLC or corporation, it is necessary for the company to choose a state to register in. This is normally either the domestic state it is already based in, or a foreign one to take advantage of its tax benefits. Texas is one of these states and is in fact one of the most popular for small businesses for this very reason.
This article will outline the steps one must complete in order to establish a business in Texas.
Business Name
The first step involved in the creation of an LLC in Texas is choosing its name. Each state has its own individual naming requirements that must be complied with, and Texas’s more specific ones can easily be found in the Texas Secretary of State guidelines, though some general regulations have been included below nonetheless.
- “Limited liability company” (on an abbreviation of this) must be included in your business name “LLC, L.L.C., Limited, Ltd., Company or Co.”
- The business’s name must be clearly distinguishable from government agencies
- To be able to use specific list of restricted words, your LLC must be licenced in that profession to use it
It is a requirement in all states that the name of every business be unique within that state. This means that your name cannot be legally shared with any other business based here. This can easily be checked with a search on the Texas Comptroller of Public Accounts website.
Registered Agent
The next requirement to establish a business in Texas is the appointment of a registered agent. This is a third party (that can be either an individual or a group of people) that handles the company’s most important correspondence (i.e. that relating to legal summons, lawsuits and tax forms).
This party must be based in Texas. For individuals that means they must reside there, whilst for companies providing registered agent services, the requirement is that they must be permitted to operate in the state.
When appointing a registered agent, it is required for them to sign a consent form, either physically or electronically. It is stipulated that this form should include several items, including: your LLC’s name, an express statement of consent, the prospective registered agent’s name, their signature and the date of execution.
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Certificate of Formation
The next step that is required from businesses looking to register themselves as an LLC in Texas is to file a Certificate of Formation with the Secretary of State. The form (FORM 205) can be applied for through several mediums: physically, in person or by mail, or digitally via the website.
When filing for your business’s certificate, the prospective owner must disclose whether their LLC will be managed by its members or by managers.
Operating Agreement
The final step in the formation of an LLC in Texas is to create an operating agreement. While this agreement (referred to as a ‘company agreement’ in Texas) is not explicitly required, it is generally accepted to be in the business’s best interest to have one anyway as it is standard practice.
An operating agreement is a legally-recognized form that thoroughly sets out an LLC’s policies and plans of action with regards to its ownership. While not necessary, they are considered very important as they allow business owners to resolve conflict early on in the business’s life by establishing a set of guidelines on how the business is to be run initially that everyone agrees upon.
Closing Considerations
For more information on the best LLC and incorporation services in Texas, please see this suggested resource.
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