The LLC’s business name must be different from all other business entity names registered or reserved with the State. The name can’t contain words or phrases that could give the impression that the LLC has been organized for some purpose other than that specified in its articles, or one that’s not allowed by state law. The LLC name must end in one of the following terms or its abbreviations: “Limited Liability Company;” “LLC” or “L.L.C.;” “Limited Company;” “LC” or “L.C.”
The filing time for Texas LLC is 7 business days and can be expedited in 3 business days.
State Filing Fees
The filing fee is $300 and can be expedited by paying an additional $50.
Articles of Organization and Operating Agreement
The articles of organization must list:
- The LLC’s name and business purpose.
- The name and address of your LLC’s registered agent (see below for specific requirements for Texas registered agents.
- How long it’s planned to last (usually perpetual unless otherwise specified).
- The name and addresses of the organizer(s) and their signature(s).
- Whether the LLC will be managed by a manager or managers.
- The name and address of each manager or initial member.
- The signature of a manager, organizer, member, trustee, or fiduciary, and the signer’s position.
- Any other relevant information.
After you’ve filed your articles of incorporation, your LLC needs an operating agreement. This isn’t required by state law, but it’s a critical internal document that officially explains how the LLC will operate. It lists:
- The members (see below for how membership works in a Texas LLC).
- How much they have invested.
- How profits are divided.
- How much weight each member has when votes are taken.
- It may also list standards for meetings (how much notice, what constitutes a quorum, rules for voting, etc.) and so on, but is not required to do so.
A typical operating agreement also includes requirements mandated by the state of Texas, and can be amended or repealed as specified by the agreement or applicable law.
Texas LLCs must have at least one member, and each member must be a natural person (as opposed to a corporate entity). To become a member, an individual usually has to make a contribution, pay money, or transfer property to the LLC, or else assume an obligation to do so or render some kind of service.
A member can resign from an LLC, but only in the way specified in the articles of organization or operating agreement. These documents also usually specify a minimum period of time a member can be a member before being allowed to resign. LLCs have the option of penalizing a resigning member for damages suffered by the LLC due to his resignation.
Texas LLCs must each have a registered agent in Texas — someone designated to receive official correspondence from state administrative or legal agencies. A registered agent for an LLC in Texas can be an individual resident, a Texas LLC or corporation, or an out-of-state (“foreign”) corporation or LLC with an office in Texas. The LLC must keep a business office at the same address as its registered office, and it must be a street address, not just a post office box or answering service.
Your LLC is “organized” when an original and one copy of the articles of organization are given to the Texas Secretary of State’s office along with the filing fee, and their office confirms that they comply with state requirements.
The Secretary of State endorses both copies, keeps the original, and returns the signed copy. The articles of organization are effective as of the date and time they are filed unless a later date and time are specified.
Ongoing Filing and Compliance
Texas LLCs are required to file an annual report with the Texas Secretary of State including the following:
- LLC name and the state where the LLC was organized (if not Texas).
- Address of the registered office and the name of the registered agent.
- Address of the principal LLC office.
- Names and business addresses of the LLC’s managers.
The Texas Franchise Tax filing requirements state that you must file an annual Franchise Tax Report, and an Information Report. You must file additional forms if you take any credits on your report, file as a tiered partnership, or file as a combined group.
A Texas LLC is dissolved when any one of the following events occurs:
- Event(s) specified in the articles of organization or operating agreement
- There is an agreement to dissolve by the number or percentage of members specified in the operating agreement
- An event that makes it illegal for the LLC to continue to operate
- When a member leaves the LLC, unless the remaining members agree to continue the LLC within 90 days, or the company continues under specifications set out in the operating agreement
- Judicial decree ordering dissolution
An LLC has some tax advantages when compared to a corporation, including the availability of more deductions. However, there is no requirement for an LLC to be a separate tax entity like a corporation. Instead, an LLC can be a “pass-through entity” when it comes to taxes, so that the LLC owner or owners report business losses or profits on their personal tax returns, in the same way that a partnership would.
The IRS treats single-member LLCs as sole proprietorships for tax purposes unless you choose for your LLC to be taxed as a corporation. This means the LLC itself does not pay taxes and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes, unless you choose for your LLC to be taxed as a corporation. This means that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.
When starting a new LLC in Texas, you may need to obtain a federal tax identification or employment identification number (EIN). In most cases, you won’t need a separate EIN for your LLC if you are the sole owner and the LLC has no employees. However, if you are not the sole owner of the LLC, or if the LLC has employees, the LLC will need a separate EIN to open a bank account and to meet tax filing requirements.