How do I form a Texas limited liability company? College Station Texas LLC lawyer explains
If you are currently operating or planning to operate a business in Texas, one of your first concerns may be what form the business should take: partnership, corporation, or limited liability company (also known as an LLC). Each form of doing business has its own advantages and disadvantages. Your Bryan business attorney can advise you of the pros and cons of each and help you choose which entity is best for your circumstances.
What is an LLC?
A limited liability company (also known as an LLC) is a hybrid entity that has some of the attributes of a partnership and some of the attributes of a corporation.
For example, LLCs provide limited liability for their owners (like a corporation), while they are taxed like partnerships. The LLC, like the partnership, does not pay income taxes. The income is passed through to the business owners and taxed to them. The business owners are called members and they may be individuals or other business entities.
LLCs are authorized by Texas statutes. Therefore, it's a good idea to get help from an experienced Texas business lawyer if you want to form one to ensure that all statutory requirements have been satisfied.
Certificate of Formation
Texas requires that an LLC file a Certificate of Formation with the Secretary of State and pay a filing fee. This filing gives creates the entity. The contents of the Certificate include the following:
- Name of the entity.
- Type of entity (i.e., a limited liability company).
- Registered agent for service.
- Address of principal office.
- Managers' names, if there are any; if not, the initial Members' names.
- A statement that the purpose of the LLC is the operation of a lawful business.
- Supplemental provisions or information desired.
- The duration of the life of the LLC if it is other than perpetual.
- Organizer's name and address.
- Effective date of filing.
- Signature of organizer.
LLCs usually operate under the terms of an operating agreement, which is somewhat analogous to a corporation's bylaws. Although an operating agreement is not required by law, your LLC ought to have one to spell out the rights and responsibilities of members and minimize disputes. Operating agreements typically cover such issues as allocation of profits and losses among members, capital contributions required of members, and how the members will manage their business. An LLC can be managed by either one or more of its members or by nonmember-managers. Your Bryan business attorney can help negotiate and prepare the agreement.
Registration as dba
If you LLC will be operated under a name that that does not include the surname of all of the members, then it is necessary to register the name as an “assumed business name” with the county clerk in the county where the business is located.
Business licenses, employment issues, and insurance
Your business may need to obtain business licenses and permits from the county and city in which you are located or where you operate. You will need to obtain an employer identification number from the Internal Revenue Service and register with the Texas Workforce Commission. LLCs are subject to a state franchise tax and must be registered accordingly. You also need to consider obtaining workers' compensation insurance, as well as liability coverage.
The decision to form an LLC in Texas involves important legal, tax, and accounting issues. Guidance from an experienced Bryan business attorney and tax advisor is recommended. In Bryan-College Station, Texas, the Peterson Law Group provides the experience and expertise to assure your compliance with applicable law. Call us at 979-703-7014 to schedule a consultation.