What Is a Limited Liability Company?
A limited liability company, or LLC, is a business entity that is formed under state law that combines characteristics of a corporation and a partnership. They are similar to corporations in that an LLC’s members are not liable for the debts of the business, provided that certain formalities are observed. Like a partnership, an LLC can be treated as a pass-through entity for tax purposes, meaning that any business income received is taxed on members’ personal tax returns.
What are Texas LLC Requirements?
Texas has five basic requirements for an LLC. These are:
- Having a unique name that indicates the company is an LLC
- Having a registered agent for legal documents
- Filing a certificate of information with the state
- Creating an operating agreement as to how the company will be run
- Getting an EIN for tax purposes.
How Is a Limited Liability Company Formed?
How Do You file an LLC in Texas?
To file an LLC in Texas, you should take the following steps:
- Choose a name that is distinguishable from the names of other business entities
- Appoint a registered agent who resides in Texas and agrees to accept legal papers on the LLC’s behalf if it is sued
- File a certificate of formation with the Secretary of State
- Prepare an operating agreement, an internal document that establishes how your LLC will be run
- Get an EIN, an IRS Employer Identification Number by filing for one with the IRS
How Do You File a Certificate of Formation?
In Texas, forming an LLC involves filing a Certificate of Formation with the Texas Secretary of State’s Office. The Certificate of Formation must contain the following information:
- The name of your LLC
- Your LLC’s registered agent and registered office
- Whether your LLC will be member managed or manager managed
- The purpose of your LLC, which may be may be for the transaction of any and all lawful purposes for which a limited liability company may be organized
- The name and address of the organizer of the LLC
- The date the filing will become effective
- The organizer’s signature.
What Are the Advantages of Forming a Limited Liability Company?
Why Should You Open an LLC in Texas?
One of the biggest reasons to open an LLC is the peace of mind it brings knowing that your personal assets are safe from liability. By forming a limited liability company, you and any other members of the LLC cannot be held personally liable for any debts incurred by the business. There are additional advantages as well, such as the ability to conduct business as an LLC, which often lends an air of legitimacy with potential clients or customers or the ability to open a business bank account to keep business and personal assets separate.
Can an LLC Have a Single Member?
Yes. Texas law allows for single-member LLCs, and they are an excellent option for people who are currently operating as a sole proprietorship but would like to take advantage of the liability protections offered by an LLC. For tax purposes, the Internal Revenue Service (IRS) treats single-member LLCs as disregarded entities, meaning that all profits and losses pass through to the LLC’s owner.
Do I Need a Lawyer to Form an LLC in Texas?
There is no requirement that you form an LLC with the assistance of a lawyer, but it is highly advisable to do so. A lawyer can help you determine whether an LLC is right for you, whether it should be member managed or manager managed, file paperwork on your behalf, and draft an operating agreement that can reduce the risk of litigation or other problems down the road.
Why do you need an LLC attorney to form a Texas LLC?
Even if not legally required, your LLC attorney can be invaluable by:
- Assisting you in completing the certificate of formation you will need to file with the SOS
- Helping you select your designated registered agent to accept official documents on behalf of the business.
- Determining if a name is available and registering the name of your business with the SOS
- Establishing an operating agreement outlining the way in which the LLC will be organized and the rights and responsibilities of the members
- Making sure you follow the formalities necessary to protect yourself from liability.
Be aware that forming an LLC will provide protection only if you treat it as a separate entity, such as by keeping separate accounts and records, not using business equipment for personal use, and having and following a specific management structure. Your lawyer can provide guidance to ensure that you benefit from the protections afforded under LLC law. Your lawyer can also help if you need to dissolve your LLC.
Talk with Houston Business Attorney Andrew Weisblatt Today
An LLC is an excellent option for many businesses, as it provides flexibility and protects its members from personal liability for business assets. Attorney Andrew Weisblatt is a business lawyer in Houston who provides a wide variety of legal services, including entity formation, business-to-business collections, general business advising, business representation, and contract drafting, to name just a few. To schedule a consultation with Mr. Weisblatt, call our office today at 713-666-1981 or send us an email through our online contact form.