How to Start an LLC (Limited Liability Company) in Texas

LLCs are a popular way to start a business in Texas and the United States as a whole. They have the best characteristics of both corporations and partnerships. Just as in starting a corporation, your personal assets are protected against liability with an LLC. However, unlike corporations, LLCs are easy to form and maintain and have a flexible management structure, just like partnerships. Also, with an LLC, you will not experience the double taxation that many corporations undergo (this means that the business income is taxed and then you as the owner are taxed on your salary from your business).

To form your LLC, you need to verify that your business fulfills all Texas State requirements. Many business owners choose to hire a business attorney or use a third-party service such as LegalZoom.com to ensure that all legal requirements are met. The following is an overview of the steps you'll need to take to form your LLC in Texas.

Pick your business name and verify its availability.

Check your intended business name on Yahoo! or Google. See if another company with similar products or services is already using that name. Check if any companies with a similar name have been involved in any major scams or scandals. Stay away from names such as these so you don't create confusion or doubt for potential customers.

Check in the Secretary of State's online database (SOSDirect) to see if any other LLC has the same or very similar name. This database also allows you to check for any companies conducting business under an Assumed Name that is similar to your intended name. Each search costs approximately $1. Visit the following site to access SOSDirect: http://www.sos.state.tx.us/corp/sosda/index.shtml

Create an Operating Agreement among the owners/managers of your LLC.

An operating agreement allows you as the owner, to lay out how your LLC will operate and how it will be managed. This document needs to include information on the rights of each member, the percentage ownership and profit sharing for each member and information on how membership percentage can be sold. Either have a business lawyer draft this document for you, use a third-party LLC service or search online for example Operating Agreements and draft your own.

Submit a Certificate of Formation for a Limited Liability Company to the Texas Secretary of State.

Visit the Business Forms Page (http://www.sos.state.tx.us/corp/forms_boc.shtml) on the Secretary of State Website and get a Certificate of Formation (Form 205). You can submit it online or you can print and mail your form to the Secretary of State. The fee for filing in Texas is $300. This is a short form in which you provide your proposed business name, address, member/manager names and the name of your registered agent.

Submit an Acceptance of Appointment and Consent to Serve as Registered Agent form to the Texas Secretary of State.

Whoever chooses to serve as your Registered Agent (the person who agrees to receive legal notices on your company's behalf) needs to sign an Appointment and Consent form. Visit the Business Forms Page (link provided above) of the Texas Secretary of State and print and file Form 401-A.

Tips:

You may also need to apply for a Sales and Use Tax Permit with the Texas Comptroller at http://www.window.state.tx.us/ and an Employer Identification Number (EIN), also called your Federal Tax ID Number, with the IRS at www.irs.gov/businesses/small/article/0,,id=97872,00.html