Many Texas entrepreneurs choose to form a limited liability company (LLC) because of the many benefits of this business entity type. An LLC provides liability protection, for instance, so your assets are not at risk if your business is sued or cannot pay debts.
An LLC is a “pass-through entity” for tax purposes, meaning that the LLC itself is not taxed. Instead, income passes through the business to the LLC owners or members, who report it on their tax returns. LLCs also offer flexibility in terms of management and taxation.
Creating an LLC is relatively straightforward, but ensuring it’s done correctly is crucial to getting your Texas business on the right foot. The most critical step is filing articles of organization.
What Is a Certificate of Formation for an LLC?
The certificate of formation (also known as Articles of Organization in other states) is a legal document filed with the Secretary of State to form an LLC officially. It will include your business name, address, registered agent information, and more, as detailed below.
First, Select a Registered Agent for Your Texas LLC
Texas requires LLCs to appoint a registered agent, a person or company authorized to accept and respond to official business correspondence, such as legal, tax, or financial documents.
The registered agent ensures all required notices and documents are received. In Texas, the registered agent can be an LLC member, individual, or entity that meets state requirements. In Texas, a registered agent must:
- Be 18 years or older
- Have a physical address in the state
- Be available during regular business hours
- Be registered to operate in the state, if it’s a business
Many business owners hire a registered agent service to ensure their LLC stays fully compliant and for convenience.
If you choose to be your registered agent, you must be at your registered agent’s address for all business hours. A registered agent service allows you to be wherever you need to be to run and grow your business.
How to Submit a Certificate of Formation in Texas
To start, visit the Secretary of State’s website and create an account to access the articles of the organization online.
In Texas, the certificate of formation requires the following information:
- LLC name
- Registered agent information
- Registered office address
- Governing authority information
- Business purpose
- Mailing address
- Organizer contact information
- Effective date
Once you’ve created your account, log in and enter your payment information. You’ll need to do so to proceed to the online filing, and you will not be charged until you’re finished entering all of your information. When finished, click Continue.
Once you’ve entered your payment information, click “SOSDirect-Business Filings” and “Let’s Do Business” from the dashboard page. Next, click “Use SOSDirect for Online Business Filings and Searches” and the “enter site” button.
From the Business Organizations Menu, scroll down to Web Filings, select Domestic Limited Liability Company from the drop-down menu, and click File Document. Then, select certificate of formation.
You’ll first be prompted to look up your desired business name to confirm it’s available. Next, you’ll enter all the information in the bulleted list above. Once complete, you’ll have a chance to review your entries before confirming and moving to the payment screen.
You can also complete and submit a paper form if you wish to file by mail. The filing fee is $300, and you should receive confirmation of formation within 5-7 business days.
Some entrepreneurs hire an LLC formation service like ZenBusiness to handle this step, saving time and ensuring the process is done correctly.
Draft an Operating Agreement
Texas does not require an operating agreement, but it’s a crucial document that defines members’ ownership percentages and profit allocations. Those are the two key elements, but it should also include the following:
- Each member’s rights and responsibilities
- Management structure and roles
- Voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
You can find operating agreement templates online, but it’s best to have them drawn up or reviewed by an attorney. The language of an operating agreement is crucial and can often help determine how member disputes will be resolved. Here you can obtain a free operating agreement template for your Texas LLC.
Contact Information for the Texas Secretary of State
Texas Secretary of State Website
Phone: (512) 463-5555
Business & Commercial Section
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
There’s only one way to create an LLC in Texas: successfully filing a certificate of formation. If you make any mistakes, you’ll likely have to refile, so be sure to do it right the first time and set your business up for serious success!