A limited liability company (LLC) is one of the business entities you can form in Texas. The Texas Business Organizations Code (BOC) governs LLCs, which are established by filing a Certificate of Formation (Form 205) with the Secretary of State and paying the required filing fee.
Once your LLC is up and running in Texas, however, there are a variety of ongoing legal issues that you'll need to handle. Follow these steps to operate your LLC in compliance with Texas law.
1. Obtain an employer identification number.
The U.S. Internal Revenue Service issues employer identification numbers (EINs) by mail, fax, phone, or online. Your LLC needs an EIN to pay its federal, state, and local taxes—including Texas sales tax—and to file the annual reports required by Texas law.
2. Draft and sign a company agreement.
In Texas, LLCs adopt a company agreement (known as an operating agreement in most other states) that sets out the rules for member and manager decision-making and the process for electing and removing managers and officers, if any. All of the LLC's owners, called members, sign the company agreement and they usually include restrictions on the members' rights to transfer their membership interests.
LLCs in Texas have broad authority to structure their company agreements to fit their desired management structure, and under Texas law, the provisions of the company agreement overrule the standard governance and voting rules contained in the BOC.
3. Open a business bank account.
If you are running a business through an LLC, it makes sense to establish a single bank account for all of the company's transactions. Not only does it make it easier to track business-related income and expenses, it also helps protect you and your fellow owners from unwanted personal liability arising from the LLC's operations.
4. Establish a sales and use tax account.
If your LLC will sell or lease tangible personal property in Texas or will sell taxable services in Texas, you must register with the Texas Comptroller. State and some local jurisdictions levy sales tax. The rules for collecting and paying sales tax are available on the Comptroller's website.
5. Pay annual franchise tax.
All LLCs organized in Texas (and foreign LLCs registered to do business in Texas) are subject to franchise tax that is levied on the "margin" of the LLC's business as calculated under the state's formula. In most cases, the franchise tax rate is applied to the LLC's total annual revenue minus certain permitted business expenses. The due date for annual franchise tax reports and payments is May 15th.
6. Pay other business taxes.
Depending on the nature of your LLC's business, you may be subject to other business taxes and fees in Texas. The Comptroller's website includes a list of all specialized business taxes and fees and links to the relevant rules and payment dates.
7. File annual Public Information Reports.
Texas LLCs are required to file a Public Information Report with the Comptroller every year disclosing the company's:
- Current mailing address
- Current principal office (defined as where company's records are kept)
- Current principal place of business (defined as the main location of the company's day-to-day operations)
- All managers (if the LLC is manager-managed)
- All members (if the LLC is member-managed)
- All subsidiaries more than 10 percent owned by the LLC
- If the LLC is manager-managed, the identity of all owners of 10 percent or more of the LLC's membership interests
8. Obtain any other required business licenses.
In addition to the Texas tax-related filings, your LLC may need to obtain other state or local business licenses depending on the nature of the LLC's business. The Texas Department of Licensing and Regulation provides guidance on these issues on its website.
An LLC can be a great business structure if you want to take advantage of the benefits that limited liability companies offer to business owners. But before doing so, you'll have to follow these steps when creating and registering your Texas LLC. If you need additional information on the specific paperwork and applicable fees required, you can obtain additional information from the Texas Secretary of State website.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.