How to form a Texas LLC
There are many reasons to start an LLC in Texas and many people do it to control their risk of running a business, owning property, or possibly lower their taxes. Many small business owners choose this exciting form of business because the LLC is not required to do some of the formalities that a corporation is required to do, like hold annual shareholder meetings. Another common question regarding an LLC in Texas is about how long can an LLC exist? The answer is indefinitely, or as long as the members want it to exists. An LLC can be given a termination date, but most LLCs are setup with an indefinite life.
Texas Limited Liability Company Risk
A main reason that business owners choose to form an LLC in Texas or any other state, is to limit risk. The concept is commonly called limited liability, and it applies to all Texas LLCs. When the owners of a business decide to form an LLC, they are separating starting the process of separating their personal assets from the assets of the business. In order to limit personal risk of running a business, the members or owners must make sure to keep their personal and business assets separate. Among many other items, the LLC should also be operated with a federal Tax ID number or FEIN. Any time that the business wants to enter into a business debt or obligation, a Federal Tax ID number should be used and not a personal social security number.
Useful tips for naming a Texas LLC
Texas Limited Liability Companies must contain the words Limited Liability Company or Limited Company, also acceptable would be abbreviations such as LLC, LC, or Ltd Co. Texas has a “two word” rule that applies to all Limited Liability Company and Corporation names. For example, if there was an entity with the name “Tex Mex Bar & Grill, LLC” anything submitted to the state with the first two words “Tex Mex” would be rejected, regardless of what followed those words.
Sometimes there is an option to obtain consent to use the name, though I it is often not granted since you need consent from the existing business. Also abbreviations such as “nortex” would be rejected due to the two word rule of “North Texas”. Texas does not include in its searches for words such as “and”, “a”, “an” and “the” etc.
How does limited liability work?
A Texas LLC, if operated correctly, is a separate legal entity from its owners. If your company finds that it has a debt it can not pay or a claim from a lawsuit, the company, and the company alone will be held responsible for that debt and not the owners.
It is not recommended to run a small business as a sole-proprietorship or partnership in the State of Texas. A main reason for this is the liability that all companies face in the current marketplace. You must remember that you will be held responsible for any debts or obligation that you personally guarantee. If you have not incorporated or you have not formed a Texas LLC, you are placing a personally guarantee on everything that your business does. This is not a smart way to run a business.
Keep your business in good standing
Submitting the articles of organization, and paying the filing fee is the way to get your LLC formed, but it is just the start. Make certain that you keep the Secretary of State updated with all name, address, and registered agent information. This is required; otherwise your business may be administratively dissolved by the state. If you move and do you not notify the state of new address information, you will not get the critical business correspondence that you need.
As a business owner, you must also make sure that you follow all required laws and regulations at the State, Federal, and Local levels. To do this you will want to check with the Local business office to get a business license and check for other required licenses that you business may need. We offer a business license compliance package that is available to all of our customers. You can read about it more during the ordering process.