Creating a Limited Liability Company (LLC) in Texas offers various benefits, including limited liability protection, pass-through taxation, and flexible management structures. If you’re considering establishing an LLC in Texas, follow these steps:
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STEP 1: Choose a Name for Your LLC
The name of your LLC must end with “Limited Liability Company,” “LLC,” or “L.L.C.”
The name must be distinguishable from existing entities registered in Texas.
You can check the availability of your desired name by searching the Texas Secretary of State’s website: https://direct.sos.state.tx.us/
Optional: Reserve your LLC name for up to 120 days by filing a Name Reservation (Form 501) and paying a $40 fee.
Time it Takes to name an LLC
Researching and deciding on a name: 1-2 hours
If opting for a name reservation: The act of filing can take about 10-15 minutes.
If opting for a name reservation: Filing can take minutes, but approval might take a few days to a week.
STEP 2: Appoint a Registered Agent
Your registered agent will be responsible for receiving legal notices for the LLC.
The agent can be an individual or a business entity, but they must have a physical address in Texas (P.O. Boxes are not acceptable).
The agent must be available during regular business hours.
Time it Takes to be a Registered Agent
Registered Agents MUST BE at the Business Address everyday during business hours. This is why Home Addresses Are Not Accepted.
If you already have someone in mind (like an attorney or a service), this can be quick. If you need to find and appoint a registered agent: 1-3 hours.
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Benefits of having Inc Authority serve as your Registered Agent include:
· Privacy: Keep your home address private
· Efficiency: Easily receive and promptly process state and legal documents
· Hassle-free: Reduction of junk and solicitation mail
· Legal Compliance: Avoid fines, penalties, and possible dissolution
· Convenience: Serves as your public & legal business address
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STEP 3: File a Certificate of Formation
Prepare the Certificate of Formation (Form 205).
This document requires details like the name of your LLC, its purpose, the name and address of your registered agent, whether it is member-managed or manager-managed, and the organizer’s details.
Submit the form online or by mail to the Texas Secretary of State.
The filing fee is $300.
Time it takes to write the Articles of Organization
Preparing the document: 1-2 hours
Filing online: 30 minutes to 1 hour.
Waiting for confirmation/approval: This can range widely, but typically, online filings can be processed in a few days to a couple of weeks.
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STEP 4: Create an Operating Agreement
Though Texas doesn’t require LLCs to have an operating agreement, it’s a good practice to have one.
This internal document outlines the management structure and operating procedures of your LLC.
The agreement should cover details like member contributions, allocation of profits and losses, and member voting rights.
Time it takes to write an Operating Agreement
If using a template and making minimal changes: 1-3 hours
If drafting from scratch or having extensive negotiations among members, it could be considerably longer, but for our purposes, we’ll stick with the 1-3 hours range.
If drafting from scratch or having extensive negotiations among members: Several days to weeks.
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STEP 5: Obtain an Employer Identification Number (EIN)
Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) for tax purposes.
You can apply for an EIN online at no cost through the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
The EIN will be used for tax filings, opening bank accounts, and hiring employees.
Time it takes to get an EIN / Tax ID
Filling out the online form and receiving the EIN: Approximately 0.5 to 1 hour (the online process is relatively quick if there are no complications).
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SO HOW MUCH TIME WILL IT TAKE TO FORM AN LLC MYSELF? DO IT MYSELF (DIY) an LLC?
Total Time Investment (Minimum): 5 hours (if you exclude the higher range estimates and name reservation)
Total Time Investment (Maximum): 11.5 hours (if you include the higher range estimates and name reservation)
This gives a ballpark range of 5 to 11.5 working hours for an individual, excluding all waiting times. It’s worth noting that these times can vary based on the person’s familiarity with the processes and any specific details or challenges related to the business being set up.
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