These are the steps required to create a Texas single-member limited liability corporation ( SMLLC). Keep in mind: A Texas single-member LLC can be used for most purposes as an LLC (multi-member limited liability company).
Name your Texas Single-Member LLC
A Texas SMLLC name must include the phrase “Limited Liability Company” (or “Limited Company”) or an abbreviation thereof such as “L.L.C.,” L.C., or “Ltd. Co.” On the records of the Texas secretary of state (SOS), the SMLLC’s name must stand out from other entities registered with the state.
You can check to see if the name you are looking for is available. You can reserve your name for 120-days for $40 by submitting Form501 (Application to Reservation or Renewal for an Entity Name). The same form can be used to renew your name reservation.
2. Get a Certificate of Formation
A Texas SMLLC can be created by filing a Certificate Of Formation with the Secretary of State. You will need to submit the following information to complete the articles:
- The official name of your new SMLLC
- The name and address of the registered agent of the SMLLC
- An indication of whether the SMLLC is member-managed or manager-managed
- The name and address of each manager or managing member
- The name and address of the organizer of the SMLLC,
- A few more details are needed.
Download a blank certificate form of formation (Form 205) from the SOS website. You can also file online through the SOSDirect website of the Secretary of State. The current filing fee for a SOSDirect application is $300
Each Texas SMLLC must have registered agents. A registered agent can be an individual or a business entity who agrees to receive legal papers for the SMLLC. A registered agent is either a Texas resident or a foreign business entity that has been authorized to do business here. SMLLCs cannot be its own registered agents. A physical address must be provided by the registered agent in Texas. Find information about Texas commercial registered agents by clicking here.
3. Prepare an Operating Agreement
Texas does not require that an SMLLC have an operating arrangement. An operating agreement is highly recommended even if an SMLLC only has one member. A SMLLC operating agreement is not required to be filed with state.
Operating agreements are usually between one member and the LLC. The agreement usually covers the rights, duties and obligations of the member as well as the management structure of the SMLLC. An agreement can provide liability protection, separating you and your business. This agreement can also be helpful with lenders and other businesses in order to enter into business transactions.
If you do not state that your SMLLC is manager-managed at the time you register, your SMLLC would be treated defaulty as member-managed. The distinction between manager-managed and member-managed can be crucial, so consider both options before deciding which management structure you would like for your SMLLC.
4. Are You a Requirement for an EIN?
An SMLLC with a default tax status disregarded entity, which is the same as a sole proprietorship and does not have employees, is not required to apply for a federal Employer Identification Number. These SMLLC owners can report their business profits or losses on their personal tax returns using their Social Security number, tax identification number, or their own Social Security number.
You must apply for a federal Employer Identification Number from the IRS if your SMLLC employs people or if your SMLLC is to be taxed as an entity rather than a disregarded entity. Although you don’t have to get an EIN for your SMLLC (although it is not mandatory), there are business reasons why. EINs are required by banks to open a business account. EINs may also be required by other businesses to process payments. Even though it is not necessary for federal tax purposes, it can make sense to have an EIN for your SMLLC.
An online application can be submitted to the IRS Website to obtain an EIN. There is no filing fee.
5. Register with the Comptroller of Public Accounts
You may need to register with the Texas Comptroller of Public Accounts if you plan on selling products and collecting sales tax. The majority of SMLLCs in Texas are subject to an annual franchise tax. Depending on the tax involved, you can register online, via mail, or in person at the CPA field office.
6. Get a Business License
Depending on the type of business and location, you might need to apply for local or state business licenses. These licenses could include:
- Your profession or occupation
- You’ll be selling or providing specific services or goods
- A fictitious or assumed name for your business.
- Safety and health are important.
7. No Annual Reports
Unlike most other states, Texas does not require SMLLCs or their agents to file annual reports with its Secretary of State. SMLLCs are required to file annual franchise tax reports. It can be difficult to calculate the tax. For more information, visit the Texas Comptroller’s website
