Setting up an LLC is fairly straight-forward in Texas. In this blog we’ll discuss the process at a high level.
First, you’ll need to choose your name. Make sure you do a “Name Availability” search on the Secretary of State (SOS) website. If you want to reserve a name for 120 days, it costs $40, and it allows you to lock down your name during that time so no one else can take it.
The next step is to appoint a Registered Agent. The Registered Agent can be you or a party that you designate. The Registered Agent’s sole responsibility is to receive legal notices, government requests, etc.
Much like FedEx or UPS requires someone to sign for a package, your registered agent will sign to acknowledge that your company is in receipt of these official mailings. Remember, the LLC cannot be its own agent. You can have a P.O. Box or some other address for day-to-day mail that does not fall into the categories listed earlier. If you want to have a separate address to where your clients could mail things, that’s perfectly fine.
The next step is to fill out the Certificate of Formation. The filing fee costs $300 to file and is fairly simple and straightforward.
After filing the Certificate of Formation, the next step would be to draft an operating agreement. An operating agreement would speak to the percentage of the company all managing-members would have, their duties, etc. (If the Certificate of Formation is the box of the board game, the operating agreement would be the rules inside.) Keep in mind that if you want any special provisions in your operating agreement, you’ll likely want to draft the operating agreement before you bring other members into your company. Once you have other members in your company, you can only add special provisions if all of the members agree to it. If you draft the operating agreement before you bring in additional members, the new members are stuck with the operating agreement that you have in place.
Next, you’ll need to obtain an Employer Identification Number, for government-related documents, bank accounts, loans, etc. You can obtain that by going to the IRS website. You’ll need your social security number or your Individual Taxpayer Identification Number (ITIN) if you do not have a social security number
Once you have your LLC formed and have an EIN, you’ll probably want to create a business bank account to allow your company the separation desired to protect your personal assets from liability. After all, one of the reasons you created this LLC is to help protect yourself, personally, from any lawsuits that might be brought against your company (but hopefully that will never be the case).
Make sure that all of your income and expenses flow through the business account(s), even if you plan on transferring money into your personal account immediately after.
While the process of forming your own LLC may seem intimidating, this guide provides easy step-by-step instructions to getting your LLC formed.
There are many more considerations that you should be aware of after you form your business, and there are a lot of best practices that you can employ to maximize the protection offered through an LLC as well as some of the tax benefits.
At Fears Law, we’re here to help, so feel free to set up a consultation with one of our Business Law attorneys today!