Home to three million small businesses, Texas has frequently been named the best state to start a business thanks to its great business ecosystem. [1] If you’re looking to form an LLC then Texas makes a favorable option.
When forming an LLC it’s highly advisable to create an LLC operating agreement to outline the rights and obligations of company members. It also defines how decisions will be made and who has the authority to make them.
Read on to learn the steps to form an LLC in Texas and download a Texas LLC operating agreement.
Is an LLC Operating Agreement Required in Texas?
An LLC operating agreement is not required in Texas. However, most business heads prefer to have one because it does establish order within an entity. It also makes provisions for changes in structure when an acquisition, merger, or buyout may occur.
An LLC operating agreement establishes roles each member plays and defines profit and loss distribution. Additionally, this agreement determines who controls assets held by a member who has withdrawn or passed away.
The percentage of company ownership that each member has is also included in an operating agreement. In addition, it contains sellout or buyout rules that apply when company members leave or die.
Texas Operating Agreement Laws
Texas has what they call the Business Organization Code. It outlines all the major procedures for how to start an LLC in Texas. For instance, it says in this law that a single-person entity is ‘not unenforceable.’
Like most states, the contract doesn’t have to be written, but it does seem easier to enforce than an ‘oral’ (verbal) one. Ensure you thoroughly read the Business Organization Code when creating your LLC operating agreement.
How Much Does it Cost to Form an LLC in Texas?
To form an LLC in Texas you will need to pay a domestic filing fee of $300. The foreign filing fee is $750.
How to Form an LLC in Texas?
To form an LLC in Texas, follow the below steps:
Step 1 – Look For an Unused Company Name
For this, you’ll have to perform some research to find out if another company is using the name you picked. Before choosing this name, search in corporation name databases and refer to Texas Secretary of State documentation concerning the availability of desired business names.
Step 2 – Verify Name Meets Requirements
Before you finalize your chosen business name, make sure it meets Texas requirements:
- Add ‘LLC’ to your name. Your business name should include ‘limited liability corporation’, LLC, or L.L.C.
- Choose words carefully. No matter what state you register your business in, choose the words that make up the name carefully. When in doubt, do not use any gambling terms in it, such as ‘lotto’, and do not use any government agency terms in it.
- Follow professional naming guidelines. Special rules may apply if setting up an LLC to operate a bank, hospital, university, or other sensitive or public institution.
- Do not use an existing name. You will not have to worry about this if you have searched for available names before starting your business.
Even a quick Google search helps to give you initial ideas of what is and what is not used. However, you should perform the official name database search before you register it. Refer to naming issues documentation for more information.
Step 3 – Register Your Chosen Name
It will cost you $40 to register your chosen Texas LLC name. The state offers a complete fee schedule along with its documentation of how to register an LLC in Texas.
Step 4 – Register Your Business.
This involves a separate process than just registering your business name. At this stage, you will begin the process of LLC operation agreement setup. The rules appear on the Texas state website within the same place where the fee schedule documentation is.
Step 5 – Designate a Legal Business Address
To set up a legal business address, make sure you have a street number and location that anyone can find on a map. For this, you must not use a P.O. Box, and you must either represent yourself as a registered agent or choose one to make it a legal business address.
What counts as a legal business address?
Any address that you or someone in business with you would normally use for legal correspondence counts. You must prove that your physical address pertains to your daily LLC operations.
What if I don’t have a physical business?
You can use your home address. However, you may not want to for safety reasons. This will require you to set up someone else to become your registered agent. They must have normal business operation hours during the day, such as 9-5. Additional rules apply regarding registered agents as established by the state.
Step 6 – File Your LLC Operating Agreement
Your Texas LLC operating agreement application requires having this information:
- Names of your LLC members
- Your official name and primary place of business
- A physical business address (no P.O. Box)
- Effective LLC formation date
- Your employer identification number (EIN)
- Indication of your primary industry
- Organizer signature
The Texas Secretary of State website offers information about how to form an LLC in Texas. You may have the chance to file online, by fax, or in person.
Texas LLC Operating Agreement Template
Create your LLC operating agreement using the template below or use our document builder to speed up and streamline the process: