How to Form a Single-Member LLC in Texas

These are the steps required to create a Texas single-member limited liability corporation ( SMLLC). Keep in mind: A Texas SMLLC is considered the same and can be used for the same purposes as an LLC (multi-member limited liability company).

1. Name your Single-Member LLC

Names of Texas SMLLCs must contain the phrase “Limited Liability Company”/ “Limited Company,” or an abbreviation one of these phrases, such as “L.L.C.,” L.C. or “Ltd. Co.” A Texas SMLLC’s identity must be distinguished on the records maintained by the Texas Secretary of State (SOS), from names of any other business entities that have been registered or reserved with Texas.

To ensure the name you desire is available, do business name searches via the SOS website or the Comptroller of Public Accounts’ website. Fill out Formula 501 to request a reservation or renewal of an entity name. This form can also be used to renew a name reservation.

2. For a certificate of formation, file

By filing a Certificate of Formation to the Secretary of state, you can create Texas SMLLC. To complete the articles, you will need to provide:

  • Your new SMLLC’s official name
  • Name and address of the SMLLC registered agent
  • This will indicate whether the SMLLC will either be manager-managed or member-managed
  • Name and address of each manager/managing member
  • Name and address of the SMLLC organizer.
  • Here are some other details.

The SOS website allows you to download a blank Certificate of Formation form (Form 205). You can also file online via the SOSDirect website. The current filing fee per document is $300

Every Texas SMLLC needs a registered agency. A registered agent is an individual, business or legal entity that accepts legal papers on behalf of the SMLLC. The registered agent may be a Texas resident or a domestic or international business entity authorized to conduct business in Texas. SMLLCs can not act as their own registered agent. The registered agent must be located in Texas.

3. Prepare an Operating Agreement

Texas does NOT require that an SMLLC has an operating contract. Even though an SMLLC may only have one member, an LLC operating agreement is strongly recommended.

The LLC and one of its members will usually sign an operating agreement. The agreement covers the member’s rights and duties and the SMLLC management structure. A contract can protect you from liability by separating your business and yourself. It can be beneficial to lenders and other businesses when entering into transactions.

Most states will not allow you to state that your SMLLC manager-managed upon registration. Your SMLLC will then be treated as member-managed by default. It is important to distinguish member-managed from manager-managed. Before you choose the type of management structure for your SMLLC, make sure to look at both.

4. Do You Need an EIN

An SMLLC that maintains its default tax status disregarded entities (same sole proprietorship), and has no employees is not required for a federal Employer Identification Number. Instead, these SMLLCs owners can report their profits and losses on personal tax returns using their Social Security or Tax Identification number.

An EIN (federal Employer Identification Number) must be obtained from the IRS for any SMLLC with employees. You don’t need an EIN to open an account for your SMLLC. However, there may be business reasons for it. EINs can be required by banks to open accounts under the company’s name. EINs can also be required for processing payments from other companies. It is common to apply for an EIN even if you are not required for federal tax purposes.

To obtain an EIN, you can apply online at the website. There is no filing charge.

5. Register with the Comptroller of Public Accounts

If you intend to sell goods or collect sales tax, there are some situations where you may need registration with the Texas Comptroller of Public Accounts. Most SMLLCs are subject to a franchise tax in Texas. Depending on which tax you are dealing with, you might be able to register online, by post (using the correct form), or in person at a CPA office.

6. Get Business Licenses

Depending on your business type and location, you may need local or state business permits for your SMLLC. You might also be eligible for licenses that relate to:

  • Your occupation or profession
  • Specific goods and services that you will sell or offer
  • An assumed or fictitious business name, or
  • Safety and health are paramount.

7. No Annual Reports

Texas doesn’t require SMLLCs not to file annual reports with their Secretary of State, which is contrary to most states. However, SMLLCs still need to file annual reports on franchise taxes. Complex details can make it difficult to calculate tax. You can find more information at the Texas Comptroller’s website or ask a CPA

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