To form a Limited Liability Company (LLC) in Texas, you must file a Certificate of Formation with the Texas Secretary of State. The Secretary of State provides a form that satisfies the minimum requirements of state law. Online filing is available through the SOSDirect portal.
An LLC is not a corporation or a partnership but a distinct type of business entity that has attributes of both corporations and partnerships. Depending on how it is structured, an LLC may resemble a general partnership with limited liability or a limited partnership in which all owners have the right to participate in management and have limited liability, or an “S” corporation without the ownership and tax restrictions imposed by the Internal Revenue Code. Unlike a partnership, in which the key element is the individual, the essence of an LLC is the entity, requiring more formality in its creation.
The owners of an LLC are called “members.” Members may be individuals, partnerships, corporations, trusts, and any other legal or commercial entity. Generally, the members’ legal liability is limited to their investment and they may enjoy pass-through taxation similar to partners in a partnership. By virtue of federal tax classification regulations, an LLC may achieve both structural flexibility and favorable tax treatment. However, those contemplating forming an LLC should consult with competent legal counsel.
An LLC may be managed by managers or by its members. The management structure must be stated in the Certificate of Formation. The management structure is a decision of the LLC and its members. The Secretary of State cannot give advice on management structure. LLCs offer several benefits to businesses, including limited liability for members, management flexibility, and tax options.
Registering an LLC in Texas requires careful preparation of the necessary documents and adherence to state regulations. This process involves choosing a business name, designating a registered agent, drafting an operating agreement, and filing the Certificate of Formation.
After you file the Certificate of Formation and it is approved by the Texas Secretary of State, your LLC will be officially formed. You will receive a certificate of formation, confirming the legal existence of the LLC.
