The decision to formalize your business through the establishment of a legal entity with Texas is one of the most savvy business decisions you can make.
It sets your company apart from other fly-by-night operations. It allows you to grow and attract investors, and it alerts the public that you are taking your business seriously.
In this guide we will discuss the very specific steps and formal timeline for setting up a Texas LLC.
What Is an LLC and Why Do I Need One?
LLCs are the most popular business vehicle in use today. They nicely blend the benefits of a corporation with the benefits of a partnership. Like corporations, LLCs have limited liability protection for their owners (i.e., “members”). Similar to partnerships, LLCs provide pass-through taxation. Finally, an LLC owns its property separately from its owners and thus additionally protects your assets from LLC activities.
How Do I Set Up an LLC?
How long does it take to get an LLC in Texas? It’s pretty swift, but the process needs to happen in a very specific order. At the outset we suggest that you do all the following online to avoid delays with mail-in documents.
Certificate of Formation
First you need to create your LLC with the State of Texas. Do this by filing a Certificate of Formation (COF) with the Texas Secretary of State (SOS). The COF must contain the following information.
Name of the LLC
This is the formal name of your company and will appear on all legal documents (e.g., leases, bank accounts, etc.). Make sure you pick a name you can live with for a long time. The name must include the phrase “limited company,” “limited liability company,” or an abbreviation of one of those. As a suggestion, consider a name that is not directly related to your business activity to give the business a bit more privacy.
This is the person that receives formal legal papers for the LLC (e.g., lawsuits, etc.). Consider a professional registered agent to avoid accepting service at your business address, which can be both disruptive and embarrassing.
This point is extremely important. How do you want your LLC managed? You can choose member-managed or manager-managed. With a member-managed LLC, all the members (i.e., owners) work together to run the business. With a manager-managed LLC, you elect a manager to run the LLC. That person is similar to the “president” of a corporation and will be responsible for the day-to-day operations of the LLC.
Purpose and organizer
Finally, you will provide information about the purpose of your LLC and its organizer. The organizer could be you or your attorney—essentially whoever is filling out the COF.
Filing the COF
How long it takes to set up an LLC depends on the speed of service. We recommend that you file the COF online and use expedited services. Currently the SOS takes up to 40 days to approve LLCs. With expedited service, formation takes approximately 5 days.
Adopt an LLC Operating Agreement
An operating agreement (i.e., “company agreement”) outlines how an LLC is run. The operating agreement establishes, among other things:
- The powers and duties of the members and/or managers,
- How profit is distributed,
- Who can be a member, and
- How to leave an LLC (e.g., buy-out rules).
Texas has some unique LLC laws, and without an operating agreement you will default to these laws, which can cause problems in the future. For instance, LLC members cannot leave an LLC unless an operating agreement outlines how to do so.
Additional Important Steps
Don’t stop with just filing the COF, or you could delay how long an LLC takes to set up. There are several other very important steps to place your new LLC on firm legal footing.
Go to the IRS website and apply online for a federal tax identification number for your LLC.
County and City Registration Requirements
While Texas does not require a general state business license, often counties and cities do. Check with the counties and cities where you plan to do business for any required licenses (this includes sales tax licenses).
Hunnicutt Law Group Knows LLCs
Don’t wonder “how long does it take to set up an LLC in Texas.” With Hunnicutt Law Group we have formed hundreds of LLCs, dozens of them custom-tailored. The above is a bare outline of how long it takes to set up an LLC. Making the investment now, instead of years in the future, is both smart and easier. Contact us today to see how we can help.