Company formation laws in Texas

Table of contents

LLC Formation in Texas

Below is a general outline of the steps you need to know in order to form a Limited Liability Company (LLC) in the state of Texas.

Choosing a business name for the LLC: As per Texas law, an LLC’s name is required to have the phrase ‘Limited Liability Company’ or an abbreviation of the phrase. Moreover, the name of the business must not be same, or deceptively similar to any other name on file with the Secretary of State.

File certificate of formation with the Secretary of the State: The filing fee is $300 and the Secretary of State's website has a simple, fill-in-the-blank form for the certificate of formation. If one or more managers will manage the company rather than all the members, you must state it as a clause in the certificate of formation.

Negotiate and execute an operating agreement: In the state of Texas, operating agreement in order to form an LLC is not required, but it’s significant to execute one. There are no set criteria of the substance of an operating agreement though, topics usually include how meetings are conducted, how the LLC will be managed, what capital each member is contributing, and how profits and losses will be allocated, etc.

Determine tax and other regulatory obligations the LLC has: Request an Employer Identification Number (EIN) from the IRS. This can be done through an online application and there is no filing fee. If the company employs one or more employees, then it becomes subject to Texas employment taxes. You can register online using the Texas Employer portal. Whenever you hire an employee in Texas, you need to inform both the IRS and the State of Texas. Again, employers in Texas can choose if they’ll provide workers' compensation coverage to their employees or not.

Open a bank account for the LLC: It’s always wise to keep your business’s finances separate from your personal ones. If you are forming an LLC in Texas, you should open a bank account for your business. However, you need to get a Tax ID number (EIN), a copy of the certificate of formation, and a resolution identifying authorized signers in order to open a bank account for your LLC.

Other significant requirements: Texas law requires certain documents to be kept in the LLC’s principal place of operation. You can find a list of the required documents in two statutory provisions: Texas Bus. Orgs. Code § 3.151 and Texas Bus. Orgs. Code § 101.501.

Non-profit Corporation Formation in Texas

Below is an outline of the steps to form a nonprofit corporation in Texas. Apart from the following, you should also take a look into Title 2, Chapter 22 of the Texas Business Organizations Code.

1) Choose a business name and check if available: What name you choose for your nonprofit corporation, may not be the same as, or deceptively similar to, other corporate names on file with the Secretary of State. However, there are some obvious exceptions. The Texas Secretary of State can initially help you for the determination of business name availability. Call (512) 463-5555, dial 7-1-1 for relay services, or e-mail your name inquiry to corpinfo@sos.state.tx.us.

2) Recruit and/or appoint directors: In order to form a non-profit corporation in the state of Texas, you must have at least three directors. However, the directors need not reside in Texas and there is no specified age bar.

3) Incorporation of your non-profit corporation: Below are the steps to incorporate your non-profit corporation in Texas:

  • Prepare and file articles of incorporation with the Secretary of state. These articles will declare the corporation’s name, the registered agent and registered office, names of the managers and board of directors, the structure of the organization, the name of the incorporator, etc. Articles of incorporation is chiefly needed to qualify for 501(c)(3) tax-exempt status. Use Form 202: Certificate of Formation for a Nonprofit Corporation to create your articles of incorporation and you must file 2 copies of Form 202 with the Secretary of State.
  • Create the bylaws. Though there are no set criteria for the content of bylaws, they usually declare the internal rules and procedures. You need not file the bylaws with the Secretary of State; rather keep a copy at the non-profit corporation’s principal place of business.
  • Hold an organizational meeting. The owner, the incorporator or the initial directors named in the articles of incorporation should hold an initial organizational meeting for the appointment of directors, corporate officers, for adopting bylaws, determining the corporation’s budget for the fiscal year, designating a bank, and selecting a corporate seal.
  • Create a records book: You need to keep a record book to store important documents concerning your nonprofit corporation.

4) Acquiring your employer identification number: Whenever, you hire an employee in Texas, you must inform both the Internal Revenue Service (IRS) and the State of Texas. Request an Employer Identification Number (EIN) from the IRS. You can do this via filing out a simple online application.

5) Register with the Department of Revenue: As an integral part of forming a non-profit corporation in Texas, you need to register for taxes. You can do this using the Texas Employer Portal.

6) Apply for tax exemptions: Once incorporating your non-profit corporation, you can apply for tax exemptions.

  • Federal tax exemption: The IRS has a series of questions to help you know if your organization is eligible for federal tax exemption.
  • State tax exemption: For state income tax exemption, you need to submit Form AP-204, Application for Exemption to the Comptroller of Public Accounts.
BBB-A--Rating