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In Texas, an operating agreement is not mandatory to form an LLC. Nevertheless, corporate lawyers, financial experts, and business consultants unanimously recommend forming an LLC with one.

LLC operating agreements legally bind all the members to the critical aspects of the business, such as the management and operation of the company.

What is an operating agreement for an LLC in Texas?

A Texas LLC Operating Agreement is a legal document detailing a Texas LLC’s operational framework.

Most LLC members enter into an operating agreement (also called an LLC Agreement or LLC Operating Agreement) to document any private agreements among themselves and to supplement or alter the default rules set out in the applicable LLC laws. This is done after the LLC is formed by filing a certificate of formation with the secretary of state (SOS). 

In other words, the company agreement governs the organizational matters of the LLC (Tex. Bus. Orgs. Code Ann. § 101.052).

Under the Texas Law, the following are the types of LLCs:

1. General LLCs – these are authorized under the Texas Business Organizations Code (BOC) (Tex. Bus. Orgs. Code Ann. §§ 1.001 et seq.) and must have at least one member.
2. Series LLCs – In Texas, series LLCs are authorized by Chapter 101, Subchapter M, of the BOC. The company agreement (often called an operating agreement in other jurisdictions) of a series LLC can establish one or more designated series, and each series can have its own (a) Members, managers, membership interests, or assets; (b) Rights, powers, or duties; (c) Business purpose or investment objective.
3. Professional LLCs—A professional limited liability company (PLLC) is an LLC formed under the BOC to provide a professional service. A professional service is any service requiring licensure in Texas to provide, including the services provided by architects, attorneys, and CPAs, among others.

Other types of LLC operating agreements:

1. Single-Member and Multi-Member LLC
2. Member-Managed and Manager-Managed
3. Tailored or Customized LLC operating agreements

A foreign limited liability company or one established outside Texas that wants to conduct business in Texas. The form to be used for the Application for Registration of a Foreign LLC is Form 304.

Why is an LLC Operating Agreement Important?

The members of most LLCs enter into LLC Operating Agreements to:

• Document private agreements among themselves.
• Supplement or alter the default rules set out in the applicable LLC laws.
• It defines the company’s management structure, describes how its profits are allocated and distributed, and sets out the agreements among its members.

In any business partnership involving multiple individuals, conflicts are inevitable. However, preempting disputes by documenting plans to address key situations can mitigate potential disagreements.

An operating agreement can help reinforce your limited liability status.

Ensuring limited liability protection requires demonstrating the separate legal identity of an LLC from its owners. Compliance with regulations, like keeping business and personal finances distinct, is crucial. Additionally, adhering to the guidelines outlined in the operating agreement further supports the entity’s distinct identity. In the event of legal disputes, a comprehensive operating agreement can bolster the LLC’s defense.

How do you create an operating agreement for an LLC?

An LLC operating agreement is an internal document that outlines how your business will be run.

Initial considerations in forming an LLC in Texas

To form an LLC in Texas, the following information has to be considered: (a) governing documents; (b) name requirements and reservation options; (c) filing requirements; and (d) annual reporting.

1. Governing documents

To form an LLC in Texas under the Texas Business Organizations Code (BOC), one or more organizers must file a certificate of formation with the Texas Secretary of State (SOS). It includes the following:

• The LLC’s name.
• The entity type (LLC).
• The purpose for which the LLC is formed, typically stated as any and all lawful purpose for which an LLC may be formed.
• The name and street address of the initial registered agent and registered office.
• The LLC’s initial mailing address.
• A statement whether the LLC initially has or does not have managers and:
• if it initially has managers, each initial manager’s name and address; or
• if it does not initially have managers, each initial member’s name and address.
• If the LLC will have a limited period of existence, the specific period of duration.
• Each organizer’s name and address;
• Alternative provisions apply if the LLC is formed under a plan of conversion or merger (Tex. Bus. Orgs. Code Ann. § 3.005(a)(8));
• The certificate of formation may specify a delayed effective date and time not later than 90 days after the certificate is signed (Tex. Bus. Orgs. Code Ann. §§ 3.001(c) and 4.051 to 4.053). Contain any other provision consistent with law relating to the LLC’s organization, ownership, governance, business, or affairs, including any provision that could be in the company agreement (Tex. Bus. Orgs. Code Ann. §§ 3.005(b) and 101.051(a)).

2. Name Requirements and Reservation Options

In Texas, selecting a name for your LLC requires adherence to specific guidelines. The name must include ‘limited liability company’ or ‘limited company’, or an abbreviation like ‘LLC’, ‘L.L.C.’, ‘L.C.’, ‘LC’, or ‘Ltd. Co.’ (Tex. Bus. Orgs. Code Ann. § 5.056(a)). Using just ‘limited’ or ‘company’ is not sufficient.

For a professional LLC (PLLC), the name should contain ‘professional limited liability company’ or abbreviations such as ‘PLLC’ or ‘P.L.L.C.’ (Tex. Bus. Orgs. Code Ann. § 5.059(a)), with compliance to additional state and federal naming statutes and rules. The name shouldn’t imply lottery-related activities (Tex. Bus. Orgs. Code Ann. § 5.061), falsely suggest affiliation with veterans’ organizations unless approved (Tex. Bus. Orgs. Code Ann. § 5.062), or indicate involvement in legally unauthorized businesses. It must also be distinguishable from existing entities or reserved names (Tex. Bus. Orgs. Code Ann. § 5.053 and 1 Tex. Admin. Code § 79.31(c)). 

Preliminary name checks are available through the Secretary of State (SOS) and the Texas Comptroller of Public Accounts websites, but final confirmation of name availability is given upon filing (1 Tex. Admin. Code § 79.45). 

Reservation Options

In Texas, anyone can reserve a business name for up to 120 days and renew this reservation for successive 120-day periods, as outlined in the Texas Business Organizations Code. This reservation can be conveniently made or renewed online using the SOS online filing system (SOSDirect), or through alternative methods like mail, in-person, fax, or the SOS online document upload system (SOSUpload). 

Applicants have the option to use a self-drafted application that complies with the Business Organizations Code or the official form provided by the Secretary of State (SOS). The current filing fee for this application is $40, but it’s advisable to confirm the latest fees on the SOS website.

3. Initial Acts of Members or Managers

Consider whether members or managers can pass initial resolutions authorizing organizational acts such as:

• electing officers (LLCs can have officers similar to corporations) (Tex. Bus. Orgs. Code Ann. § 3.103);
• adopting the company agreement;
• issuing membership interests to the initial members;
• applying for foreign qualification in other states;
• adopting the fiscal year (LLCs usually operate on calendar years); and
• opening bank accounts and authorizing signatories.

4. Set Up Your Accounting Books

You must set up your accounting method primarily to determine the amount of LLC’s liabilities or the value of the company’s assets. (Sec. 101.206)

The company’s assets and liabilities, as determined by the accounting books, determine the present financial condition of the company, tax compliance, future economic outlook, and fair valuation.

5. Filing Requirements

Organizers looking to file a certificate of formation in Texas have multiple options: online filing through the SOS online filing system (SOSDirect), or by mail, in person, fax, or the SOS online document upload system (SOSUpload). 

The SOSUpload system requires an SOSDirect account and allows for the uploading of entity documents in PDF format. Filers can choose to draft their own certificate that complies with the Texas Business Organizations Code or use the standard form provided by the Secretary of State (SOS). 

The current fee for filing the certificate is $300, but it’s recommended to verify the latest fees on the SOS website. Additionally, the date the SOS receives the certificate is typically considered the filing date, provided the certificate fulfills the code’s requirements and all fees are paid. 

For detailed information on the process of filing documents with the SOS, including available payment methods, expedited service options, processing times, and contact details, resources such as the ‘Practice Note, Filing Documents with the Secretary of State (TX)’ are invaluable.

6. Annual Reporting

The BOC does not require a Texas or foreign LLC to submit an annual report to the SOS. However, they do have specific reporting obligations under the state franchise tax. 

As part of these obligations, an LLC must submit a Public Information Report (PIR) to the Comptroller, which includes detailed information such as the names and ownership percentages of entities in which the LLC holds significant interest, the names of entities with substantial interest in the LLC, and the names, titles, and addresses of key personnel like officers, managers, and members. 

Additionally, the report must include the name and address of the LLC’s agent for service of process, as well as the principal office and business address. The Texas Tax Code (§ 171.203) mandates that a copy of the PIR be sent to any officer or governing person listed in the report who is not currently employed by the LLC. For more information on the Public Information and Owner Information Reports, resources provided by the Comptroller’s office can be consulted.

Organizational Matters

LLC Operating Agreements meticulously outline organizational details, including the LLC’s legally compliant name, members’ contact information, and the formation date.

Texas LLC Operating Agreements list all LLC owners (“Members”), their contribution amounts, and ownership interest percentages.

They also define the fundamental operational guidelines of your LLC, encompassing aspects such as voting procedures, buy-out arrangements, and managerial framework, crucial for effective business governance.

It specifies the registered agent’s details and the principal business location. It addresses the need for foreign qualifications and adherence to publication requirements for LLCs operating across state lines.

The agreement defines the LLC’s operational term, either perpetual or fixed, and clearly states the business purpose, which can range from specific objectives to broader commercial activities. It also ensures compliance with professional licensing for service-based LLCs.

It addresses the requirement of local and state business licenses based on the LLC’s type of business and geographical location.

The LLC’s Management

The Operating Agreement determines the type of the LLC’s management, choosing between member management, one or more individual managers, or a board.

It also decides if officers will be part of the structure, detailing their roles, powers, and how they’re appointed or removed.

Member-Managed LLCs

In member-managed LLCs, the agreement specifies which members manage the LLC, outlines their powers, and sets standards of conduct. It also addresses compensation for members providing services to the LLC.

Manager-Managed LLCs

This section identifies the initial manager(s) and considers multiple managers, including their appointment, removal, and decision-making powers. It also discusses the significant decisions requiring member approval and delineates the managers’ roles and compensation.

Manager Meetings and Compensation

The agreement outlines the protocols for manager meetings, including scheduling, notifications, quorum requirements, and written consent needed for such meetings. The manager’s roles are detailed in this section and such person may be entitled to a specific compensation.

Indemnification of Managers

Provisions for indemnifying managers to the extent allowed by law are included, protecting them from liabilities incurred in their managerial duties.

Member Considerations

Admission

In an LLC, key considerations for members include the admission process, where new members might require existing members’ vote or managers’ consent, especially in a manager-managed LLC. The Operating Agreement may allow managers to update it unilaterally for new members. 

Liability

Regarding liability, members typically aren’t liable beyond their capital contributions, and LLC agreements often indemnify members against claims related to their membership, subject to certain exceptions. 

Transaction Engagements

Additionally, the agreement should specify if members can engage in transactions with the LLC, such as making loans to it. These provisions ensure clarity in members’ roles and protections within the LLC.

Voting Rights

Members’ voting rights should be clearly defined in the Operating Agreement. This includes specifying the matters subject to member votes, such as significant transactions, and the required majority for different decisions, ranging from simple majorities to unanimous consent for critical actions like dissolution or major asset sales.

Dissociation

An operating agreement outlines the asset distribution or how a member’s ownership interest will be handled if he dissociates from the LLC. It could be a voluntary sale or an allowing existing members to purchase that offered portion before it is sold or transferred. (“Right of First Refusal”)

Procedures for Meetings

The agreement should also outline procedures for member meetings, including guidelines for conducting annual and special meetings, notification requirements, quorum criteria, and options for written consent and proxy voting. These details ensure orderly and efficient decision-making within the LLC.

Initial Capital Contributions

The Operating Agreement of an LLC should clearly define the form and amount of the initial capital contribution of every member, including their due dates – either at formation, on a set schedule, or upon specific events. 

This legal document must also address the potential need for additional capital contributions (capital calls), individual contribution responsibilities, and alternatives for raising extra funds.

Additionally, the agreement should outline the repercussions for members who fail to meet their contribution requirements and typically specify that members are not entitled to interest on these contributions. This clarity ensures all members understand their financial commitments and the consequences of non-compliance.

Allocation of Profits and Losses

An LLC operating agreement (Texas) is an internal document that documents ownership percentages and based on such percentages, profit distribution is based.

In an LLC, the allocation and distribution of resources hinge on whether certain members or classes have priority in distributions. Typically, net profits and losses are divided based on each member’s ownership percentage, but more complex deals might use tiered or target capital account allocations. 

For manager-managed LLCs, the decision to distribute company funds depends on whether it’s at the managers’ discretion or set for specific times, like on certain dates or events. Distributions, which can include cash, securities, or other LLC property, usually follow the same pattern as profit and loss allocations, often tied to ownership percentage or structured through a waterfall provision.

Tax distributions may also be included to cover members’ tax obligations due to their LLC involvement. However, there are restrictions to ensure distributions don’t impede the LLC’s ability to pay its liabilities and operating expenses. Lastly, it’s essential to have the allocations and distributions section reviewed by tax counsel or an advisor to prevent any unintended tax implications for the LLC and its members.

Tax Provisions

The Operating Agreement should include tax return preparation and filing provisions, define the fiscal year, and appoint a partnership representative for handling tax matters.

This representative’s responsibilities include making tax elections and managing audits, with their powers potentially limited by member consent requirements.

The agreement must also address the need for an Employer Identification Number (EIN) for banking, tax reporting, and employee hiring purposes.

Lastly, having these provisions reviewed by a tax professional is crucial to ensure effectiveness and compliance with the internal revenue code.

Resolving Deadlocks

A deadlock exists if the owners of a company or parties to an agreement have an irreconcilable conflict. The following is an example of a deadlock resolution clause:

(a) If at [two/[NUMBER]] successive meetings of the Board, the Managers are unable to reach a decision by the required vote regarding a Fundamental Issue submitted for consideration by the Board at such meetings (a "Deadlock"), the Board shall refer the matter subject to the Deadlock to the Members, who shall attempt to resolve such matter within [20/[NUMBER]] [Business Days/days] after referral to them of the Deadlocked issue (or, if mutually agreed by the Members, a longer period of time). Any resolution unanimously agreed to by the Members [in writing] shall be final and binding on the Company and the Members.

(b)During the continuation of any Deadlock, the Company shall continue to operate in a manner consistent with its prior practices and this Agreement until such time as such Deadlock is resolved. If the Deadlock involves the approval of the Company's annual business plan or budget, the Company shall operate its business in accordance with the business plan or budget then in effect until such Deadlock is resolved[; provided, that all monetary line items set forth therein shall be increased by [5/[NUMBER]%]].

Capital Accounts

The LLC agreement’s provisions for capital accounts are crucial for defining members’ financial involvement. Key aspects include establishing and maintaining these accounts, and whether members are responsible for restoring negative balances.

Avoiding such obligations is essential to maintain the separation between the LLC and its members, thus protecting them from unlimited liability. Additionally, the agreement should clarify if a member’s capital account transfers to a transferee upon partial or full transfer of their LLC interest. Decisions regarding withdrawals from capital accounts, whether permissible or required, also form an essential part of the agreement.

To ensure these provisions comply with tax laws and do not result in unintended tax consequences, a review by tax counsel or an advisor is highly recommended.

You may use any free operating agreement template online or generator to save time and money. Getting the services of Texas-based attorneys with reasonable attorneys fees is a good idea to help protect the LLC and its members from potential lawsuits.

Finance

Indicate in what bank or financial institution will the funds of the LLC be deposited. In what name, in such account or accounts with such financial institutions as may be approved by the Member from time to time. Withdrawals of funds from Company accounts shall be made on such signature or signatures as the Member may approve from time to time.

How will the LLC be treated for US federal income tax purposes?

When forming an LLC, it’s crucial to understand how the Internal Revenue Service, a government agency, classifies your business for tax purposes.

This encompasses several key considerations, including the default tax classifications of an LLC based on its number of members—treated as a disregarded entity if it’s a single-member LLC, or as a partnership if it has multiple members. It also explores the option for an LLC to elect a different tax status, such as being taxed as a corporation (either a C corporation or an S corporation) by filing specific forms with the IRS. This treatment affects how profits and losses are reported and taxed, the filing requirements, and the potential tax benefits and obligations associated with each classification.

Understanding these tax implications is essential for LLC owners to ensure compliance with federal tax laws, optimize tax outcomes, and make informed decisions regarding the financial and operational aspects of their business.

How will the LLC deal with dissolution?

To dissolve an LLC, it typically involves a vote or agreement among the LLC members as outlined in the agreement. It further includes the filing of necessary paperwork with the Secretary of State of Texas, such as the Certificate of Termination, and notifying the IRS and other relevant tax authorities of the business’s end.

Subsequently, the winding up of the LLC’s affairs follows which involves settling of debts and obligations, distributing any remaining assets to the members according to their ownership interests or the stipulations of the operating agreement, and ensuring all final tax returns are filed.

LLC Operating Agreement Generator

For those ready to take the next step in crafting their LLC Operating Agreement, a free LLC Operating Agreement generator can be an invaluable resource. It simplifies the process, ensuring that you cover all essential aspects in compliance with Texas law.

Click here to access the free generator tool and create your customized LLC Operating Agreement or an LLC operating agreement template.

Free Custom Operating Agreement Generator

Texas LLC Operating Agreement FAQs

• Is an operating agreement required for all LLC formations in Texas?
  No, an operating agreement is not legally required for all LLC formations in Texas. According to the Texas Business Organizations Code, specifically Section 101.052, while an LLC may adopt an operating agreement, it is not mandatory for its formation. However, having an LLC operating agreement to govern the company's operations is highly advisable.
• Can I create an operating agreement after forming my Texas LLC?
  Yes, in Texas, you can create your own operating agreement independently; legal counsel isn't mandatory for its preparation. Using an LLC operating agreement template simplifies the procedure, guaranteeing the inclusion of essential elements to fulfill legal requirements. While Texas doesn't mandate an operating agreement for LLC formation, there's no prescribed form to submit or formal filing requirement.
• Are there any specific requirements for the contents of an LLC operating agreement in Texas?

  As per §101.054, the following may not be waived or modified in the company agreement of an LLC:

  1. It is a legal requirement that an LLC must have at least one member; §101.101
  2. Those that have managers are not required to have any members during a reasonable period between the date the company is formed and the date the first member is admitted to the company; §101.101
  3. Distribution may not be made if, immediately after the distribution, the company's total liabilities exceed the fair value of the company's total assets. But these liabilities do not include (a) those related to membership interest; or (b) those specific properties that serve as the recourse for creditors; §101.206
  4. A Texas LLC shall keep a list of each member of a group of membership interests in the company; a copy of the company's federal, state, and local tax information or income tax returns for each of the six preceding tax years; a copy of the company's certificate of formation; a copy of the company agreement including any amendments - these shall be kept in the principal office of the LLC in the US. §101.501
  5. A member may examine and copy records at 3.151 and 101.501, such as books, records of accounts, minutes of the proceedings, member records, tax information, income tax returns, certificate of formation, and other information regarding the company's business, affairs, and financial condition. §101.502
• Can an LLC operating agreement be amended multiple times in Texas?
  Yes. The company agreement of a limited liability company may be amended only if each company member consents to the amendment. (§101.053)
• What happens if my Texas LLC does not have an operating agreement?
  Without a Texas operating agreement, Chapter 101 of the Texas Business Organizations Code ("Limited Liability Companies") shall govern how your LLC operates.
• Can an LLC operating agreement outline the roles and responsibilities of members and managers in Texas?
  Yes. §101.052 of the Texas LLC Law provides that the company agreement governs the relations among members, managing member(s), and officers and the company's internal affairs. By default, subchapter C of the Texas Organizations Code shall govern.
• Does Texas require an LLC operating agreement to be notarized?
  A Texas LLC operating agreement does not need to be notarized.
• Can an LLC operating agreement address dispute resolution among members in Texas?
  Yes. While the BOC does not explicitly state "dispute resolution" as a term, it grants LLCs the flexibility to include provisions on the conduct of business and the rights and duties of members, managers, and officers. Specifically, Section 101.052 allows for the operating agreement to contain any provisions for regulating the LLC governance, as long as they are not inconsistent with the law.
• Can I use a template to create my Texas LLC operating agreement?
  Yes. Texas law does not explicitly require the use of a specific format or prohibit the use of templates for LLC operating agreements. As long as the agreement covers all necessary provisions and complies with Texas LLC statutes, it is legally valid.
• Can an LLC operating agreement address the allocation of profits and losses among members in Texas?
  Yes. The profits and losses of a limited liability company shall be allocated to each member on the basis of the agreed value of the contributions made by each member, as stated in the company's records required under the law, unless otherwise provided under the LLC operating agreement--Texas.
• How does an LLC operating agreement protect members' personal assets in Texas?
  The fundamental principle behind an LLC is that it gives its members protection from personal liability for the debts and obligations of the LLC. In the event of a lawsuit against the LLC or if the LLC defaults on its debts, creditors cannot pursue the personal assets of the members (such as homes, cars, or personal savings) to satisfy the business debts. Instead, they can only target the assets of the LLC. (Sec. 101.114)
• Can an operating agreement address the procedures for admitting new members to the LLC in Texas?

  Yes. LLC members may adopt a company agreement to regular the company's in-house operations, including the admission of new members. Specifically, Section 101.103 of the TBOC addresses the admission of members. It states that after the filing of the certificate of formation, the LLC may admit new members on:

  • The day the company started; or
  • On a date noted in the company records; or
  • On a date mentioned in a special agreement for new members, whichever comes last.
• Are there any specific clauses required in a Texas LLC operating agreement for multi-member LLCs?

  For tax purposes, a multi-member LLC is treated as a partnership. Hence, the following clauses may be added:

  "Income Tax Status. It is the intent of the Company and the Members that the Company shall be treated as a partnership for federal, state, and local income tax purposes. No Member shall make an election for the Company to be classified as other than a partnership pursuant to Treasury Regulations Section 301.7701-3."

  If a partner is an entity, there must be a Tax Matters Representative. The following clause may be added:

  Section 11.04 Tax Matters Representative.

  (a)Appointment. The Members hereby appoint the Manager as "partnership representative" as provided in Code Section 6223(a) (the "Tax Matters Representative"). The Tax Matters Representative can be removed at any time by a vote of Members holding [a majority/[NUMBER]%] of the Membership Interests, and shall resign if it is no longer a Member. In the event of the resignation or removal of the Tax Matters Representative, Members holding [a majority/[NUMBER]%] of the Membership Interests shall select a replacement Tax Matters Representative.

  (b)Tax Examinations and Audits. [The Tax Matters Representative is authorized and required to represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. The Tax Matters Representative shall have sole authority to act on behalf of the Company in any such examinations and any resulting administrative or judicial proceedings, and shall have sole discretion to determine whether the Company (either on its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any Taxing Authority.

• Can an operating agreement specify voting rights and decision-making processes for the LLC in Texas?
  Yes. A limited liability company's (LLC) operating agreement can create various classes or groups of members or membership interests, each with its own specific rights, powers, duties, and voting rights. It also allows for the establishment of additional member classes or groups in the future, with their rights, powers, and duties clearly defined, including how they vote. Essentially, this provision offers flexibility in structuring the LLC's governance and voting system to accommodate different levels of involvement and investment among its members. (Sec. 101.104)
• Can an LLC operating agreement in Texas include non-compete clauses?

  Yes, an LLC operating agreement in Texas can include non-compete clauses. The legality and enforceability of these clauses are governed by the Texas Business and Commerce Code, particularly Section 15.50, which applies to covenants not to compete (non-compete clauses). The following are the key considerations of non-compete clauses:

  1. Reasonableness;
  2. Legitimate business interest;
  3. Ancillary to an Otherwise Enforceable Agreement;
• How does an operating agreement help in maintaining limited liability protection for members of an LLC in Texas?

  The separate legal entity of the LLC. Section 101.114 of the TBOC states that members or managers of an LLC are not personally liable for its debts, obligations, or liabilities solely because of their status as members or managers.

  Not commingling of profits and loss distribution. The distribution of profits and losses of the LLC are not commingled with the members' personal assets. In other words, members' personal assets are protected from the liabilities of the LLC.

  LLC governs business affairs. The actions of the LLC are governed by agreed-upon rules that comply with the law, thus maintaining the legal separation between the LLC and its members. (Sec. 101.051)

• What is the role of the Commercial Licensing Bureau?

  In Texas, the regulation and oversight of businesses, including Limited Liability Companies (LLCs), primarily fall under the Secretary of State and the Texas Comptroller of Public Accounts, rather than a specific entity called the "Commercial Licensing Bureau." These state agencies play significant roles in the formation, regulation, and taxation of LLCs.

  1. Texas Secretary of State: This office is responsible for the formation and maintenance of business entities in Texas. LLCs are required to file their formation documents, such as the Certificate of Formation, with the Secretary of State, as stipulated by the Texas Business Organizations Code (TBOC). This office also handles amendments to the LLC's formation documents, dissolutions, and other critical filings.
  2. Texas Comptroller of Public Accounts: Once an LLC is formed, it must register with the Texas Comptroller of Public Accounts for tax purposes. The Comptroller's office is responsible for administering state taxes, including sales and use tax, franchise tax, and others that may apply to LLCs. This agency ensures that businesses comply with Texas tax laws and regulations.
  3. There is no specific "Commercial Licensing Bureau" in Texas responsible for LLCs. Instead, LLCs may need to obtain specific licenses and permits depending on their type of business and location.
• Who can serve as a Registered Agent for my Texas LLC?
  According to §5.201, a registered agent is one to whom any process, notice, or demand required by law may be served. The registered agent can be: (a) an individual who is a resident of Texas and has consented to be served as the agent; or (b) an entity other than the filing entity or foreign entity to be represented that is registered to do business in Texas and has consented to be served as the agent.
• Can a legal business entity act as a member of a Texas LLC?
  The Texas Business Organizations Code (TBOC) does not restrict membership in an LLC to individuals only; rather, it permits various types of entities, including corporations, partnerships, other LLCs, trusts, and other legal entities, to be members of an LLC. §3.004 provides that organizers can be any person having the capacity to contract.
• What is the filing fee for an LLC Operating Agreement in Texas?

  In Texas, an LLC Operating Agreement is not filed with the state. The Texas Business Organizations Code (TBOC) requires the filing of a Certificate of Formation to create an LLC, but the Operating Agreement itself is a company-held record. It outlines the operating rules for the LLC and is kept by the LLC members or managers. Therefore, there is no filing fee associated with an Operating Agreement because it does not need to be submitted to the Secretary of State of Texas or any other state agency.

  The relevant costs associated with forming an LLC in Texas are related to the filing of the Certificate of Formation, not the Operating Agreement. The filing fee for the Certificate of Formation for an LLC in Texas is $300.

• How does the Internal Revenue Service (IRS) classify an LLC in Texas for tax purposes?

  The Internal Revenue Service (IRS) classifies a Limited Liability Company (LLC) based on the number of members it has and whether it elects to be treated differently. This classification applies to LLCs in Texas and throughout the United States. The default federal tax classifications for LLCs are as follows:

  1. Single-Member LLCs - an LLC with only one member and does not pay taxes as a separate entity;
  2. Multi-Member LLCs - an LLC with more than one member is treated as a partnership for federal tax purposes.
• Do I need to file my Texas LLC Operating Agreement with the state?
  No, you do not need to file your Texas LLC Operating Agreement with the state. In Texas, the Operating Agreement is an company-held record that outlines the governance and operating procedures of the LLC. The TBOC does not require the Operating Agreement to be filed with the state. Instead, the Operating Agreement is kept by the LLC members or managers and is used to govern the internal operations of the LLC
• What form should a foreign limited liability company, or one established outside of Texas, use when applying to conduct business in Texas?
  A foreign LLC or one established outside Texas that wants to conduct business in Texas. The form to be used for the Application for Registration of a Foreign LLC is Form 304.
• Do I have to live in Texas to start an LLC?
  No, you don't have to live in Texas to start an LLC there. However, you need a registered agent with a permanent physical address in Texas. They'll accept legal notices during business hours on behalf of your LLC. This can be an individual Texan, a business registered in the state, or an LLC member who meets these criteria. Alternatively, you can hire a registered agent service if you live outside Texas.
• Are husband and wife considered one member of an LLC in Texas?

  In Texas, a husband and wife are generally considered as two separate members when they both participate in the ownership and operation of an LLC. However, for federal tax purposes, the IRS allows a special provision for certain qualified joint ventures, including LLCs owned solely by a husband and wife, to elect to be treated as a single-member LLC. This is often done to simplify tax reporting, allowing the LLC to be treated as a disregarded entity for tax purposes, with income and expenses reported on their personal tax returns.

  It's important to note that while they can be treated as a single entity for federal tax purposes, they are still legally two separate members in the eyes of the state and other legal considerations.

• How much does an LLC cost in Texas?

  In Texas, the cost to form an LLC includes the following:

  • Filing Fee: The fee to file the Certificate of Formation with the Texas Secretary of State is $300.
  • Registered Agent Fee: While you can act as your own registered agent, hiring a registered agent service typically costs between $50 and $300 per year.
  • Annual Franchise Tax: Texas LLCs are required to pay an annual franchise tax. The amount varies based on the LLC’s revenue, with a minimum fee of $0 for businesses with total revenue below $1.23 million (as of 2024). Businesses above this threshold may pay a larger amount based on their revenue bracket.

  Additional costs may include fees for business licenses and permits, which vary depending on the type of business and its location within the state.

• How to look up an existing LLC in Texas?
  Visit the Texas Secretary of State website. Navigate to the business search page and enter the name of the LLC you are looking for. You can search by business name, business ID, or the name of the registered agent. After entering your search criteria and submitting the form, a list of businesses matching your search will be displayed. Click on the name of the LLC to view more detailed information. The detailed view will provide information about the LLC, including its status, formation date, principal office address, registered agent, and other relevant details.