How to Form a Limited Liability Partnership in Texas

Here are the steps to form a limited liability partnership (LLP) in Texas. LLPs are governed by state law and must be registered with a state office. They are often formed by licensed professionals (like attorneys, accountants, or physicians) because they generally protect each individual partner from liability for the professional malpractice of all other partners. However, any group of two or more people can form an LLP in Texas.

1. Name Your LLP

The name of a Texas LLP must contain the phrase "Limited Liability Partnership" or an abbreviation of that phrase. Unlike most other states, the names of Texas LLPs are not required to be distinguishable from the names of other Texas business entities, nor can you pay a fee to reserve a name for an LLP.

2. File a Registration

You create a Texas LLP by filing a Registration with the Texas Secretary of State (SOS) and paying the required filing fee. To complete the Registration you'll need to provide:

• the official name of your new LLP
• the LLP's federal employer identification number (EIN) if already obtained
• the number of general partners at the time of registration
• the LLP's principal office address
• a statement of the partnership's business, and
• an effective date for the filing.

You can download a blank Registration of a Limited Liability Partnership form (Form 701) by going to the SOS website. You can also file online at the Secretary of State's SOSDirect website. You are not required to publish your Registration.

3. No Registered Agent

Unlike many other states, Texas LLPs are not required to have a registered agent. (Foreign (non-Texas) LLPs doing business in Texas are required to have registered agent.

4. Prepare a Partnership Agreement

You are not required to have a written LLP partnership agreement in Texas. However, a written partnership agreement is highly recommended. You don't need to file the agreement with the state. For further guidance, check Nolo's article Creating a Partnership Agreement.

5. Get an EIN

An LLP is a separate legal entity from its individual partners. Therefore, your LLP must obtain a federal Employer Identification Number (EIN) from the IRS. You need an EIN for an LLP even if it has no employees. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

6. Register With the Comptroller of Public Accounts

In some cases, for example if you will be selling goods and collecting sales tax, you'll need to register with the Texas Comptroller of Public Accounts (CPA). Texas also imposes an annual franchise tax on LLPs. Depending on the tax involved, you may be able to register online, by mail (using the correct form), or in person at a CPA field office.

7. Obtain Business Licenses

Depending on what kind of business you are running and where it is located, you may need to obtain local or state business licenses for your LLP. Among other possibilities, these might include licenses related to:

• your profession or occupation
• specific goods or services you'll sell or provide
• an assumed or fictitious name for your business, or
• health and safety matters.

8. File Annual Renewals

The State of Texas requires you to file annual renewals of the registration for your LLP and pay an annual fee. The renewal is due by the anniversary date of your LLP's registration. You can download a blank Renewal of Registration of a Limited Liability Partnership form (Form 703) by going to the SOS website. You can also file online at the Secretary of State's SOSDirect website. To complete the renewal you must provide the same information as on the original Registration.

9. Professional Services

If you're interested in forming an LLP to provide professional services, it's always advisable to first review the state law and regulatory board rules for your profession. In some cases, you may find restrictions on whether or how you can form an LLP. Texas's general partnership law has specific provisions regarding partnerships formed jointly by combinations of:

• doctors of medicine, doctors of osteopathy, and podiatrists; and
• physicians and physician assistants.

If you are a licensed professional in any of the latter areas and want to form an LLP, you should be sure to review Sections 152.055 and 152.0551 of Texas's partnership law.

10. Malpractice Insurance

Forming your business as an LLP will protect you personally from creditors seeking to collect unpaid debts owed solely by the LLP. Moreover, in most cases, if you are a licensed professional and your LLP is formed to provide professional services, you also are protected from:

• liability for the malpractice of other LLP partners, and
• people who are personally injured in connection with the LLP because of things having nothing to do with your own professional malpractice or torts (for example, if someone slips and falls in your LLP's offices).

However, for some professions in some states, LLP partners are required to have a minimum amount of malpractice insurance before they are eligible for protection from other partners' malpractice. In addition, some states require LLPs for some professions to adhere to additional rules—such as having partners keep up with professional registrations—in order for each partner to be eligible for protection from liability from other partners' malpractice. Therefore, it's always a good idea to double check your state's rules for your particular profession regarding minimum insurance requirements, registration renewals, and other issues that may affect your personal liability as a partner.

Meanwhile, you are personally responsible if:

• you personally guarantee repayment of a business loan
• you engage in professional malpractice (such as egregiously mishandling a client's case or completely botching a patient's treatment), or
• you intentionally or negligently commit a tort (such as assaulting someone).

Because professionals are not protected from their own malpractice, if you are a professional you should make sure you have professional liability insurance—and, if applicable, that your coverage meets any state minimum insurance requirements.

Additional Information

As an alternative to forming your business as an LLP, you may want to consider options such an LLC or S Corporation. In addition, if your business provides professional services, you may want to consider a PLLC or PC. For more information on business entity choices, including how an LLP differs from other business entities, see the Business Formation section of the Nolo website.