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How to Form a Single-Member LLC in Texas

Want to form a single-member LLC (SMLLC) in Texas? Here's what you need to know.

By , Contributing Author

These are the steps to form a single-member limited liability company (SMLLC) in Texas. Remember: For most formation purposes, a Texas SMLLC is considered the same as a multi-member limited liability company (LLC).

1. Name Your SMLLC

The name of a Texas SMLLC must contain the phrase "Limited Liability Company" or "Limited Company," or an abbreviation of one of those phrases such as "L.L.C.," "L.C.," or "Ltd. Co." The SMLLC's name must be distinguishable on the records of the Texas Secretary of State (SOS) from the names of other business entities already registered or reserved with the state.

Check to make sure the name you want is available by doing business name searches as available via the SOS website and via the Comptroller of Public Accounts website. For a fee of $40 you can reserve a name for 120 days by filing Form 501 (Application for Reservation or Renewal of Reservation of an Entity Name). You can also use the same form to renew your name reservation.

2. File a Certificate of Formation

You create a Texas SMLLC by filing a Certificate of Formation with the Secretary of State. To complete the articles you'll need to provide:

  • the official name of your new SMLLC
  • the name and address of the SMLLC's registered agent
  • an indication of whether the SMLLC will be member-managed or manager-managed
  • the name and address of each manager or managing member
  • the name and address of the SMLLC's organizer, and
  • a few other basic details.

You can download a blank certificate of formation form (Form 205) by going to the SOS website. You can also file online at the Secretary of State's SOSDirect website. The current filing fee is $300.

Every Texas SMLLC must have a registered agent. A registered agent is an individual or business entity that agrees to accept legal papers on behalf of the SMLLC. The registered agent can be an individual Texas resident or a domestic or foreign business entity authorized to do business in Texas. The SMLLC cannot act as its own registered agent. The registered agent must have a physical street address in Texas. You can find information on Texas commercial registered agents here.

All of the paperwork and procedural steps to start a single-member limited liability company in Texas can be done online using Nolo's Texas Online LLC Formation application.

3. Prepare an Operating Agreement

Texas does not require an SMLLC to have an operating agreement. However, even though an SMLLC has just one member, an operating agreement is highly recommended. An SMLLC operating agreement does not need to be filed with the state.

The operating agreement is usually made between the single member and the LLC itself. The agreement typically covers the member's rights, duties, and obligations, as well as the SMLLC's management structure. Having an agreement in place can help with liability protection by separating your business from you personally. It also can be useful with lenders and other businesses when entering into business transactions.

In most states, if you don't state that your SMLLC will be manager-managed when you first register with the state, then your SMLLC will be treated by default as member-managed. The distinction between member-managed and manager-managed can be important so be sure to consider both options before you decide which type of management structure you want for your SMLLC.

For more information and help creating an SMLLC operating agreement, see Nolo's Guide to Single-Member LLCs, by David M. Steingold (Nolo), or use Nolo's Online LLC.

4. Do You Need an EIN?

An SMLLC that keeps its default tax status of disregarded entity (same as a sole proprietorship) and does not have employees is not required to obtain a federal Employer Identification Number (EIN). Instead, owners of these SMLLCs can report their business profits and losses on their personal tax returns using their own Social Security number or tax identification number.

If your SMLLC has employees or if you choose to have your SMLLC taxed as a corporation rather than as a disregarded entity, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN for your SMLLC, there are often business reasons for doing so. Banks may require an EIN to open an account in the business's name and other companies you do business with may require an EIN to process payments. In many cases it makes sense to obtain an EIN for your SMLLC even if it is not required for federal tax purposes.

You can get an EIN by completing an online application on the IRS website. There is no filing fee.

5. 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 most SMLLCs.) 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. For more information on state LLC tax registration, see Nolo's article LLC Annual Report and Tax Filing Requirements: A 50-State Guide.

6. Obtain Business Licenses

Depending on what kind of business you're running and where it's located, you may need to obtain local or state business licenses for your SMLLC. 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.

7. No Annual Reports

Unlike most states, Texas does not require SMLLCs to file annual reports with the Secretary of State. However, SMLLCs must file annual franchise tax reports. The details for computing the tax can be complicated. Check the CPA website for more information.

For more information on SMLLCs, see the Single-Member LLCs section of Nolo's website or Nolo's Guide to Single-Member LLCs, by David M. Steingold.

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