What You Need to Know about Texas LLCs

Before starting a Limited Liability Company (LLC), many entrepreneurs and business owners read LLC frequently asked questions in Houston, TX to understand what an LLC is and how it works. Forming and operating an LLC can be a complex process, which is why having a skilled Houston business law attorney on your side can make all the difference. 

At GK Law PLLC, we regularly help all types of business owners decide whether forming an LLC is right for them, as well as help them navigate every step of the formation process. If you are considering forming an LLC or are unsure of what business entity would best suit your needs, our business law firm can help you navigate the legal landscape and provide tailored solutions to meet your business needs. 

Contact us today and schedule an initial consultation so you can focus on growing your business while we take care of the legal details.  

What is an LLC?

A Limited Liability Company (LLC) is a type of business entity that combines the liability protection of a corporation with the tax benefits of a partnership. An LLC can have one or more owners, referred to as "members." It can be managed by the members or a designated manager. The management structure of an LLC can be customized to fit the needs of the business.

LLCs are a popular choice for small and medium-sized businesses because they offer flexibility in management structure and ownership, as well as limited personal liability for the owners. This means that the owner of the LLC, if properly operated, should not be personally liable for the debts and obligations of the business. Our knowledgeable Houston LLC attorney can help you decide whether forming an LLC is right for your particular situation.

What are the Benefits of Forming an LLC?

Forming a Limited Liability Company can provide your business with many benefits, most notably limited liability for debts and judgments while allowing for flexibility in how you operate the business. When established properly, it can protect you and your business from disastrous financial consequences. Here are some of the main advantages:

• Limited Liability Protection. It provides personal liability protection to the owners, also known as members. This means that the individual assets of LLC members cannot be used to satisfy the LLC’s debts and obligations. A member’s risk of loss is limited to the amount that the member invested in the business. If the company is sued or goes bankrupt, the owner's personal assets, such as their homes and cars, are generally protected from seizure.
• Pass-Through Taxation. A limited liability company is a “pass-through” tax entity. This means that the LLC’s gains, losses, income, deductions, credits, and other tax items flow through to the member or members.
• Flexibility in Taxation. LLCs can also choose how they want to be taxed. LLC owners can choose whether to use pass-through taxation or pay taxes as a corporation, depending on the business circumstances. This is easily accomplished by filing a document called an election with the IRS. 
• Ease of Formation and Maintenance. An LLC is the simplest business entity to form and operate. LLCs have fewer formalities to follow and are not required to hold regular shareholder meetings or keep detailed records.
• Flexible Management Structure. LLCs offer flexibility in the management structure. There are no minimum or maximum limits on the number of owners or members that an LLC can have. Members can manage an LLC, which allows all owners to share in the business’s day-to-day decision-making.
• Credibility. Forming an LLC can give your business credibility and legitimacy, which can be important when dealing with customers, suppliers, and other stakeholders. It reassures customers that yours is a real business.

How Do I Form an LLC in Texas?

While there are several options for business structures, the limited liability company (LLC) is a popular choice for new businesses. The steps to start an LLC depend on state law. By following these steps, you can ensure that your LLC is legally compliant and ready to operate in Texas. Our trusted Houston LLC attorney can walk you through the process. Here are the steps you need to take to form an LLC in Texas:

1. Choose a Business Name. The name must be unique and not already in use by another business in Texas. Find an available business name that conforms to your state's rules regarding LLC names. Usually, owners include the words “Limited Company” or “LLC” at the end of the name.
2. File a Certificate of Formation. File a Certificate of Formation with the Texas Secretary of State's office. You’ll need to provide basic information like your company’s physical location and mailing address as well as details on the governing individuals (members) within the LLC. 
3. Operating Agreement. An LLC operating agreement is an essential internal document that outlines how your LLC will be governed. This document outlines the ownership and management structure of your LLC. Without an operating agreement, Texas state laws could apply in the event of a dispute or conflict within the organization.
4. Obtain an EIN. An EIN (Employer Identification Number) or Tax ID number is a number assigned to business entities by the IRS (Internal Revenue Service). This unique identification number is used for tax purposes and is required if you have employees or plan to open a bank account for your LLC.
5. Publish a Notice. Some states require that LLC members publish a notice to the public in a local newspaper of their intent to form an LLC. In Texas, you are required to publish a notice of formation in a local newspaper within 120 days of filing your Certificate of Formation. This notice must include your LLC's name and address, the name and address of your registered agent, and a statement that your LLC has been formed.

Can an LLC have one member?

Yes, an LLC can have one member, also known as a single-member LLC (SMLLC). SMLLCs are allowed in all states. A single-member LLC operates in much the same way as a multi-member LLC, with the main difference being that there is only one owner.

Who are LLCs best for?

Organizing your business as a corporation or an LLC is most helpful in two situations:

• The business owners have large amounts of personal assets that they want to shield from any potential liability associated with the business.
• The business is engaged in a dangerous activity that makes it more likely to be sued or has the potential of racking up large amounts of debt.

What's the Difference Between a Corporation and an LLC?

The main difference between an LLC and a corporation is that an LLC is owned by one or more individuals, and a corporation is owned by its shareholders. Both LLCs and corporations provide limited liability protection to the owners. But LLCs are ordinarily taxed like sole proprietorships or partnerships. In addition, LLC owners do not work as employees of the LLC—they are self-employed business owners.

Call Our Experienced Houston LLC Attorney Now!

Forming an LLC in Texas can be a smart choice for entrepreneurs and small business owners looking to protect their personal assets, minimize taxes, and establish a formal business structure. It can be a rewarding and profitable venture, however, it requires careful planning and attention to detail. Navigating the legal requirements involved can be overwhelming and confusing, and mistakes can be costly.

At GK Law PLLC, our seasoned Houston business law attorneys can help you know the legal and financial requirements, and provide guidance on tax strategy, liability protection, and other important considerations. Aside from business law, our law firm also handles cases related to real estate law and condemnation law. 

Contact us today and schedule an initial consultation to learn more about our legal services and how we can help you start and maintain a successful LLC in Texas.