Texas LLC Formation FAQ - United States

Texas LLC Formation FAQ - United States Texas LLC Formation FAQ - United States GeneralWhy should I form my LLC with LawDepot? LawDepots Texas LLC Formation Package is: Quick- we will begin filing your LLC within one business day. Your LLC should be registered within two to five business days. Easy- with comprehensive customer support via email and phone. Affordable- just $99 plus state fees. Accurate- your information is reviewed for consistency and accuracy where possible. We review your submitted answers for accuracy of grammar, spelling, and completeness. We do not offer legal reviews or legal advice. If you require advice on whether you should and how to incorporate your business, please consult with a local attorney in your area. How does LawDepot protect privacy and provide leading web security? LawDepot maintains the security of your information at all times. We use the Secure Socket Layer (SSL) protocol with 128-bit encryption strength to transmit sensitive information. This is the same technology used in transmitting sensitive information by banks, governments, and online businesses such as Amazon.com and eBay. Once information is in our system, it is accessible to authorized LawDepot personnel only. We strictly enforce our privacy policies with our employees and any breach of this policy will result in termination and possible criminal prosecution. For more information please review: www.lawdepot.com/privacy.php. Does LawDepot review my submitted answers for accuracy? Yes, LawDepot does review submitted answers for accuracy of spelling, grammar, completeness and consistency. LawDepot does not check, nor offer reviews of legal completeness, accuracy or offer legal advice of any nature. If you require advice on whether you should and how to incorporate your business, please consult with a local attorney in your area. Can I make changes to my LLC filing once I have ordered? Once LawDepot reviews your order, it will be submitted for registration within 1 business day. If you need to change your order, please immediately contact LawDepot technical support by telephone, 866.608.1020 (toll-free North America). We will make best efforts to stop your order, but all orders should be considered final. How long will my registration take? As long as there are no problems with the name(s) you have chosen, your registration should be completed in 2-5 business days. LLCs What is a Limited Liability Company? A. A Limited Liability Company (LLC) is an unincorporated business entity whose members cannot be held liable for the debts or obligations of the company. An LLC can be thought of as a blend of the elements of a corporation and a partnership. LLCs are now recognized in all 50 states, although the rules governing them vary a bit from state to state. If you would like to review the Texas Statutes for Limited Liability Companies, you can follow this link. What are the advantages of an LLC? A. The following are generally considered to be some of the advantages of an LLC when compared to other business types. An LLC: Provides pass through taxation, meaning that the companys earnings are passed through to the members before they are taxed, as opposed to the taxation of a corporation, where the earnings of both the corporation and the shareholders are taxed. Generally requires less formalities and paperwork than a corporation. Is owned by its members, not by shareholders. What are the disadvantages of an LLC? A. The following are generally considered to be some of the disadvantages of LLCs when compared to other business types. An LLC: Cant sell shares or stock to raise capital. Cant reward employees or entice new ones with stock or shares. Will generally find it more difficult to transfer ownership than a corporation. Generally becomes increasingly difficult to manage as it grows larger. How does an LLC compare to a general partnership? A. LLCs and partnerships are generally treated similarly for tax purposes, unless the members of the LLC have opted to have the LLC taxed like a corporation. LLCs and Partnerships both feature pass-through taxation, where earnings are not taxed at the entity level, thereby avoiding the double-taxation of corporations. An LLC is different from a general partnership in that an LLC is recognized as a separate legal entity. LLC members are not held liable for the debts and obligations of a corporation beyond the amounts they have invested in the company.* In general, slightly more paperwork is required to form and run an LLC than is required with a partnership. Note: An individual member of an LLC can be held personally liable for the debts and obligations of the company beyond his or her investment if that member has personally guaranteed debts or obligations incurred by the LLC, or if the LLC is found to be the alter ego of the owner or owners. How does an LLC compare to a corporation? LLCs and Corporations are both considered separate legal entities, meaning that owners and members are not held personally liable for the debts and obligations of the company. However, corporations are taxed at both an entity level (the corporation itself is taxed on its earnings) and at a shareholder level (shareholders are taxed on the dividends they are paid). LLCs are not taxed at the entity level and therefore avoid this double taxation. For the most part, running an LLC requires less paperwork and formalities than running a corporation. For example, LLCs are not required to hold annual meetings or keep meeting minutes (although they are encouraged to do so.) It can be difficult to transfer membership interest within an LLC. Oftentimes members are not allowed to sell their membership interest without the majority vote (or sometimes unanimous consent) of the other members. In a corporation, on the other hand, stocks or shares can be purchased, sold, and transferred with relative ease, as there are usually fewer restrictions on who can sell stock and when. Corporations will often give stock as a reward to employees, or offer stock as an incentive when recruiting employees. LLCs do not have this option. Does Texas permit single-member LLCs? Yes, Texas permits single-member LLCs. However, you should know that while a single-member LLC may provide tax and business advantages, it does not necessarily provide the same level of asset protection and liability limitation as a multi-member LLC or a corporation. This is because creditors can argue, often successfully, that a single-member LLC is really just the alter ego of its owner, and that the owner should therefore be responsible for the debts and obligations incurred by the LLC. You can form a single member LLC through LawDepot, but we advise you to speak to an attorney if you have any questions regarding single-member LLCs, especially questions pertaining to asset protection and liability limitation. Contact Person Who is the contact person? The contact person is the person who authorizes registration of this LLC. The contact person may be contacted by LawDepot staff, Registry Agents, the Texas Department of State or the IRS if additional details are required regarding this filing. LLC Name What are the requirements for naming an LLC in Texas? In Texas, an LLC name: Must contain one of the following suffixes: Limited Liability Company, Limited Company, L.L.C. or LLC. Limited may be shortened to Ltd. and Company may be shortened to Co. May not contain language that states or implies that the company is organized for a purpose that is different than its actual purpose or a purpose that is illegal. May not contain language that states or implies that the company is connected with a state or federal government. Must be unique and distinguishable from the names of all other LLCs, corporations and partnerships filed with the Texas Secretary of State. Note: When you order an LLC Filing Package through LawDepot, we will ensure that the company name(s) you have selected is/are available for registration with the Texas Secretary of State. However, the Secretary of State does not take responsibility for name infringement that may result from your name selection. You are responsible for any name infringement that may result from your name selection. What elements should I include in my LLC name? Although there are no requirements for naming a Texas LLC beyond those listed above, there are marketing and trademark advantages in having a name that has a distinctive element and describes the business dealings of the LLC. For example, a name might have: A distinctive element, i.e. Ace. A term that describes the business dealings of the company, i.e. Distribution. Your choice of suffix, i.e. LLC. In the above example, the LLCs name would be Ace Distribution LLC. What differences must exist for a name to be unique? A name will not be considered unique if it different merely due to: The addition or deletion of punctuation marks or spaces, The insertion or removal of a year in the name, The substitution of a word for its abbreviation or an abbreviation for its word, The substitution of a word for its homonym (a word that sounds identical), The addition or deletion of an article (the, a, etc.), The addition or deletion of the phrase of Florida, A difference in suffix (Miracle Snacks LLC would not be considered different from Miracle Snacks Limited Liability Company), or Any other change that does not produce a phonetic difference between the names. What happens if the name I choose is already registered? If the name you choose is already registered, your name will be rejected. As such, we ask you to provide three LLC names. In the event that the first name is registered, we will search for the second name provided. If the second name is registered, we will search for the third. If none of the names you selected are available for registration, we will alert you by email and ask for an alternate name or names. When I register my LLC, will the LLC name be trademarked? No, your LLC name will not be trademarked when it is registered. Over time, the name of a company may become a trademark due to common use. However, if you want to ensure that the name of your company becomes a trademark, you should file a trademark application with the United States Patent and Trademark Office (USPTO) at www.uspto.gov. Is my LLC name registered throughout the world or just Texas? Your LLC name is registered in the State of Texas. TermsWhat is the principal business address? An LLCs principle business address is usually the place of business where the company is located and which is ordinarily available to the public. It doesnt have to be an office of the LLC, but a copy of the records of the LLC must be available there. The address must be a legitimate street address and not a postal box. What is a Manager? A manager is a person who is appointed or elected to manage an LLC. Unless otherwise noted in the Certificate of Formation or Company Agreement/Operating Agreement, a manager may be, but does not have to be, a member of the LLC. What is a Member? A member is any person who has been admitted to a limited liability company as a member and has an economic interest in the LLC. What is Membership Interest? Membership interest refers to a members share of the profits and losses of the LLC, as well as the right to receive distributions of the LLCs assets, voting rights, management rights, or any other rights given to members in the Certificate of Formation or Company Agreement/Operating Agreement. What are the Certificate of Formation? The Certificate of Formation refers to the initial document that needs to be filed with the state of Texas in order to form an LLC. What is the Operating Agreement/Company Agreement? An LLC Operating Agreement/Company Agreement refers to written or oral provisions that are adopted for the management and regulation of the affairs of the LLC and that set forth the relationships of the members, managers, or managing members. LawDepot offers an automated LLC Operating Agreement form that can be used to quickly and easily draft a written Operating Agreement. What is the Registration Date? The registration date is the date that the Contact Person authorizes the filing of this LLC. The registration date is typically todays date, unless there is a specific reason for delaying the LLCs existence. What is an Assumed Name? An Assumed Name is a name that a company operates under that is other than its legal name. For example, if an LLCs legal name is Johnson and Meyers Distribution LLC but the company operates under the name JM Distribution, JM Distribution is its assumed name. Assumed names must be registered in accordance with Chapter 71, Business Commerce Code.