Benefits of an LLC in Texas

If you’re looking for a business structure that isn’t a headache to start or maintain, forming a Texas LLC is a great choice. Compared to other formal business structures, such as corporations, LLCs require far less paperwork, requiring you only to file the Certificate of Formation (also known as the Articles of Organization in other states). Additionally, while it’s not required in Texas, we recommend drafting an Operating Agreement as well.

To maintain an LLC in Texas, you need to file an annual report — it’s that easy! Not to mention, you avoid the complexities of operating a corporation, such as holding shareholder meetings, leaving you to focus on the day-to-day operations of your startup.

In the event that your Texas LLC is sued or accrues a debt, personal asset protection ensures that your personal assets aren’t vulnerable should either event happen. This is what is known as a corporate veil, which is essentially a legal barrier that separates your assets from your business. Unlike informal business structures, such as sole proprietorships where the business owner is financially responsible, with an LLC, your personal finances are distinct from your business finances.

Unlike C Corporations that are taxed twice, an LLC in Texas allows you to avoid double taxation. This means that an LLC’s profits are taxed on the member(s) personal tax returns, which means all profits are only taxed once at each member's income tax rate — also referred to as pass-through taxation. By bypassing double taxation, tax preparation and filing is streamlined and simplified.

How you choose to manage your Texas LLC is determined by whether you prefer a hands-on approach to business ownership. Fortunately, forming an LLC gives you plenty of flexibility to choose how your startup is managed.

There are two types of management for LLCs: member-managed and manager-managed. Business owners that prefer to be active in the daily operations of their LLC tend to choose a member-managed model while owners that would rather avoid the daily duties of operating the business to someone they trust typically opt for a manager-managed model.

Having a formal business structure, rather than a sole proprietorship or general partnership, increases your credibility with customers in a number of ways. First and foremost, the inclusion of “LLC” at the end of your business name indicates that your business is credible and informs a sense of permanence. Additionally, unlike sole proprietorships that are only registered at a city or county level, an LLC is registered with the state of Texas which is a major selling point for many customers looking for credible, trustworthy businesses.

While it may sound appealing to not register your business by opting to form a sole proprietorship, you sacrifice the benefits of support from your government. For LLCs in Texas, this includes support from the Texas Secretary of State (SOS). The Texas SOS website is full of business resources and services developed to support the wellbeing and growth of small businesses and startups.

From business registration assistance, to valuable guides and resources, as an established Texas LLC you will have access to all of the helpful information the Texas SOS has to offer.

Forming an LLC in Texas can also save you money during the registration process compared to other business structures such as Limited Partnerships. The fee to register a limited partnership in Texas is $200 for each partner (up to a maximum of $750). Limited partnerships in Texas must renew their registration annually. In contrast, to register an LLC in Texas, you can expect to pay a single filing fee of $300 to the Secretary of State.

You can start an LLC in Texas on your own by following our simple, step-by-step guide:

1. Name Your LLC in Texas
2. Choose a Registered Agent
3. File Texas LLC Formation Documents
4. Create a Texas LLC Operating Agreement
5. Get an EIN

You can also have a professional service form an LLC in Texas for you. Read our review of the best LLC formation services.