One of the first significant decisions made as a Texas small business owner is choosing the right type of entity for your business.
LLCs or limited liability companies enjoy increasing popularity in Texas. LLCs in Texas offer the protections of corporations with the flexibility of a partnership.
Also, LLCs are not subject to the in-depth filing requirements demanded of corporations.
For immediate assistance, please contact us online or call our firm at (512) 410-0343 today.
Why Hire a Lawyer to Form Your Texas LLC?
Do you need a lawyer to form an LLC? Although a business lawyer is not required, setting up an LLC without one may result in complex legal issues that may end up costing your LLC a significant expense.
There are many reasons why it’s beneficial to hire an experienced small business attorney in forming your LLC in Texas.
Setting up an LLC requires numerous steps. Additionally, as your LLC business progresses, legal issues may continue to arise.
Retaining a small business attorney’s services limits the possibility for your LLC to engage in litigation over avoidable conflicts.
Here are some of the things a Texas LLC formation attorney can do for you.
1. Set You Up for Success
An attorney works to ensure your LLC begins on the right foot. Through consultation during the LLC formation process, an experienced Texas business attorney reviews your risks, future challenges, and goals as your venture commences.
2. Correct Mistakes
A qualified business attorney works to correct any mistakes when creating an LLC. Starting a business is a stressful yet exciting event. As you market and establish your business, keeping tabs on potential legal issues may be furthest from your mind.
Through extensive discussions with your business attorney, you may review the details of your LLC Operating Agreement and quickly spot any gaps in liability that may exist.
Furthermore, addressing unclear positions, employee responsibilities, and other information avoids confusion down the road.
As your LLC gets off the ground and begins to succeed, the last thing any business owner needs is the threat of litigation to slow their momentum.
An experienced Texas business attorney remedies these possible points of conflict before they become an issue.
3. Avoid Legal Problems
Even if in agreement, LLC members may experience other legal problems as your business grows. Disagreements may arise when one member of the LLC fails to perform obligatory tasks.
Additionally, a Texas business attorney can assist with issues facing your business as it grows. For example, drafting company policy handbooks are essential to avoid sexual harassment, wrongful termination, or discrimination lawsuits.
Qualified business attorneys equip their clients with the tools to prevent liability under the multitude of federal and state laws.
4. Protect Your Interests
Initially, you may not understand the legal requirements of how to create an LLC.
For example, when forming an LLC in Texas, the LLC name must contain the words “limited liability company,” “limited company,” or the abbreviations “LLC,” “L.L.C.,” “LC,” or “L.C.”
Additionally, your LLC name must be distinguishable from other business entities on file with the Texas Secretary of State.
If your LLC has more than one member, you must obtain a federal Employer Identification Number (EIN) with the IRS. The EIN identifies you for federal tax purposes.
Retaining the services of an attorney ensures prompt handling of these critical tasks.
5. File Required Paperwork
Forming an LLC in Texas requires filing a Certificate of Formation for a Limited Liability Company.
This certificate must include the following information:
- The LLC’s name,
- The name and address of the registered agent for service of process,
- Whether the LLC is member-managed or manager-managed,
- The names of each member or manager,
- A general statement of purpose for the LLC,
- The name and address of the LLC organizer,
- The effective date of the certificate, and
- The signature of the organizer.
Texas permits the online filing of the Certificate of Formation for a Limited Liability Company for a fee of $300.
A Texas LLC does not require an operating agreement. However, creating an operating agreement is strongly advised. The operating agreement sets out the rights and obligations of members or managers of the LLC.
Additionally, it preserves your limited liability by showing that the LLC is indeed a separate business entity. Hiring an attorney to draft a concrete operating agreement reduces the opportunity for disagreements and conflict between the LLC members or managers.
Additionally, a well-crafted operating agreement includes essential provisions such as buy-out clauses and termination clauses.
Additionally, Texas LLC law requires filing an annual franchise tax report with the Texas Comptroller. Missing these filings can affect the operation of your LLC through the imposition of penalties. Extensive delays may result in the automatic dissolution of your LLC.
6. Tax Advice
Taxation of your LLC occurs at local, state, and federal levels. An attorney educates you on the most advantageous election for tax purposes.
Avoiding double taxes, delinquent taxes, and penalties should be a priority for your LLC. These unnecessary and avoidable expenses hurt the profitability of your company.
7. Protect Intellectual Property
Intellectual property includes product designs, inventions, trademarks, business services, trade secrets, client lists, and original works.
All intellectual property adds value to your business and gives your Texas LLC a competitive advantage. It is wise to consult with an attorney depending on the type of intellectual property connected to your LLC.
For example, federal law requires the filing of trademarks, copyrights, and patents to obtain certain protections.
Additionally, an experienced business attorney works to preserve your intellectual property rights, thereby providing vital protection for your business.
8. Prepare Company for Audits
There may be instances where your Texas LLC faces audits. Audits of your LLC can occur at any time.
During an audit, parties may investigate the financial records of your LLC. Additionally, audits may investigate company policies and procedures of the LLC. As your LLC undergoes the process of an audit, your business attorney guides you through the process and advises how best to protect your interests.
9. Contract Review
As your Texas LLC grows, you may consider hiring employees. Drafting employment contracts with clearly defined terms and conditions ensure your business is not subject to litigation down the road. Additionally, your LLC may require the use of vendors and other third parties.
Creating vendor contracts protects your interests as you conduct business with these third parties.
10. Litigation
Unfortunately, despite efforts, business disputes occur. When conflicts like contract disputes, discrimination, or internal member disputes occur, a qualified business attorney guides you through the litigation process while protecting your business interests.
How Much Does it Cost to Form an LLC in Texas?
The Texas Secretary of State charges a $300 filing fee, plus an additional state-mandated 2.7% convenience fee to file an LLC Certificate of Formation.
Ready to Form Your Texas LLC?
If you are considering forming a Texas LLC, the business formation attorneys at Massingill possess extensive experience providing superior legal services to small businesses throughout Texas.
Massingill works with you to anticipate problems before they happen, fill gaps in your liability, and craft customized contracts and other solutions for your LLC.
Contact or call (512) 410-0343 to reach the dedicated attorneys at Massingill today to discuss how to set up an LLC in Texas.
Where You Can Find Our Austin, TX Office
Joshua Massingill
Joshua Massingill is an attorney practicing in Austin, Texas. He serves on the Texas State Bar’s Law Practice Management Committee, the Leander Educational Excellence Foundation (LEEF) Board of Directors, and the Success-Werx Board of Advisors. He mentors young entrepreneurs in Leander ISD’s INCubatorEDU program and is active in his church.
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