Every entrepreneur planning to create a limited liability company must think about protecting its members. In this review, we will introduce you to a perfect method—the Texas LLC operating agreement. The agreement will let you preserve your finances and the future LLC members’ private funds from any extra liability.
In Texas, a limited liability company is not mandated to have an LLC operating agreement form to carry out business. However, this legal tool has several undeniable advantages, so owners of both small and large enterprises should consider creating it. The business owner needs to know how to draw up an accurate operating agreement to be valid and genuinely effective. This article is devoted to this task.
An operating agreement is a legal document that companies use to establish and regulate their domestic and external policy and other fundamental aspects. This paper is also a guarantee of the protection of LLC members’ personal finances. As you probably know, all the owners have to make monetary contributions to get a share in the LLC. Of course, no one wants to lose their money because of the absence of the funding agreement. If the company does not have it, the courts usually decide in favor of the plaintiff.
This document also regulates matters related to court proceedings and lawsuits against the company (if such occur). With the agreement at hand, the members will get to keep their personal assets intact. At the same time, all financial responsibility will be borne solely by the company and not by the people working for it. Moreover, the operating agreement provides the members with additional tax benefits.
You can use online platforms to create an operating agreement. We strongly advise you to use our latest form-building software to compile and fill out the necessary form online. It will significantly save your time and make the process easier. However, you can always do it manually if you wish.
All the necessary information regarding the local LLC legal regulations is contained in the Texas Business Organizations Code (Title 3, Chapter 101). This chapter is devoted to the limited liability companies and includes the legal aspects of their creation and management.
According to the Code, a “limited liability company” is identified as a domestic entity, which effectively means that only such entities are subject to the local jurisdiction. For more information on the LLC management aspects, you can refer to Section 101.052 of the State code. For instance, it states that this document governs the relations among members and managers of the company, assignees of membership interests, the company itself, and other internal affairs of the company.
The Code also claims that the company’s operating agreement can grant specific rights to any person, including people who are not participants of the deal, to the extent provided by this document. Moreover, the operating agreement can be enforceable by or against the LLC regardless of whether the company has signed or otherwise expressly adopted the agreement.
Below are our step-by-step guidelines on how to register an LLC in Texas.
1. Give a Name to your Company
Before submitting your registration application to the Secretary of State, each candidate must make sure their potential brand name is available. You can check the state records for organizations with the same or similar names. Once you are sure that your name is unique, you can proceed to the next step.
2. Find a Registered Agent
You need to find a lawful company representative who will receive the court notices and other legal claims on your behalf. Requirements for assigning the Registered Agent are as follows:
3. Choose your LLC Type
When filling out the application form, figure out the type of your limited liability company. It can be either created within the state (domestic) or outside of it (foreign). Each type requires separate sets of forms to fill out. Also, keep in mind that different types of LLC require different registration fees.
4. Fill the Application
Fill the form that corresponds with the type of your limited liability company. For this purpose, you can download the document and either print it and write the paper by hand or do it using a computer. Note that all the paper applications must be in duplicate.
For a domestic LLC, you need to complete a certificate of formation of your company. On the other hand, for a foreign LLC, you need an application for registration. There is an additional requirement for the foreign LLCs: they must include a Certificate of Existence or another similar document. Remember that you have to create an account to access the online filing system.
5. Pay the Registration Fee
Each domestic LLC must pay a fee amounting to $300. For foreign companies, the fee is higher at $750. If you are filling the application online, there is an option to pay the fee before submitting the form. If you send this paper by mail, enclose your remittance and send everything to the address indicated in the form.
Please note that without paying the fee, you will not be able to apply.
6. Operating Agreement
You need to find out what kind of Agreement corresponds to your business structure the most. In particular, it depends on the number of owners who run the company or have shares.
There are two types of LLC operating agreements: single-member and multi-member. The former is explicitly designed for use by a sole owner, while the latter can be used by companies with one or more contributing managing members.
7. Receive an Employer Identification Number
The EIN is a necessary item for tax reporting purposes. Besides, if your LLC plans to open bank accounts or hire employees, you also need an identification number. You can get it from the Internal Revenue Service; all you need to do is to fill a free application on the website or by hand.