Forming an LLC in Texas: What Comes After the Filing?

Forming an LLC can feel like the big moment when a business becomes “official.”

You choose a name, file your Certificate of Formation, pay the filing fee, and receive confirmation from the State of Texas.

But legally forming the entity is only the beginning.

The Texas Secretary of State itself notes that its Certificate of Formation form is designed to meet minimum statutory filing requirements and is not a substitute for legal or tax advice.

For business owners, the next steps are about creating the structure behind the company.

1. Establish How the Business Will Operate

If you've formed an LLC, one of the next considerations is your company agreement, commonly called an operating agreement.

A company agreement can establish rules governing the relationship among the LLC's members and the company's internal affairs. Texas law gives company agreements an important role in governing LLCs.

Depending on the business, an agreement may address issues such as ownership, management authority, decision-making, and changes involving members.

For a multi-owner business, these questions can become particularly important.

Who has authority to enter into contracts?

How are major decisions made?

What happens when an owner wants to leave?

What happens if another owner wants to join?

Addressing those issues before they become problems can provide greater clarity for everyone involved.

2. Obtain an EIN When Appropriate

An Employer Identification Number, or EIN, is a federal tax identification number issued by the IRS.

The IRS advises businesses creating an LLC, corporation, or partnership to form the entity with the state before applying for an EIN. EINs are available directly from the IRS at no charge.

An EIN may also be necessary for other business activities, such as hiring employees, opening certain business bank accounts, or meeting tax requirements.

3. Keep Business and Personal Operations Organized

Creating an LLC doesn't mean business owners should stop thinking about the separation between the company and their personal affairs.

Establish business banking, accounting, recordkeeping, contracts, and operational processes appropriate for the company.

Your attorney, accountant, and other professional advisors can each play different roles in helping establish those systems.

4. Put Your Business Agreements in Writing

Once the company begins operating, contracts quickly become part of everyday business.

Depending on the company, those may include:

Customer agreements

Vendor agreements

Independent contractor agreements

Consulting agreements

NDAs

Master Service Agreements

Statements of Work

Licensing agreements

Partnership or referral agreements

Instead of waiting until a disagreement occurs, businesses can establish the terms of important relationships from the beginning.

5. Understand Ongoing Texas Requirements

Formation isn't the last interaction your company may have with the State of Texas.

Texas imposes franchise-tax requirements on taxable entities formed or doing business in the state. Current Comptroller guidance also requires applicable entities to continue filing a Public Information Report or Ownership Information Report even when their revenue is at or below the no-tax-due threshold.

Requirements can change, so business owners should work with their legal and tax professionals to understand the obligations applicable to their particular company.

Build Beyond the Filing

Creating the LLC establishes the entity.

Building the legal structure around that entity helps establish how the business will actually operate.

The Law Office of Ian M. Angkiangco assists Texas entrepreneurs and business owners with business formation, organizational documents, ownership agreements, contracts, corporate governance, and ongoing business counsel.

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