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Texas LLC Formation Requirements, Forming an LLC in Texas


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Articles of Organization: During Texas LLC formation, articles of organization must be delivered to and filed with the Secretary of State. State law requires that certain information be included in your articles of organization during Texas LLC formation. This information must include:

·        The company name

·        A statement as to the type of entity formed

·        A statement as to the purpose for which the entity is formed

·        The duration of the LLC if this period will not be perpetual (for a set amount of time)

·        The street address of the registered office and the name and street address of the registered agent (If you do not have a registered agent, LegalZoom can arrange to be your legal agent - see below for additional details)

·        The name and address of each organizer

·        The signature of each organizer

·        A statement as to whether the company will be managed by a manager or managers and, if applicable, the name and address of each initial manager or in the alternative the name and address of each initial member

·        The signature of a manager, member, organizer, fiduciary or trustee and the capacity of the signer.

·        Any other relevant information

Filing: Your LLC is considered organized once an original and a duplicate copy of the articles of organization are delivered to the Secretary of State with the proper filing fee and the Secretary of State determines that they are in compliance with state requirements. The Secretary of State endorses both copies but retains the signed original and returns the duplicate copy to the LLC or its representative. The document is effective as of the day and time it is filed or if a date and time is indicated the document is effective as of delayed effective date and time.

Additionally, Texas LLC formation requires inclusion and/or consideration of the following:

Duration: Perpetual unless otherwise specified in the articles of organization or other governing documents.

Operating Agreement: Although not required, LLC members may adopt an operating agreement to regulate the affairs of the company, which may also be amended and repealed as allowed by the agreement or applicable law. The articles of organization may contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. The operating agreement may not conflict with the articles of organization or any other provisions of law.

Membership: A limited liability company must have one or more members. Requirements:

·        Minimum Number of Members: One or more

·        Eligibility Requirements: A member must be an individual

·        Procedure for Membership: An individual may become a member by, but is not required to:

o       Make a contribution to the company

o       Pay cash or transfer property to the LLC

o       Assume an obligation to make a contribution, pay cash or transfer property

Resignation of Membership: A member can resign from a LLC; however, certain prohibitions exist surrounding the ability of a member to resign from the company.

·        A member may not resign from a LLC except in accordance with the operating agreement or articles of organization

·        A member may not resign from a LLC before a minimum term set for membership set out in the operating agreement or articles of organization

·        A LLC may pursue certain remedies for any damages suffered by the LLC as a result of the resignation

Contribution: The contributions of a member to the limited liability company may be in cash, property, promissory notes, services previously rendered, or other obligation to contribute cash, property, or contracts for services to be rendered

 

Do I need two members?

Unlike a corporation which can have as few as one shareholder, most states require that an LLC consist of two or more members (owners). Recently, however, more states are allowing single-member LLCs. Please note, however, that the IRS may treat a single person LLC differently than an LLC with more than one member.

Are the members of an LLC responsible for LLC debts?

Ordinarily, only the LLC is responsible for the company's debts, thus shielding the members from individual liability. However, there are some exceptions where individual members may be held liable:

Guarantor Liability: Where an LLC member has personally guaranteed the obligations of the LLC, he or she will be liable. For example, where an LLC is relatively new and has no credit history, a prospective landlord about to lease office space to the LLC will most likely require a personal guarantee from the LLC members before executing such a lease.

Alter Ego Liability: Very similar to the judicial doctrine applied to corporations where a court may hold the individual shareholders liable where the business entity is merely the "Alter Ego" of its shareholders, a member of an LLC may also be held liable for the LLC's debts if the court imposes its "alter ego liability" doctrine.

Must I hold LLC meetings?

Although a corporation's failure to hold shareholder or director meetings may subject the corporation to alter ego liability, this is not the case for LLCs in many states. In California, for example.an LLC's failure to hold meetings of members or managers is not usually considered grounds for imposing the alter ego doctrine where the LLC's Articles of Organization or Operating Agreement do not expressly require such meetings.

Who votes in an LLC?

Ordinarily, voting interest directly corresponds to interest in profits, unless the articles of organization or operating agreement provide otherwise.

Can I sell Member Shares?

Transferability: In most jurisdictions, no one can become a member of an LLC (either by transfer of an existing membership or the issuance of a new one) without the consent of members having a majority in interest (excluding the person acquiring the membership interest) unless the articles of organization provide otherwise.

How long does an LLC endure?

Although many states now allow an LLC to have a perpetual existence, LLC's traditionally were required to specify the date on which the LLC's existence will terminate. In most cases, unless otherwise provided in the articles of organization or a written operating agreement, an LLC is dissolved at the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interests vote to continue the LLC).

Do I need an Operating Agreement?

To validly complete the formation of the LLC, members must enter into an Operating Agreement. This Operating Agreement may come into existence either before or after the filing of the Articles of Organization and may be either oral or in writing in many states. We suggest EVERYONE put it in writing.

What is a Registered Agent?

Almost ALL jurisdictions require that the corporation designate a registered agent for service of process.  However, in most cases, anyone who has a street address (NO PO BOXES) within the state of incorporation may act as a registered agent for the corporation.

MyCorporation.com can select a registered agent service for you if you are in need of such services.  Persons who require our registered agent services are usually those who are incorporating in one state ( for example) and operating a business in another state ( for example).

Why must my business designate a Registered Agent?

Any entity conducting business within virtually every state must register to do business in that state, designate and maintain a registered agent, and in some cases a registered office.

What is the purpose of a Registered Agent?

A Registered Agent acts as the representative for accepting Service of Process served upon the company within the jurisdiction of any state where the company conducts business. Service of Process is broadly construed to include any legal proceeding, legal notice, or official government communication presented to the company while it is within the jurisdiction of a state.

What happens if my company fails to register or designate and maintain a Registered Agent?

The failure, to register and designate a registered agent, may foreclose or hinder the company's ability to legally enter into contracts and gain access to the state courts. Moreover, it may subject the company to monetary, civil, and possibly criminal sanctions. Also, failure to maintain a registered agent may cause your company to fall out of "good standing" within the state. This will subject your license to do business within a state to forfeiture, with monetary penalties assessed to reinstate your company to a "good standing" again.

Slater Kennon & Jameson, LLP Click here if you have a general question. Click here if you want to  form a new entity and retain an attorney. Click here if you want to form an entity but don't know which type is best suited to your needs.

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