LLC Formations

Texas LLC Formations

Form a Texas LLC Today

A Texas limited liability company (LLC) is a business entity that contains characteristics of both a corporation and a partnership. The Texas LLC provides its owners with liability protection similar to that of a corporation, while retaining the beneficial tax characteristics of a partnership. The Texas LLC dispenses with many of the burdensome formalities of a corporation and permits a more flexible operational framework.

An LLC is owned by its members and can be governed by either the members (member-managed LLC) or managers (manager-managed LLC). A manager-managed LLC is very similar in structure to a corporation with a board of directors.

While a corporation is governed by its bylaws and a partnership is governed by the partnership agreement, the LLC is governed by a company agreement (also known as the operating agreement).

Form a Texas LLC

To form a Texas LLC, you must file a certificate of formation with the Texas Secretary of State. After the Texas Secretary of State accepts the certificate of formation, the managers (or members in a member-managed LLC) need to (1) call an organizational meeting and (2) approve and execute the operating agreement. Forming a Texas LLC can protect the LLC's owners from personal liability arising out of the business' debts and liabilities. If you have any questions or would like the assistance of our Dallas LLC attorney, feel free to contact us at your convenience.

Advantages of the Texas LLC

One of the advantages of an LLC over a corporation is protection against "outside liabilities." The liabilities of a member existing outside of the LLC (i.e. a member’s mortgage on their home or a member’s liability due to a car accident) are known as "outside liabilities," and the claims of creditors of the members are known as “outside creditors.” On the other hand, the liabilities of the LLC are known as "inside liabilities," and the claims of creditors against the LLC are known as "inside creditors."

As long as the LLC is distinct from its owners, is adequately capitalized and is not used to perpetuate a fraud, then, the LLC as well as a corporation will protect its owners from inside liabilities and inside creditors (This means that the member cannot be held personally responsible for the LLC’s debts and obligations and the member’s personal assets are shielded from the LLC liabilities).

The multi-member LLC also protects the LLC (and thus the other members of the LLC) from outside liabilities and outside creditors. An outside creditor with a judgment against one member of the LLC is only allowed to take whatever actual cash distributions are made by the LLC. The outside creditor cannot force a distribution or demand any portion of the assets of the LLC.

Our Texas LLC Formation Lawyer

Our business formation lawyer regularly works with clients and their accountants in connection with the preparation and filing of the certificate of formation and the preparation of the operating agreement and organizational minutes (or consent in lieu of organizational meeting). We can typically form a Texas LLC for a flat fee. Contact our Dallas business lawyer today to discuss.

Additional Information

Business Formation Overview
Texas Series LLCs
Texas Corporations