Setting Up a Single-Member Limited Liability Company in Texas

Protecting Your Personal Assets When You’re In Business for Yourself

When you’re running a business, one of the most important decisions you have to make involves your potential exposure to the liabilities of your enterprise. As a sole proprietor, you can put your personal assets and net worth in jeopardy should the business be successfully sued for any reason. You could set up a Subchapter S corporation, but there are a number of initial and annual filing requirements that can be cumbersome. In Texas, as the sole owner of a business, a good option can be a single-member limited liability company.

What Is a Limited Liability Company and What Are Its Benefits?

A limited liability company, or LLC, is a legal business structure that combines some of the benefits of a partnership or sole proprietorship with the advantages of a corporation. With a limited liability company, you won’t be subject to a corporate or business tax but will be subject to “pass-through” taxation, with income from the business reported on your personal tax return. However, unlike a partnership or a sole proprietorship, an LLC shields its owners from personal liability for the debts of the business. With a limited liability company, the most you can lose to creditors is the amount of your investment in the business.

How Do You Set Up a Single-Member Limited Liability Company?

A Texas single-member limited liability company (SMLLC) is relatively easy to establish:

• Choose a legal name for the business—It must include either the phrase “limited liability company,” the phrase “limited company,” or some abbreviation of one of those phrases. The name must not be confusingly similar to one that has already been reserved or registered.
• File a Certificate of Formation with the Secretary of State’s office—This is similar to the articles of incorporation required to set up a corporation. As part of this process, you must name a registered agent to accept legal papers on your behalf. The business itself cannot be the registered agent and cannot have a P.O. box.
• You may prepare an operating agreement, but it’s not required under Texas law, and it doesn’t get filed with the state. It’s used for internal purposes to identify rights and responsibilities within the LLC.
• If you elect for income to be taxed on your personal return, you don’t need a federal employer identification number (EIN) for the business. You can, however, choose to be taxed as a corporation, which will require a separate EIN.
• You may need to apply for a business license, based on local or state laws and the type of goods or services you are providing

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses and business owners throughout southeast Texas, handling all matters related to business formation. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.