Starting a business in Texas is quite easy since owners need not obtain a State of Texas business license. However, not all businesses succeed so owners need to protect their personal assets from litigation and collection.
Thus, our financial experts suggest entering a Single-Member LLC Operating Agreement to safeguard the owner’s properties. In this guide, we will show how to prepare this document.
Single-Member LLC Operating Agreement in Texas
A Single-Member LLC Operating Agreement is a legally authorized document used by the lone owner of a business. It is used to establish the agreement between the business entity and themselves, including their assets.
Is it Required?
No, this Single-Member LLC Operating Agreement is not required when opening a business in Texas. The state does not impose any company to create or possess this legal document, but having one has some advantages.
Why You Need a Single Member-LLC Operating Agreement in Texas
Though it is not required, there are a lot of benefits of entering a Single-Member LLC Operating Agreement when you open a business in Texas. One benefit is the protection of the business owner’s assets from liquidation.
If the company is not under a Single-Member LLC Operating Agreement, the owner’s assets can be collected by a financial institution. However, given an LLC, the personal assets are protected. The company is still liable for any financial debts but the personal assets of the owner are protected.
Another benefit is tax protection. The pass-through taxation indicates that the company under an LLC structure is not required to pay LLC taxes or corporate taxes. The income and expenses of the company passes through to the owners’ personal income taxes, hence the company will not pay anything.
The owner will pay the tax as it is included in his or her personal tax. This is beneficial as tax is paid only once, unlike in corporate ownership where both company and personal taxes are paid.
How to Write a Texas Single-Member LLC Operating Agreement
Before writing the document, make sure to outline the following:
- Name of the business
- Date of establishment and start of operations
- Purpose of the company
- Rights, Powers, and Obligation of Member
- Name and address of the LLC's registered agent
To begin, you first need to check if your company name is still available. You can check it through the Texas Comptroller of Public Accounts website. Once confirmed available, you can then download the form for Single-Member LLC Operating Agreement and fill out the necessary information.
A registered agent is someone who has agreed to accept legal papers on behalf of the single-member LLC. He can be a Texas resident or a domestic or foreign business entity who is authorized to do business in the State of Texas. It should be noted that the business cannot act as its own registered agent.
After writing the agreement, have it notarized by a legal office. Then, file the LLC online through the Texas Secretary of State [1]. To date, the filing fee is $300.
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Conclusion
Owning and operating a business in the State of Texas is fairly easy. Though it is not required, it is best to register a Texas Single-Member LLC Operating Agreement to protect the owner’s personal assets and enjoy taxation benefits. Our finance experts indicated that LLC applications can be done online as long as all the necessary documents are prepared and notarized.
