Creating A Small Business In Texas

It's been quite a ride so far with the things needed to set up a business. There are several business types to choose from, but the only ones that I was interested in were sole proprietorships and LLCs (limited liability corporations). A basic explanation can be found here. I found many websites that were offering to "help" me set this up for a fee. These fees ranged from $149 to $600 based upon what service was being offered. So, this document is intended to help others with an easier path to business independence.

I was concerned about a few things in setting this up [1] proper bank accounts [2] ability to have a company liable. So, a sole proprietorship was ultimately out of the question, but I still set one up at first so that I could ensure I was able to immediately have the name I chose within Texas. So I went to the county clerks office and filed an "Assumed Name Certificate of Ownership for Unincorporated Business or Profession". Here is a sample form from Collin County, but what was nice is that the forms are filled out online in the office now. The price for filing this as of 15 June 2010 was $9.50. Now that I had that, I could open a bank account using my social security number. Additionally, you can create an Employer Identification Number (EIN) online and use that instead. Really, that could have been the end of it. Many people leave it at this, because the fees for creating a corporation are much higher up front.

But, I really wanted to create this as an LLC instead.

From the perspective of the State of Texas, to start an LLC all you need to do is file Form 205 Certificate of Formation - Limited Liability Company. This is an interactive form (starts on page 4). A couple of points - one person can create a limited liability company in Texas. As of 21 June 2010, the filing fee for this is $300. Send two copies plus a check or money order to Austin, TX (the address is on the form). From mailing it to receiving the reply back from the state takes about 7 days. A side note: you can call the Secretary of State office and inquire about the progress of your form. This can help expedite the bank account creation process.

After you get the forms back from the state (Certificate of Filing and a copy of the Formation is returned to you with a packing slip and letter from the Business & Public Filings Division), in order to set up a business account with your financial institution you'll need a few other things (this may vary depending on where you go)

  • Articles of Organization. This was a simple document that has the following listed: Name of Company, Duration, Purposes, Registered Agent, Initial Members, Management and Indemnification. There are no fees for this as it can be a simple document.
  • Documentation from the state for the Certificate of Formation
  • Federal Tax ID Number (EIN) - there is currently no fee for this.
  • Assumed Name Certificate for Incorporated business. This is similar to the Assumed Name Certificate filed for the sole proprietorship. The fee for this as of 1 July 2010 is $10.50. If you had a sole proprietorship before with a similar name, you'll want to abandon that. The fee as of 1 July is $9.50. The county clerk should be helpful in this regard.

I had no problems with any of this other than finding all of the information in one place for the items that I needed. At this point, I'm all set up and ready to go! Of course, I am no lawyer - this is just my experiences up to this point with managing a business. I found the people at the various county offices to be pleasant and helpful in this regard. If you have any feedback about this information, I'd love to hear it.

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5 Comments

  1. Lance Hunt Says:

    Nice writeup. I've been thinking of going through this mess, but have been procrastinating since I didn't know the process.

    On a side note, I have heard others say LLC is a bad choice but wasnt sure what options & pros/cons are beyond LLC & Sole Proprieterships. Did you research this before chosing LLC?

  2. David L. Penton Says:

    @Lance - I chose LLC over sole proprietorship because as a sole proprietor your personal assets (such as your house, car, etc) are rolled in as part of the business entity. With a limited liability company it is considered a separate legal entity. I felt that was important enough to warrant the creation.

  3. Rob Sullivan Says:

    I also made sure to register my LLC address with a P.O. Box as to further insulate the company liability with my personal assets. Not sure if that is overkill or not, but you never know how creative a lawyer might get when a payday is on the line.

  4. David L. Penton Says:

    @Rob - I thought about that too but opted to not do it. I was thinking that some folks might not want to do business with a company with a P.O. box. Maybe I was over-thinking that part.


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