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Forming a Texas LLC takes about fifteen minutes and a few hundred dollars. You can do it yourself on the Secretary of State’s website, and for some businesses that is genuinely the right answer.
What a filing service sells you is the filing. What it does not sell you is the decision about which entity you should have formed, the company agreement that governs what happens when an owner dies or wants out, or the plan for what your share of the business does when you are gone. Those are the parts that cost money to get wrong, and they are the parts we handle.
A formation service files a certificate of formation and hands you a generic template. That is a real service at a real price, and we will tell you when it is enough.
It stops being enough when there is more than one owner, when the business owns real property, when you have employees or a professional licence, when you are raising money, or when the business is a meaningful part of your net worth. At that point the questions are: who owns what, what happens when someone leaves, dies, divorces or wants out, and how does this interact with your estate plan. A template has no answers to any of them.
The default for most Texas small businesses. Liability protection without corporate formalities, flexible profit allocation, pass-through taxation by default, and a company agreement you can write to fit the actual deal between owners.
A Texas specialty worth knowing about. A series LLC creates separate protected series inside one entity, each holding its own assets with liability walled off between them. For an owner of several rental properties it can replace a stack of separate LLCs, with one filing and one franchise tax report. It has to be set up correctly — the series must be named in the governing documents and the assets genuinely segregated, or the separation fails. Our post on Texas series LLCs goes into the mechanics.
Not an entity — a tax election an LLC or corporation can make. It can reduce self-employment tax once profits are consistently above what you would pay yourself as a reasonable salary, at the cost of payroll administration and stricter ownership rules. Worth modelling before electing. See S corp or LLC.
Right when you intend to raise institutional capital, issue stock options, or bring on investors who expect familiar governance. Heavier formalities, and double taxation unless you elect S status.
A general partnership forms by default the moment two people run a business together without filing anything — with unlimited personal liability for both, including for what the other one does. Most people who discover they are in a general partnership did not intend to be.
If you are still deciding whether you need an entity at all, start with do I really need an LLC.
Texas entities come into existence when the certificate of formation is filed with the Secretary of State. It names the entity, its registered agent and registered office, its governing authority, and its purpose.
Two things people get wrong here. The registered agent must have a physical Texas address and must consent — you cannot simply name a friend. And the entity name has to be distinguishable from existing filings, which is a lower bar than trademark clearance; a name can be available to file and still infringe someone’s mark.
Texas does not require an LLC to have a company agreement, and this is where the real damage gets done. Without one, the Business Organizations Code default rules govern — and they are almost never what the owners actually agreed.
A company agreement worth having covers:
The single most common failure we are asked to fix: two people started a business as equals on a handshake, one wants out five years later, and there is no written mechanism for valuing or buying the interest. By then it is a negotiation between adversaries rather than a clause agreed when everybody was friendly.
A buy-sell agreement decides in advance what happens to an owner’s interest on death, disability, divorce, bankruptcy or a voluntary exit. It sets the triggering events, the valuation method, and how the purchase is funded — often with life insurance so the surviving owners are not forced to sell assets or take on debt.
Without one, a deceased owner’s interest passes under their will or by intestacy, and the surviving owners can find themselves in business with a spouse or adult child who has no interest in the company and every interest in being bought out.
This is the point where business formation and estate planning stop being separate matters.
Your ownership interest is an estate asset, often the largest one. If your plan does not address it, the business gets treated like any other property in probate — frozen while the estate is administered, at exactly the moment it most needs someone with authority to act.
Planning options include transferring non-voting interests into a trust while retaining control, using a buy-sell funded by insurance, or naming a successor manager in the company agreement so operations continue without a court order. Our page on business succession planning in Texas covers the structures, and estate planning in Frisco covers how the personal side fits together.
An LLC shields your personal assets from business liabilities. It does not shield business assets from your personal creditors, it does not protect you from your own negligence or professional malpractice, and it does not survive being ignored.
Texas courts will disregard the entity where owners commingle personal and business funds, fail to keep the entity adequately capitalised, or treat the company account as a personal one. The protection is real, but it is contingent on operating the business as a separate thing.
For personal asset protection, entity structure is only one layer — see asset protection in Texas.
Every Texas entity owes an annual franchise tax filing. Most small businesses fall below the no-tax-due threshold and owe nothing — but the filing is still required, and the Public Information Report along with it. Miss it and the entity forfeits its right to transact business in Texas, which means it also loses the liability protection you formed it for.
Current thresholds, forms and due dates are published by the Texas Comptroller. Reinstating a forfeited entity is straightforward but avoidable.
A note worth having, because a great deal of published advice on this is now wrong.
The Corporate Transparency Act originally required most US companies to report beneficial ownership information to FinCEN. After extensive litigation and rulemaking, that requirement has been permanently removed for domestic US companies — a Texas LLC formed by US persons no longer files a BOI report.
Foreign entities registered to do business in the United States may still have obligations, and some states have enacted their own disclosure rules. Check the current position with FinCEN rather than relying on an article written during the litigation.
The Kazi Law Firm is a boutique practice in Frisco serving business owners across Collin, Denton and Dallas counties, with offices in Cedar Park and San Antonio. We handle entity selection and formation, company and partnership agreements, buy-sell agreements, contract drafting and review, and the succession planning that connects your business to your estate plan.
Most formation work is handled on a flat fee, so you know the cost before we start. Schedule a consultation and we will start with what the business actually is and who else has a stake in it — the structure follows from that, not the other way round.