Starting your own business can call for personal sacrifice. From the earliest planning stages, you will need to surrender your time and energy to create an enterprise that will support you, your family, and any staff that you bring on. Of course, with all of your hard work, you may be able to create something truly successful, reaping the personal and financial rewards that come with it. Once you have carved out a business plan and thought a bit about daily operations, you may find yourself thinking about forming an LLP.
The lone star state is home to a great deal of savvy entrepreneurs. The opportunities afforded to Texas business owners are many, with our vast state being home to a wide array of different industries. From the oil fields in west Texas, to the burgeoning tech hub developing in Austin, whatever your area of business may be, it is probably wise to learn more about forming an LLP in Texas.
What is an LLP, and is it Right for Your Business?
A limited liability partnership (LLP), is a mode for structuring a business. It is essentially a graduated version of a general partnership that adds a layer of legality to an existing business relationship. While a general partnership occurs whenever two or more people go into business together–sometimes with legal documents for profit sharing in-place, sometimes with more informal agreements–a limited liability partnership takes things a step further.
The concept of limited liability means that business owners can exempt themselves from being found liable in matters such as lawsuits, or debts incurred by their business. While a limited liability company (LLC), which is a more common distinction, can offer more broad protections, an LLP is tailored more so for people providing a professional service. For example, doctors and lawyers often opt to form an LLP because it allows a partner to hold some liability in the event that they demonstrate provable negligence, while others can be shielded from their actions.
In an LLP, there is a managing partner. This individual is responsible for running the business operations of the organization, and as such, they hold a greater liability than the other partners. Like an LLC, an LLP is treated as a “pass-through” entity by the Internal Revenue Service (IRS). That means that the income generated by the business is not taxed, but rather the partners pay taxes on their individual salaries and profits.
Steps to Take When Forming an LLP in Texas: Choosing a Name
If you have decided to form an LLP in Texas, your first order of business should be to select a name for your enterprise. While this is of course critical in how you will market your business and separate yourself from the competition, it is also the entry point for your LLP application. While most states require that limited liability partnerships have completely unique names, Texas does not. Still, from a business plan perspective, it is a wise idea to come up with a moniker that allows you to stand out from the pack.
Most states also make it compulsory to select a Registered Agent–a person responsible for receiving legal documents and correspondence–but Texas does not. You can forgo this step in the formation of your business.
Filing Your LLP Registration
To make your LLP official, you will need to submit a registration document to the Texas Secretary of State’s office. In this form, you should include the following pieces of information: The name and physical address of your business, the names of the partners involved in the LLP, a statement of your business, and an employer identification number (EIN).
This document is called a Form 701, or a “Registration of Limited Liability Partnership form.” You can download and print a blank version of this document from the Secretary of State’s office, which you can in turn fill out and mail back. You will need to renew your LLP annually with the state of Texas.
You Can Form Your LLP Online with Our Help
If you have performed the necessary market research, signed a lease on office space, and obtained all of the required permits and licenses your business needs to operate, you may feel that you are ready to open your doors for clients. If the tax and liability benefits that come with an LLP are right for your organization, it is a prudent maneuver to complete the formation of that structure before you fully kick off your operation.
Since owning and operating a business will command much of your free time, why not work with the Corporation Center to submit your LLP registration online? By using our easy-to-fill online forms, you can save yourself a trip to the post office and submit your Form 701 to the Secretary of State in just a matter of minutes. To learn more, contact one of our customer service representatives today.