Texas Limited Liability Companies
Limited liability companies are generally divided into two (2) types of entities: the member-managed company and the manager-managed company. Either can be taxed as a corporation, sole proprietorship (if owned by one individual), or partnership (if owned by more than one individual). This entity is required to make a filing with the Secretary of State of Texas and to pay the necessary fees to the Secretary of State of Texas. The difference between these entities is whether the owners desire to manage the company as members or to have a separate tier of managers who manage the company.
Filing with the Secretary of State of Texas
A Texas limited liability company must file its certificate with the Secretary of State of Texas and pay the related fees to the Secretary of State of Texas. It must then take the necessary steps to complete the formation of the company as required by the Texas Business Organizations Code.The Texas limited liability company is the entity that is most frequently used when there is a single or few owners and operators or the owners are related (such as a husband and a wife). It might consist of two (2) or three (3) tiers of individuals: the members who own the company, the managers who manage the company and the officers and agents who perform the day-to-day tasks of the company. A properly formed company requires proper documents, proper funding, and proper documentation of these events. The advantage associated with this type of entity is the flexibility that it provides to the owners and the ability to remove one layer of operations-which is the manager level. The disadvantages of this type of entity are the more likelihood of a deadlock between the owners and the general lack of history and development with the courts. Therefore, it is generally not advisable to use this type of entity if one person brings operating funds to the company and the other individual or individuals bring operational experience and know-how, since the person bringing the funds should require some means to protect the capital investment. The entity is most frequently used by individuals who are single owners or there are a small or few number of owners, or by individuals who desire to have equal management authority in the company. The company may, but is not required to, have officers in the company.