State Specific Question About: TEXAS (TX)

I did the formation of the first LLC using "MyLLC", and then did the second LLC by myself using the Florida state website. It's not hard at all. But I had single member LLCs. I didn't use a specialized operating agreement because it was just me alone.

The lawyers we talked to said (not unexpectedly) that you need a lawyer to draw one up. Yes, they're easy to set up, just like the standard rental agreement from OfficeMax. However, the devil is in the details. Just like in a rental agreement.

Our lawyer said that once he'd generated one for us, subsequent ones would be half price, but he admitted that we could just use the one he generated for us as a template.

Linda,

No I never created an Operating Agreement. I just had the Articles of Organization.

It seems a little unusual that the lender is asking you to form an LLC. I'm assuming they still expect you to sign a personal guarantee for the loan. Curious, what's their reasoning behind it?

The reason is important. My wife and I formed a multi-member LLC for several reasons: cost is low in my state ($80), easy to set up and maintain (no yearly costs), some anonymity, as a pass-thru entity it doesn't make our taxes any more complex, and for the liability protection. Out of all those, the only one I could see that would be beneficial to a lender is the last one. Are they afraid that if someone sued you that you'd lose not only the property but also assets titled in your name? If that's the case, maybe would a $1 million liability policy with them as added beneficiaries make them happy?

Or is there some other reason they want you to have an LLC?

I'm wary of over-using lawyers after I was ripped off aoubt ten years ago for $400 by a local asset protection guru/lawyer for advice that was basically useless.

It used to be that an LLC was $300, and to fast-track it was $325. Now I think everything defaults to fast-track-online.

So-- the first thing is to double-check your LLC name against all the other people doing business in Texas and make sure you don't conflict. You do the Taxable Entity Search. I had tried forming one that I thought was conflict-free, but there was a large company in a different field I didn't know about that was just one letter's difference, so they try to protect the bigger companies to prevent conflict or misunderstanding. I think I solved the conflict by putting in an extra word or something. But I didn't find that out until they bumped it back to me... and if I have a nonrefundable $325 at stake, I don't want to run the risk of losing it just because I hadn't heard of, say, a popular MRI-manufacturer or a major aluminum extrusion company. (They let me change the submitted name without penalty.)

Your certificate of filing is going to coincide with the Texas Business Organization Code. So if you do a Google search for that term, plus "Certificate of Formation", and check out Sec. 3.005--- those are the elements your filing with cover. But if you want the right boilerplate, you might have to look a little deeper. A lot of it is fill-in-the-blank with your specific information, but some of it is legalspeak. :)

A quick search on the Internet says Incfile will file for $49 plus state fees. Legalzoom will do it for $149 plus state fees.

This is a copy of my operating agreement, names changed to protect the guilty!

Operating Agreement for ABC, LLC

ABC, LLC operates in the State of Oklahoma for

the purpose of new home construction and sales, home

remodeling, rental property acquisition and sales. Duties include the management and maintenance of vacation home properties owned by the company.

Stock is owned 51% by GS, 47% by HS, 1%

by TP, and 1% by GM. All parties are

authorized to sign any and all documents pertaining to the

purchase and sale of company owned properties. Likewise all

parties are authorized to sign closing statement documents, and may enter in to loan agreements with banks and other entities on behalf of the company.

GS __________________________________SIGNATURES

HS

TP

GW

I forgot to mention that I did mine online at the Oklahoma Secretary of State's website.

You may need to get a federal ID # if you don't have one already. Helps to keep your taxes and the LLC's taxes separated.

The Articles are required for forming and filing your LLC with the state.

Oh-- yeah. You also have to decide if you want a single-member LLC? Or something else? I have a single-member LLC under my name, not because it's necessarily better or worse for rentals, but to protect those assets from problems with DH's day job.

From the TX SOS website:

What is the difference between a member and a manager of an LLC? Which management structure should I choose on my certificate of formation?

A member of an LLC is a person that holds an ownership or membership interest in the LLC. An LLC is always going to have at least one member, but the affairs of the LLC can be managed or governed in one of two ways.

First, the LLC may be governed by its members as a whole. In this situation, every member has management authority. An LLC with this type of management structure is often referred to as a member-managed LLC.

Second, the LLC may elect to have a separate group of managers to manage the affairs of the LLC. The managers of an LLC may or may not also be members.