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This article will discuss the basics of forming traditional and series LLC's in Texas - although our preference is clearly in favor of the new Series LLC (available in both Texas and Nevada) which provides significant benefits in terms of simplicity, economy, and asset protection.  For important related material see our article entitled Asset Protection in Texas.

We will also examine our recommended two-company asset protection strategy - using one company as a shell management company to deal with the public and the other company as a holding company that quietly owns the hard assets and remains in the background. This is a simple but very effective program, particularly for real estate investors.

We have two other important LLC articles: LLC's in Texas - Series LLC and LLC's in Texas - Governing Documents.  For a complete overview of the topic, you may want to consult these other articles as well.

Should the reader decide to proceed with forming an LLC, our LLC Checklist is attached at the end of this article.  We will need this Checklist filled out in order to begin the process.

There are lots of good reasons to form a Texas LLC as part of an asset protection plan. The main reasons are (1) using the company liability barrier to minimize personal exposure and maximize asset protection; (2) organizing and managing one or more businesses in a less formal way; (3) tax benefits including pass-through (one-time taxation) of members' profits; (4) achieving a measure of anonymity; (5) credibility with the public, which may be helpful in marketing and when engaging in "creative" transactions (wraps, land trusts, and the like); and (6) the compartmentalization and insulation of assets and liabilities in the separate series.      

An LLC is also a useful device for organizing a business, particularly in separating business from personal affairs.  Failing to do this is a common mistake of novice investors and can create legal and accounting problems.  Running business income and expenses through your personal account may not be illegal, but it can complicate your defense if you are sued.  It will be alleged that you "commingled funds."  Again, this may not always be contrary to law, but it will arouse the suspicion of the judge and jury and may result in your defense failing what trial lawyers call the "smell test." This sort of error can also result in your being held personally liable for damages.

Why risk it? Set up an operating account in the name of your LLC in which all income and related expenses are clearly shown, coded separately for each of your properties. In the case of landlords, a separate account for tenant security deposits is advisable. If you get sued it is very likely that you will be asked for an accounting and to produce your bank statements. Being prepared to show a sound business structure that functions with integrity is an essential part of your asset protection strategy.

Anonymity is a key part of asset protection and a primary reason for forming an LLC. Ideally, your personal name should never appear on any deeds or leases, and a tenant should never write a check to you personally. There is an old rule that people tend to sue whomever they write their checks to.  Make sure that is never you.

It has been reported that a new lawsuit is filed every 1.3 seconds.  Literally millions of lawsuits will be filed this year.  Many will award huge damages for such things as serving coffee that is too hot. In this legal environment, asset protection is a serious matter, and a Texas LLC is an excellent tool for achieving it.

Although there is no such thing as a "bulletproof" plan to avoid personal liability or protect assets, you can get close. An LLC is an important step in getting there. This office recommends a Texas LLC or Nevada LLC or a combination of the two.

The basic principle of asset protection is this: the more fences a plaintiff and his attorney have to jump, and the more money they have to spend in order to get to you personally, the better protected you are. One way or another, plaintiffs have to pay their lawyers, and that means either cash or contingent fee - and few good lawyers will take a real estate fraud case on a contingent fee, particularly if they know they will have to penetrate a bona fide LLC before they can get to any real assets. 

In setting up a Texas LLC, one of the first things to consider is a company name - and whether or not it is available. Unfortunately, the easy names tend to be taken, so you will need to be creative.  You can get name availability information by calling the Texas Secretary of State at (512) 463-5555. We recommend calling since using their website for this purpose is unreliable.
In any case, do not be distressed if a favorite name is unavailable, since our strategy favors using an assumed name (DBA) for company operations.

Legal fees do not include costs such as filing fees. The filing fee in Texas (including the special handling for rapid response) is $325; in Nevada, $75 for regular handling or $200 for an expedited response. 

When you have an available name, contact your attorney and tell him who the original members are going to be and what percentage of ownership each will have.  Generally, Texas LLC's have a managing member or co-managing members, although it is also possible to hire a manager who is not a member. Who will be serving in these capacities?  You will also need to choose a registered agent with a physical street address in Texas, which can include a suite number but not a PO Box, PMB, POB, or other obvious indication that the address is a postal box. The registered agent will receive and forward official company mail from the Secretary of State, the Comptroller, and anyone who is putting the company on formal legal notice. He or she is also the person who is served with process by the constable if the company is sued. For privacy reasons, listing the home address as the registered address is not recommended - use of a client's physical office address is a better alternative. This office will serve as registered agent for an annual $250 fee.

Note that the Certificate of Formation in Texas also requires listing the initial managers and their addresses. These addresses may (and should be) a PO Box rather than the home address.

For those clients who are interested in complete anonymity, this firm offers our proprietary "anonymity company" utilizing a trust as initial manager with a POB address. We serve as organizer and registered agent.  Fees are higher. Inquire.

All LLC's are not created equal - basic "no frill" filings and company agreements do not contain key asset protection provisions and should never be used.  Your goal should not be to merely "set up an LLC" and consider the job done; your goal should be to establish a Texas Series LLC that includes sophisticated asset protection provisions beginning with the very first documents filed with the state (i.e., the Certificate of Formation in Texas or the Articles of Organization in Nevada) and then continuing with the company agreement, the minutes of first meeting of members, and other key documents.  These documents work together to build a wall against lawsuits and creditors. The company should also have a formal record book with a seal and membership certificates that are properly dated and issued. 

Clients often report to their attorney's that "I already have an LLC." Often, they mean that the minimum initial paperwork has been filed (often by an internet service), the filing fee paid, and nothing else done. In Texas, this may not be sufficient to maintain the company's liability barrier if the LLC is challenged in court. If the LLC is not sufficiently independent and fully established with all the trimmings, the court could potentially "pierce the corporate veil" and hold individual members personally liable.

Clients will go on to say the following about their LLC's formation: "Oh, I just filled out and filed the standard forms." That's the point. There are no "standard forms" for establishing and properly documenting an LLC - regardless of what internet services may say or imply in the promotion of their highly simplistic documents.  Even the very basic formation forms that are available at the Secretary of State's website are of minimal use - they will get you a filing number, minimal legal status, and that is about all.  Will they get you real asset protection?  Do not count on it.

Use of an internet service like LegalZoom to form an LLC should never be considered by any serious investor or business person.  If it is worth setting up an LLC in the first place, then it should be done with maximum effectiveness relative to the company's purpose and the desire of its members for asset protection. 

As for internet legal forms services, an entire article could be written on how they often do more harm than good. Here is what internet services do not provide:

The documents provided by such services are so simplistic as to be barely above the level of junk. This office spends a fair percentage of its time cleaning up the inadequacies in companies formed this way and offering asset protection advice that the client should have received from the beginning. Still think internet services are a good deal?

The traditional Texas LLC has long been a favorite of real estate investors and others.  Recently, however, a new type of LLC - the Series LLC available in both Texas and Nevada - has quickly become the preferred way to own multiple properties and businesses. The Texas Series LLC - like traditional Texas LLC's, corporations, and limited partnerships - is governed by Title 3, Chapter 101 of the Texas Business Organizations Code ("BOC"). Changes to the BOC in 2009 by the 81st legislature have made the BOC a model of progressive legislation and improved Texas' already deserved reputation as an excellent place to do business and engage in asset protection. 

The Texas Series LLC allows an investor to hold assets and liabilities within separate compartments or "series" which effectively operate as sub-companies. The Texas Series LLC shares characteristics with the traditional Texas LLC, including the benefit of informal management, an effective liability shield, and pass-through taxation; but the Texas Series LLC also has the ability to segregate assets and insulate them from liability arising from other assets within the same company.

Is the Texas Series LLC risky because it is a new vehicle?  No.  The series company has been around for many years in Delaware and Nevada, where it has a solid, court-tested track record, and is spreading rapidly to other states.  It is an idea whose time has come.

Lawyers are frequently asked two questions: How many LLC's do I need? How many properties can I safely hold in one LLC?  The Texas series LLC eliminates these issues for most clients.  The series LLC is an ideal asset protection tool because it has a liability barrier and it simplifies the lives of its members, who no longer need multiple companies to do business. And a Texas series LLC can own any type of property anywhere in the world (but it must have a registered agent with a physical address in Texas).

The advent of the series structure in Texas makes both the traditional LLC and the S-Corporation obsolete for many purposes. See our companion article LLC's in Texas - Series LLC.

Clients occasionally ask if they should form a corporation instead of an LLC. While the corporate format is still available, it has been declining in use. The LLC features a liability barrier, informal management, and pass-through taxation - combining the best of a corporation and a partnership. A corporation should be considered only if an investor has significant net income that he or she wishes to be retained in the corporation at lower tax rates (Nevada is a good place for this since there is no corporate income tax). 

General partnerships, sometimes called "tenants in common" arrangements in other states, are also the subject of inquiry by clients. So are trusts. These are useful structures, but should in be used, if at all, in conjunction with an LLC. Why?  Because an LLC has a liability barrier. General partnerships, TIC's, and trusts do not. 

Limited partnerships (with a corporation or LLC as a general partner) have a liability shield but are more complex structures suitable for large commercial transactions - acquiring shopping centers, apartment buildings, and the like.

Our suggested asset protection plan for Texans is the following:

The resulting structure involves two LLC's and a living trust for the homestead. The fact that the holding company exists quietly in the background and does not usually enter into contracts or business dealings (this is the job of the management company) makes the holding company nearly impossible to sue successfully (the reason is the legal doctrine of "privity").  Few investors or business persons need anything more exotic than this structure. While asset protection lawyers are capable of developing more complex structures, this office prefers to keep matters simple whenever possible. 

It is critical that your attorney draft the LLC's governing documents so that they discourage creditors from even contemplating the seizure of your membership interest. Asset protection provisions should be included from the outset in the Certificate of Formation and then extensively set out in the company agreement.  Basic "plain Jane" documents (such as those available online) do not maximize asset protection and should never be used by anyone who is serious about asset protection. See our companion article LLC's in Texas - Governing Documents.

The owners of a Texas LLC are referred to as "members" rather than shareholders or partners.  A Texas LLC may be formed by one or more persons.  Members may be individuals, partnerships, other LLC's, corporations, and/or any other type of legal entity. LLC's generally operate through a managing member or co-managing members (a frequent arrangement for husbands and wives), although officers such as a president and secretary may also be elected if the company agreement so provides.

We suggest establishing two classes of members and announcing this fact in the company's Certificate of Formation or Articles of Organization.  Class A members are "regular" members who have full ownership and voting rights; Class B members are those who acquire their membership interest by execution on a judgment or similar means.  They cannot vote and are not entitled to distributions except with the unanimous approval of the Class A members.  How better to deter creditors than to make it clear from the outset that any interest they obtain will be essentially worthless?

In order to maintain the viability of the company as a separate legal entity that provides a liability barrier for its members, the members should meet at least once a year.  The first meeting of members (also called the organizational meeting) should include approval of the details of the Certificate of Formation and the Company Agreement. Annual meetings in successive years should review and ratify the preceding year's actions by the company and its managing members, recognize any unusual events or circumstances, and elect new managers. It is also advisable to hold special meetings to approve any "major decision" as defined in the Company Agreement; approve the purchase or sale of real property, approve a loan to the company, or accept new members and realign the members' respective percentage interests. 

A Texas LLC, like a corporation, is a distinct legal entity with a life of its own. It has its own rights, duties, and remedies. It has its own TIN, although the LLC's tax return is combined with the members' personal return (similar to a partnership). However, an LLC requires maintenance and continued respect in order to maintain its independent status.  It may be your company, but it must still be treated at arm's length for legal purposes. You must undertake certain actions to preserve its separate character, and it is vital that you do so if you wish to avoid personal liability for the actions of the company or its agents and employees.  The reason is the legal doctrine of "piercing the corporate veil."  Unless the company pays its state and federal taxes, maintains a bank account, conducts regular meetings, keeps records, and the like, then in the event of a lawsuit, a court may decide you do not have a "real" company - the judge may then disregard the company's existence and allow the plaintiff to proceed directly against the members/owners personally. It will be alleged by the plaintiff's attorney that the company is a sham and nothing but the personal "alter ego" of its owners, designed to shield them from the consequences of wrongful conduct.  Needless to say, this is a disaster and entirely defeats the purpose of forming an LLC in the first place.

Doing the minimum initial paperwork to file the company and paying a filing fee - and then not doing anything else to support the company's existence - is not enough to maintain a liability shield over time. It will not protect you from a clever plaintiff's lawyer who is determined to reach your personal assets or get a judgment against a member individually.  Remember, that lawyer will be looking for deep pockets and hard assets, wherever they can be found.  If there is a hole in the company's liability shield, he or she will likely find it.

Even if you have a properly constituted, operating Texas or Nevada LLC, you may still be sued in your personal capacity. Unless you have personally guaranteed indebtedness of the company, this is a form of lawsuit abuse - yet certain lawyers do it anyway. Your lawyer should respond by sending out written discovery (including interrogatories and requests for production) to find out if the other side has any basis for holding you personally liable.  If no such basis can e shown, your lawyer should file a motion for partial summary judgment to have your personal name removed from the case as a defendant.  He or she should also ask for attorney's fees and costs for having to go through this process. If you have properly maintained your LLC, this motion should be successful. If not, this defense can be reasserted at trial. A related article on www.LoneStarLandLaw.com, Litigation in Texas, is recommended reading.

Any and all investment property acquired or currently held in a personal name should be moved into the LLC by means of general or special warranty deed without delay. For more details, see our companion article entitled Deeding Property to an LLC. 

Clients often wonder if the transfer of property into an LLC is barred by the "due on sale" clause in their deed of trust.  Firstly, this clause (if you read it carefully) does not prohibit a transfer; it merely gives the lender the option to accelerate the note if a transfer occurs.  Secondly, this almost never happens so long as the loan is not in monetary default.  See our companion article entitled Due on Sale in Texas.

It is not advisable to transfer a Texas homestead into an LLC since the homestead is already protected by the Texas Property Code against forced sale or execution upon a judgment. Also, as previously mentioned personal and homestead-exempt assets should be kept separate from investment assets. This is a cardinal rule. Read our article Homestead Protections in Texas.

One factor that should be considered in deeding property into an LLC is whether or not the property is to be transferred with an assumption of the existing loan or "subject to" the existing loan (i.e., the LLC does not take liability for the loan). This choice has accounting implications - whether or not the company will in the future be carrying the loan on its books as a company debt. An appropriate clause specifying assumption or "subject to" should be included in the deed. 

An LLC differs from a conventional corporation in that it avoids "double taxation," i.e., taxation on corporate profits and then taxation again when dividends are paid to corporate shareholders. Income passes through to the individual members of the LLC with only one taxable event. In this way, an LLC is treated similar to a partnership for federal income tax purposes. Your LLC will need to obtain an EIN or TIN (taxpayer identification number) using an SS-4 form (supplied with our company book) or the EIN can be applied for online. The EIN will be required to open a bank account for the LLC (although banks will often open the account if the LLC has been approved by the Secretary of State and the EIN application is pending).

If the LLC is a series company, each series may, but is not required, to obtain its own EIN and receive its own federal income tax treatment.

Although Texas does not have a personal income tax, it does have a franchise tax (also called the margin tax) that is, in effect, an income tax on companies. It is imposed on all "taxable entities." The statutory definition of a "taxable entity" can be found at Texas Tax Code Sec. 171.0002(b)(2), but it definitely includes LLC's.  The margin tax is basically a modified gross receipts tax, although some thresholds and deductions apply.

As with the IRS, you must file a Texas franchise return even if the company has no income. You are eligible to file the No Tax Due Information Report (Form 05-163) if your company is a passive entity as defined in Texas Tax Code Sec. 171.0003; if you have annualized income less than the statutory threshold ($600,000 after Jan. 1, 2012); if the company has zero Texas gross receipts; or if the company is a real estate investment trust (REIT) as defined by Texas Tax Code Sec. 171.0001(c)(4).  If your company does not fall into one of these categories, you will likely be filing the EZ Computation Report (Form 05-169).  If you have other Texas LLC's or entities, you will likely have to include an Affiliate Schedule (Form 05-166). 

The annual filing of a Texas Franchise Tax Public Information Report (Form 05-102) is also required by the Texas Comptroller. Note that this form requires disclosure of the names of the current members of the LLC (You may recall that the Certificate of Formation required disclosure only of the initial managers). This factor that should be considered if you are concerned with privacy or anonymity.

Visit the Texas Comptroller's website at www.franchisetax.tx.gov http://www.window.state.tx.us. for further information.

Note that obtaining a TIN and filing tax returns are part of what an LLC must do in order to preserve its status as an independent entity with a liability barrier that protects its individual members.

Beyond the foregoing, this firm does not give tax advice. The best arrangement is to have a good real estate/business/asset protection attorney and a good CPA who is familiar with small business operation in Texas - both of whom should be "on call" for advice. 

Anonymity can be enhanced by filing a DBA for your LLC and we strongly recommend that you do so. For example, the name of the company as registered with the Texas Secretary of State might be "ABC, LLC." The company's DBA, however, might be "Wilshire Investments."  Therefore, the face you show to the public (on letterhead, checks, etc.) should always be Wilshire Investments. As a technical legality, Wilshire Investments cannot be sued since it is not a legal entity - any such suit would be dismissed upon motion by your attorney.  A claimant would have to research the DBA records to discover the true legal entity, which is of course ABC, LLC - and suit would then have to be filed against the company and service would be have to be made upon the company's registered agent.

It is neither necessary nor advisable to transfer a Texas homestead into an LLC since the homestead is already protected by the Property Code against forced sale or execution upon a judgment. Homestead-exempt assets should be kept separate from investment assets. We recommend a living trust to avoid probate on these assets. See our companion articles Living Trusts in Texas and Homestead Protections in Texas.

It is recommended that investors and businesspersons form a Texas LLC or Nevada LLC for purposes of asset protection. We favor the new Series LLC. Consult an attorney who will tailor his or her advice and documents to your individual investment and asset protection plan. Questions relating to structuring an asset protection plan as well as follow-up questions on company formation are included in the legal fee charged by this office.  No internet service will do that.

Information in this article is proved for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well.  Although we will respect your confidentiality, this firm does not represent you unless and until it is retained and agrees in writing to do so.

THIS DOCUMENT IS NOT INTENDED TO BE USED, NOR CAN IT BE RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES IMPOSED UNDER UNITED STATE FEDERAL TAX LAWS. THIS DOCUMENT DOES NOT CONSTITUTE DOES NOT CONSTITUTE A TAX OPINION OR OTHER ADVICE TO WHICH CIRCULAR 230 IS RELATED.

Copyright © 2013 by David J. Willis.  All rights reserved worldwide. David J. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization.More information is available at his websites, http://www.LoneStarLandLaw.com, http://www.TexasSeriesLLC.com., and http://www.TexasAssetProtection.com.

David J. Willis Attorney
www.LoneStarLandLaw.com
www.TexasSeriesLLC.com
www.TexasAssetProtection.com
Email: LoneStarLandLaw@aol.com
Tel. (713) 621-3100
Fax (832) 201-5321

            For more information on limited liability companies, read our articles on the subject.  Go to www.TexasSeriesLLC.com or www.LoneStarLandLaw.com.

            Follow these instructions.  Why?  It is to your advantage to do so.  No company formed by us has ever been pierced.  Texas and Nevada series limited liability companies are a specialty of ours. There is a reason - both states have great LLC laws. For more information on our suggestions for asset protection, see our article Asset Protection in Texas.

Company formation is handled online and services are priced accordingly – i.e., office conferences increase these fees significantly (usually double). Please do not ask for an office meeting and expect to pay the internet price.

Note that the great majority of the new companies we form are series companies, since we no longer recommend corporations or traditional LLC’s for most of our clients’ investments – although there are exceptions. See our article LLC’s in Texas – The Series LLC. Few small businesses elect to file as corporations nowdays. These trends are reflected by filings at the Secretary of State’s office.

Prices are quoted in terms of legal fees plus costs (which are beyond our control and subject to change without notice).  Company books at our cost are part of the package – we insert our own sophisticated documentation into these books (minutes, company agreement, etc.) customized to your business plan and designed to maximize asset protection. 

Texas LLC Formation. Legal fees for traditional or series LLC formation in Texas are $750 plus the filing fee for expedited handling ($325), $90 for the company book (our cost – includes black vinyl notebook, seal, and custom membership certificates – leatherette upgrade available for $135), and $20 domestic shipping by UPS ground (overnight/air is $20 additional) for a total of $1,185 for the complete Texas package. For this total, you must supply your own registered agent with a physical street address (not a POB or UPS box) in Texas. EIN not included (Why? Because completing the EIN application involves naming a “responsible party” - and we choose not to be financially responsible payment for clients’ taxes). 

Anonymity Company Formation. This is our proprietary system for utilizing a trust in connection with the LLC filing in order to maintain the client’s anonymity in the Certificate of Formation.  Trust agreement is included.  No one else does this or, so far as we can tell, has even thought of it. 

Fees are $1,500 plus the filing fee ($325), $90 for the company book (our cost – includes black vinyl notebook, seal, and custom membership certificates – leatherette upgrade available at a cost of $135), $20 domestic shipping by UPS ground (overnight/air is $20 additional), and $250 annual fee for registered agent services for a total of $2,185.00. EIN not included – but that is easily obtained at irs.gov.

Two-Company Structure (recommended for real estate investors). If the client wishes to establish our two-company asset protection structure (utilizing a series LLC as an asset-holding company plus a separate “shell” management LLC to deal with the public), then legal fees for forming these two companies simultaneously are reduced by $100.  Again, see our articles for details.

Nevada Series LLC Formation.  Nevada is an excellent venue for the “holding company.” Legal fees for series LLC formation in Nevada are $750 plus $290 in costs, which include the $200 filing and expedited handling fee (regular processing is just too slow), $90 for the company book (our cost – includes black vinyl notebook, seal, and custom membership certificates – leatherette upgrade available for $45), and $20 domestic shipping by UPS ground (overnight/air is $20 additional) for a total of $1,160.  EIN not included – but that is easily obtained at irs.gov. Note that a Nevada LLC is not recommended for a management company for Texas properties since it would then have to pay expensive fees to register and do business in Texas. Our opinion is that a holding company does not have to register.

The Nevada registered agent with whom we have an established relationship charges approximately $375 per year. You will deal directly with them on payment of their fees. This supplies your company with both a mailing address (on West Sahara Drive in Las Vegas) and registered agent services at that same address. There are no franchise taxes in Nevada, but after establishing an LLC the state will require payment of an annual business license fee (subject to change) of $200.  Even so, NV is still an inexpensive state in which to do business. 

Conversion of Traditional Texas LLCs. Some clients will request that we convert a traditional Texas LLC to a series company. We generally discourage this option since older entities often come with “baggage” (debt, litigation, taxes owed, etc.) but under certain circumstances it may be acceptable.  $750 excluding filing fee of $175 and any other costs (e.g., company book and shipping).

Documenting an Existing Traditional LLC.  If you have formed a traditional LLC with a minimal “one pager” filing and have no organizational minutes, company agreement, or other documents, we will document your company with these items and provide complete instructions for starting business as a traditional LLC. We can also order a company book with seal and membership certificates from our printer. Fee is $550 plus $90 for the company book plus $20 shiping. EIN not included – but that is easily obtained at irs.gov. Not available for previously formed series companies, since these require a more extensive revamping of documentation. Better to start a new series LLC.

Total Structural Reorganization.  Clients occasionally request that we take their existing complicated structure (often consisting of numerous LLC’s, corporations, and limited partnerships) and overhaul it to create a simplified but effective asset protection program.  Fees (not costs) begin at $2,500 and are deposited as an initial retainer with supplemental deposits expected. Inquire.

Shelf Companies.  From time to time, we may have an inventory of existing, established companies that we can assign to you. These are premium companies specially designed by this office to include unique anonymity and asset protection features, EIN’s, assumed name certificates, and bank accounts. Fees are substantially higher. For our current inventory, see shelf companies on the website.

Optional Add-Ons.  These include:

Exclusion of Certain Registered Agents. The documents produced by this office are sophisticated and proprietary. They are never distributed for reuse. We reserve the right to decline to do business or file formation paperwork that lists a competing asset protection law firm as registered agent or otherwise threatens the proprietary nature of our documents. It is truly amazing the extent to which unscrupulous lawyers will go to get copies of our documents.

Asset protection can be complex work – so feel free to ask for an exact quote for the combination of entities and features you’re seeking. Costs are beyond our control and are subject to change. Fees and costs must both be paid in advance, since we immediately start writing checks for the client. Go to the “Make Payment” button on the website for payment options.  If payment is made by check, it should be made payable to David Willis and overnighted to our dedicated registered agent address: 330 Rayford Rd., Suite 401, The Woodlands, TX 77386 (Note: we cannot proceed until the check clears).

Kindly do not attempt to negotiate fees or request a discount. 

______________________________________________________________________________

1.  Which state are you using to form this company?

            _______ Texas             ________ Nevada

2.  What name have you chosen for the company?

Note: All the popular, easy names are taken, so you will need to be creative – which isn’t necessary a problem from an asset protection point of view. Our recommendation is to get a “random” name (nothing special) for the LLC (e.g., “ABC LLC”) and then afterward personalize the company with an assumed name (“DBA”) certificate filed with the local county clerk. Makes the entity harder to find and sue. This may involve a trip to the county clerk’s local office, but it’s well worth it. Please do not ask us to select a name for you.

Note: a comma between the name and “LLC” is not required.  Many assume it is.

3. FOR TEXAS: Have you called the Texas Secretary of State to make sure your proposed company name is available?  Call (512) 463-5555 for name availability.  Do not check online for Texas – that method has proven itself to be unreliable.

            _______ Yes, the name is available          ________ No, I haven’t called yet. Do not process this Checklist until I do.    

    FOR NEVADA: Check availability at www.nvsos.gov.

We will order the company book from the printer based on this assurance from you that the name is ready to go.  Note that your proposed name may not be the same as or “deceptively similar” to the name of an existing company. You may be told you’ll need a letter of consent.  Forget it.  No one ever gives such letters. Think of another name.  I recently formed a company called “Blue Toe-Nailed Surfer Dog” (they do business under a more sedate assumed name). In any case, I advise that you do business not under the company name that you file with the Secretary of State but under the assume name (DBA) that you file with the county clerk.

If re-filing is necessary because of name unavailability it will be at the client’s expense.  All risk of name selection is on the client. Sometimes we’re told that a name is OK on the phone and then the paperwork is later rejected. Clerks make mistakes. The problem is that now a new engraved company book and membership certificates will need to be ordered ($90 plus $20 shipping).  If you’re willing to wait for the whole process to work its way through before ordering the company book then this is not a problem - but few clients are – they want their company now.  In no case will this firm absorb the cost of re-ordering company books.

4. Who are going to be the initial members of the Company and what are their respective percentage interests?  Note: these may not be minors unless (1) represented by a trustee or guardian; or (2) or you want to break the law and hope such minors reach majority before this is an issue.  Your choice.

            NAME AND ADDRESS                                              PERCENTAGE INTEREST

5. We must name the initial manager(s) (not the initial members) and their respective addresses in the Certificate of Formation. Here you can use a POB and - for anonymity purposes - you should do so rather than listing your home address. Note: I prefer not to name spouses in this section at all, even if the spouse is going to be a co-manager (reason: it needlessly makes them a target). 

            NAME AND ADDRESS

Do not use the same address as the registered agent you are naming unless you actually physically office there.

Secretaries of State can and do turn down addresses unpredictably.  They occasionally Google an address to make sure it’s not a POB.

6.  What are the contributions of each member to the company? Complete this section if members are putting property into the company or making a capital (monetary) contribution (if any - not required to establish the company).

                       
                        NAME                                                 CONTRIBUTION

                                                                        Services, formation costs, and $________ [optional]

                                                                        Services, formation costs, and $________ [optional]

                                                                        Services, formation costs, and $________ [optional]

7. Note that companies are often funded by a combination of equity (capital) and debt (i.e., loans to the company).  If you have special requirements in this area, what are they?

8. What is the purpose of the company?

9.  What type of LLC do you wish to form?

9.A. If you wish to form an anonymity company, the initial manager will be listed as a trust.  Do you have a suggested name for the trust along with an address (suggest POB)?

10. Series LLC property: If you are forming a series LLC, which property or businesses do you want to put in each series (if you know at this time)?

            Example:        Series A: rental property at 123 Oak St., Houston, TX 77057
                                    Series B: my general contracting business called “Mr. Fix-It”

            Series A: _____________________________________________________________

            Series B: _____________________________________________________________

            Series C: _____________________________________________________________

            Series D: _____________________________________________________________

Note: conveyance of property or business into a series is not automatic as a result of forming the company.  It must be accomplished by a separately executed warranty deed or bill of sale into the specific series.  This is not included in LLC formation fees.

11.  As to initial management of the company as a whole (must be listed in filing documents):

12.  As to management of each series (if this is a series company):

            _______ the managers of the company will also manage the individual series (this is the usual case).                     

            ______   we will have a separate managing member for each series/property.

                            Details: ___________________________________________________

                                         ___________________________________________________

           
13. Will you also be selecting officers (President, Secretary, etc.)?  This is entirely optional.  Most people forming an LLC don’t bother, electing to have the title “manager” or “managing member.” But you can name officers if you like.

            ________ No officers at this time (keeps things simple).

            ________ Yes, the officers will be:

                                    Chairman: __________________________________________________

                                    President: __________________________________________________

                                    CEO: _____________________________________________________

                                    Vice-President: _____________________________________________

                                    Secretary: _________________________________________________

                                    Treasurer: _________________________________________________

                                   
READ THIS NEXT QUESTION CAREFULLY PLEASE

14.  Who will be the registered agent and what will be the registered address?  This address will be public record! Choices:

            _____ We have someone to serve as registered agent:

                                    Name: ___________________________________________________

                                    Street Address (not POB, PMB, UNIT X – 1200, or the like, or the S of S will reject our filing – they often
                                            Google such addresses to check them):_________________________
                                             ________________________________________________________
                                   
_____ Texas: We would like the attorney to serve as registered agent (add $250 annually).  Registered address will be 330 Rayford Rd., Suite 401, The Woodlands, TX 77386. Note that the RA is designated to receive only official mail – from the state, legal notices, etc. – not routine correspondence or junk mail, which will not be forwarded.

_____  Nevada:           UPS STORE 0715
                                        Attn: Diane Watson
                                        4616 W. Sahara Ave.
                                        Las Vegas, NV 89102-3796
                                        Tel. (702) 878-8999
                                        Fax (702) 878-5108
                                        store0715@theUPSStore.com
                       
Please do not select a different NV registered agent. This is the one with whom we have an established working relationship that benefits our clients (e.g., Diane sends us an email if something is up with one of our NV companies). She also knows everyone in the NV S of S’s office. 

Function of Registered Agent: The registered agent receives official mail from the Secretary of State, the Comptroller, and legal notices and correspondence. This is also the person who is served with process by the constable if the company is sued.  Most often the registered agent is an individual; but it can also be another company or corporation.

Address of Registered Agent: Note that the registered address must be a physical street address since a constable cannot serve a PO Box. The address cannot contain “Post Office Box,” “POB,”  “PMB,” “Unit XX-YYYYY” or other obvious indication that it is a postal box or the Secretary of State will likely reject it.  If re-filing is necessary because of such a rejection, it will be at the client’s expense. For anonymity reasons it is recommended that the home address NEVER be used as the company’s registered address or as the address of an initial manager.  Note: initial managers can use a POB.

Fees for Reg. Agent Services: If the attorney serves as registered agent in Texas, there is an add-on fee of $250 annually. Our function is to forward official company mail and accept service of process only. The registered agent can be easily changed by filing a form with a nominal fee.

Exclusions: The documents produced by this office are sophisticated, proprietary, and sought after by those who to copy them. We reserve the right to decline to file formation paperwork that lists a competing asset protection law firm as registered agent.

15.  Who will be empowered to sign Membership Certificates (check one)? 

________ the sole managing member
         ________ any managing member
         ________ both managing members (if there are co-managing members)
         ________ president (if officers are named)
         ________ secretary (if officers are named)
         ________ other: _______________________________________________________

16.  Who will be empowered to sign company checks (check one)?

________ any managing member of the company
         ________ both managing members (if more than one)
         ________ president (if officers are named)
         ________ secretary (if officers are named)
         ________ other: __________________________________

17. If you intend that the company will operate under a “DBA” (assumed name other than the official name at the secretary of state’s office), what is that assumed name?  This is not required at this point in the process, but if you already know what these DBA name(s) are, then list them here.  DBA’s can be statewide or county-by-county. We prefer to file these at the county level.  Checks should be printed in the DBA name.

            _______ Our DBA will be ______________________________________________

            _______ No DBA at this time

18. REAL ESTATE. After forming the company, will you need to deed any real estate into it? If so, please give details.  Note that the fee for deeds is $175 excluding county clerks’ recording fees. We will need a copy of your existing deed to prepare a deed into the company. 

_______ I am attaching a copy of the deed(s) to this checklist. Please go ahead and prepare one or more deeds (add $175 per deed excluding filing fees). If there is/are loan(s) against the property, specify one of the following as to any existing debt:

______ since it’s not strictly necessary to refer to existing indebtedness in the deed, don’t mention it

______ state that the company will assume the existing debt

______ the company will take the property “subject to” the existing debt

_______ I am not deeding properties into the LLC yet – maybe later.  If and when I’m ready to do that, I will send you a copy of the existing deed to the property to work from.

19. BUSINESS INTERESTS. After forming the company, will you be transferring any businesses into it or into one of the series?  If so, you won’t use a deed to do that, since deeds are only for real estate. We suggest a Bill of Sale to evidence the transfer. In some cases, if the business owns real estate, you may need a deed and a bill of sale. Fee for a simple Bill of Sale is $75.  Please supply details: ____________________________________

20. Management and Consulting Agreements (for clients establishing two companies)

_______ We would like to have management and consulting agreements included in order to facilitate capital flows between our two companies (add $350).
         _______ We do not need these agreements at this time.

21. Company book and shipping:

_______ the black vinyl notebook is OK.
        _______ I prefer the red and black leatherette (add $45) – heavier, display quality.

_______ UPS ground shipping is OK.
        _______ I prefer 2-day air (add $20 per shipping event)

Note: there are two shipping events.  One is from the printer to us, the other from us to you.
           
Ship the company book to:

_______ the company’s registered address shown above
        _______ my address shown below (we use UPS exclusively , so please supply a street address – UPS will not deliver to a PO Box).
                           

22. Do you have any special requirements or instructions?

                                                                       
                                                                       
                                                                       
                                                                        Person completing this form:

                                                               __________________________________________
                                                                        Name

                                                                __________________________________________
                                                                        Street Mailing Address for UPS Delivery

                                                               __________________________________________
                                                                        Email

                                                               __________________________________________
                                                                        Phone