A limited liability company (LLC) is a unique type of business entity that is neither a corporation nor a partnership. An LLC has members, which can be individuals, partnerships, corporations or other types of legal entities. An LLC is subject to a state franchise tax. A certificate of formation, similar to a certificate of incorporation, is the document that legally begins the organization.
Once an LLC files its certificate of formation with the Texas Secretary of State, it is recognized as having been legally formed and licensed to operate. An LLC can file a certificate of formation online through the Texas secretary of state website 24 hours a day, seven days a week.
What Form to Use
A certificate of amendment, Form 424, should be used to alter a Texas certificate of formation. Amending a certificate of formation involves changing certain information that the state has on file about the company. The party must submit the form in duplicate to the Texas Secretary of State.
What Amendments Can Change
A party can amend an LLC's name, the registered agent, the registered office of the business or other articles or provisions in the certificate of formation. A registered agent can be an individual Texas resident or an organization registered and authorized to do business in Texas with a business office at the same address as the entity’s registered office. A person appointed or designated as an LLC’s registered agent must have consented in written or electronic form to serve as the LLC’s registered agent.
An LLC does not have to fulfill a filing requirement with the secretary of state when there is an ownership change, but if the registered agent or office information changed after a change in ownership, the LLC must update that information. There is a filing fee to change the registered agent of the LLC.
Steps to Amending Information
The first step is for the LLC to internally change the necessary information. Typically, an LLC changes management information by following the procedures for removal or resignation. These procedures are usually in the company’s governing documents, such as bylaws, regulations or company agreement.
When an LLC wants to change its business address, it can update the address with the comptroller, the state’s chief tax collector and accountant. The comptroller then sends the information to the secretary of state, which updates management records. Alternatively, an LLC may file an amendment to update management information. An amendment is not required; it updates the records for the secretary of state and the comptroller.
Requirements for Amendments
An amendment to an LLC’s certificate of formation must be approved by the affirmative vote of all of the company’s members. When the company has managers, but has not yet admitted its first member, the amendment should be approved by the affirmative vote of the majority of all the company’s managers. If the LLC has managers, an authorized manager must sign the certificate of amendment. If the company does not have managers, it will be managed by its members, and an authorized managing-member will sign the certificate of amendment.
An LLC can amend its certificate of formation at any time. It can do so regarding as many pieces of information it wants, as long as the certificate as amended contains only the provisions that could have been included in the original certificate of formation. An LLC can adopt amendments to change the language of an existing provision, add a new provision or delete an existing provision. If the LLC proposes to add many amendments, it should consider filing a restated certificate of formation.
Differences Between Members and Managers
A member of an LLC is a person that holds an ownership or membership interest in the company. An LLC must have at least one member. There are two ways an LLC can be governed: LLC can be governed by the members as a whole where every member has management authority. This type of LLC is a member-managed LLC. An LLC can also have a separate group of managers that govern the affairs of the LLC.
The managers of the LLC may or not be members. A certificate of formation must state how the LLC will be managed. An attorney can help individuals who created the LLC make this decision, but the secretary of state cannot assist with this determination.
Filing Fees for LLCs
As of mid-July 2021, the filing fee for a certificate of formation for an LLC is $300. The filing fee for a certificate of amendment is $150, and the filing fee for a certificate of correction is $15. An LLC can pay a fee by personal check, money order, LegalEase debit card or American Express, Discover, MasterCard and Visa credit cards.
Amending a Business Name
For an amendment regarding a business entity name, the certificate of amendment must contain the legal name of the entity and identify the type of filing entity, such as LLC. If the amendment changes the name of the entity, the name of the LLC as it currently appears on the records of the secretary of state should be stated. The LLC should provide the company’s date of formation and the file number assigned by the secretary of state.
The secretary of state will do a name search to check the new entity name for availability when the LLC submits the certificate of amendment. The document cannot be filed if the new name of the entity is the same as, or similar to, an existing entity or any name reservation or name registration filed with the secretary of state. A preclearance of a name or issuance of a certificate under a name does not authorize the use of a name in violation of another person’s rights to that name.
Protecting a Company Name
Filing or amending a certificate of formation does not mean that other companies can not try to use the company’s name. A business must take action to protect their intellectual property and goodwill. They should consult an attorney about what legal measures can help achieve these goals. Filing or amending a certificate of formation only prevents the secretary of state from filing a subsequent certificate of formation for an entity with a name that is not distinguishable in the secretary of state’s records.
Registering a Trade Name
Texas law does not allow a business to register its trade name. An LLC that does business under an assumed name, such as a “Doing Business As” or “DBA,” must file an assumed name certificate. The LLC must do this with the secretary of state and the county clerk in each county in which the business has an office.
Details on Amending Office Address
When an LLC amends its office address, the new registered address must be located at a street address where service of process may be personally served on the entity’s registered agent during normal business hours. The registered office cannot consist only of a mailbox service or telephone answering service, but the registered office does not have to be the entity’s principal place of business.
When Amendments Take Effect
A certificate of amendment takes effect when it is filed by the secretary of state. The effectiveness of the instrument can be delayed on the occurrence of a future event or fact, but may not be delayed by more than 90 days from the date the instrument is signed.
Who Signs the Certificate
Typically, a governing person or managerial official of the entity signs a filing instrument. The certificate of amendment does not need to be notarized. A person commits an offense if they sign or direct the filing of a document they know to be materially false, with the intent that the instrument will be delivered to the secretary of state for filing. The crime is a Class A misdemeanor, unless the party has the intent to harm or defraud another; then the offense is a state jail felony.
Corrections for TLLCs
A correction is different from an amendment. A person can correct a typographical error or a mistake in text in an LLC’s certificate of formation by using Form 403, a certificate of correction. Typographical errors include inaccurate records of an action referred to in the instrument; inaccurate or erroneous statements of fact; and/or defects in execution, acknowledgment or verification.
After the secretary of state files the certificate of correction, the original document is considered to have been corrected on the date that it was originally filed, unless a person was adversely affected by the correction. In that case, the filing instrument is considered to have been corrected on the date the certificate of correction was filed.
A certificate of correction can only be used to correct errors or inaccuracies in drafting or execution of a filed instrument. A certificate of correction cannot cancel a filing, such as undoing the LLC’s existence. A certificate of correction also cannot add, alter or delete a statement that would have caused the instrument not to conform to the law at the time it was originally filed.
Certificate Is a Public Record
A certificate of formation on file with the secretary of state is a public record. It can be disclosed to, and accessed by, members of the public. An LLC’s certificate of formation should not include confidential information like an individual member’s Social Security number. When the LLC is amending information relating to directors or governing persons, it should use a business or post office box address rather than a residence address because privacy concerns could become an issue.
Terminations and Reinstatements
An LLC is required to continuously maintain a registered agent and a registered office address in Texas. The failure of an LLC to maintain both these things may result in the involuntary termination of the LLC, which ends the right of an LLC to exist and operate in Texas.
An LLC that wants to wind up its affairs should first take the internal steps necessary to do so and then submit two signed copies of the certificate of termination. The LLC needs to attach a certificate of account status for dissolution/termination issued by the Texas Comptroller.
The certificate of account status indicates that the LLC has paid all taxes. The LLC cannot attach a printout from the comptroller’s website, as this certification is insufficient. The LLC will also need to pay the appropriate filing fee for the stated documents.
Different Types of LLCs
Texas is home to LLCs that have a nonprofit purpose. A nonprofit LLC is not automatically exempt from paying state and federal taxes and is subject to LLC fees. It must abide by state law requirements for LLCs.
Texas is also home to series LLCs. A series LLC provides in its governing documents for the establishment of a series of members, managers, membership interests or assets that have separate rights, obligations, liabilities and business purposes from the general LLC. It is possible to amend a certificate of formation for both types of LLC.
Organizing an LLC
An organizer is a person who has the capacity to contract for themselves or another party and assists with the formation of an LLC. Only one organizer is required to form an LLC, but there may be more than one organizer. The organizer must be a natural person 18 years or older, a corporation or another legal entity. There are no residency requirements for an organizer. The organizer must sign the certificate of formation.
- Texas Secretary of State: Form 424, Certificate of Amendment
- Texas Secretary of State: Form 205, Certificate of Formation (LLC)
- Texas Secretary of State: Form 401, Change of Registered Agent/Office
- Texas Secretary of State: Amendments and Corrections FAQs
- Texas Secretary of State: Business and Nonprofit Forms
- Texas Secretary of State: Formation of Texas Entities FAQs
- Texas Business Organizations Code: Sections 3.001-3.255, Formation, Existence, and Certificate of Formation
- Texas Secretary of State: Registered Agents FAQs
- Texas Comptroller of Public Accounts: Homepage
- Texas Comptroller: Change Mailing Address/Phone Number for Franchise Tax
- Texas Secretary of State: Business Filings & Trademarks Fee Schedule
- Texas Secretary of State: Terminations and Reinstatements FAQs
Jessica Zimmer is a journalist and attorney based in northern California. She has practiced in a wide variety of fields, including criminal defense, property law, immigration, employment law, and family law.