Limited Liability Partnership (LLP) in Texas is governed by state law and must be registered with the Secretary of State. LLPs are often formed by licensed professionals such as attorneys, accountants, or physicians with the intention of protecting each individual partner from liability for the professional malpractice of the other partners. However, any group of two or more people can form a Limited Liability Partnership in Texas. A limited liability partnership is a general partnership where the partners' individual liability for the LLP's obligations is substantially limited. LLP's were designed in Texas to provide certain professions limited liability, and these professions originally included physicians, architects, certified public accountants, attorneys, and veterinarians, but it eventually evolved into something bigger and now applies to all partnerships. Texas LLP requires an extra filing fee of $200.00 per partner and must have liability insurance of at least $100,000.00. The only time that an LLP partner will be liable in excess of his contribution is when the obligations are attributable to the said partner's fault. In terms of taxation, LLP's are a flow-through entity and do not pay federal income tax. Should you decide to register an LLP in Texas, our dedicated Business Specialists will be able to assist you through the entire process.
What are the steps needed to form a limited liability partnership (LLP) in Texas?
Name your Limited Liability Partnership:
In Texas, an LLP's name must contain the phrase "Limited Liability Partnership" or an abbreviation equivalent to that phrase. Unlike most other states, the name of a Texas LLP is not required to be distinguishable from the names of other business entities in the state. You cannot pay a fee to reserve a name for an LLP in the state of Texas.
File for your LLP registration
Registration must be filed with the Texas Secretary of State (SOS), and paying the filing fee required. The following information is needed to complete this process: A. Your chosen LLP name; B. Your LLP's federal employer identification number (EIN), if you have already secured one; C. The number of general partners at the time of your registration; D. A statement detailing the nature of the partnership's business; E. Your LLP's principal business address; and F. The effective date for the filing.
No registered agent required
Texas LLPs are not required to have a registered agent; only foreign or non-Texas LLPs doing business in Texas must have a registered agent.
Preparation of your partnership agreement
While it is not required in Texas for LLP's to have a partnership agreement, it is highly recommended to have one for your protection, and our office can assist you in its preparation. This partnership agreement does not need to be filed with the state.
Obtain an EIN (Employer Identification Number) if you don't have one
Since an LLP is a separate and distinct legal entity from its owners, it must obtain a federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This requirement is mandatory whether or not your LLP has employees. Your EIN can be obtained free of charge by completing an online application at the website mentioned below. https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers
Register with the Texas Comptroller of Public Accounts (CPA)
This is a requirement if your LLP is selling goods and collecting sales tax. The state of Texas also collects an annual franchise tax on LLPs. Your registration can be done online, through the mail, or in person at the CPA field office. Our company will be able to assist you in this process through our dedicated Business Specialists.
Secure your business license:
A local or state business license may be needed depending on the kind of business you run and its location. These licenses might include any licenses related to your: profession or occupation, specific goods or services that you offer, an assumed or fictitious name for your business, or because of health and safety measures.
File annual renewals
It is required in Texas for LLP's to file for annual renewal of their registration and the payment of the annual fee. This renewal falls due at the anniversary date of your LLP's registration. A blank Renewal of Registration of a Limited Liability Partnership form (Form 703) can be accessed through the SOS (Secretary of State) website. The same set of documentary requirements as to when you registered your LLP is required to complete the renewal process.
Mandate on professional services LLP's
If you are interested in forming an LLP that will provide professional services, we strongly advise you to review the state law and regulatory board rules concerning your profession. Our company will assist you with this important task as, more often, you may find restrictions in forming an LLP in Texas. The state has specific provisions regarding partnerships formed by doctors of medicine, doctors of osteopathy, podiatrists, physicians, and physician assistants. If you belong to any of the mentioned professions, be sure to review Sections 152.055 and 152.0551 of Texas's partnership law.
Secure malpractice insurance
An LLP will protect you personally from creditors seeking to collect unpaid obligations solely owed by the LLP. More often, if you are a licensed professional and your LLP provides professional services, you are likewise protected from liability for the malpractice of the other LLP partners and claims from people who were personally injured in connection with the LLP, provided it has nothing to do with your own professional malpractice or torts. Professionals are not protected from their own malpractice. It is recommended that you secure professional liability insurance where applicable and such coverage must meet the state's minimum requirement.
An LLP partner can only be held personally if at the same he or she:
Personally guarantee the repayment of any business loan
Engages in professional malpractice such as awfully mishandling a client's case or completely mismanage the treatment of a patient
Intentionally or negligently commit a tort.
If you have second thoughts in establishing an LLP in Texas, an alternative for you to form your business is an LLC or S Corporation. Either way, our business will be able to assist you accordingly. For more information on business entity choices, please feel free to contact us, and our dedicated Business Specialists will be more than happy to assist you.