Five Essential Aspects for a Foreigner to Establish an LLC in Texas, USA
Creating an LLC in Texas can be an excellent option for any foreigner wishing to expand their business in the United States.
The creation and management of a Limited Liability Company, also known as an LLC by its acronym in English (Limited Liability Company), could be considered the best option for foreigners to expand their business operations from anywhere in the world, make sales on popular internet sites (Amazon, Shopify, etc.), and even open bank accounts within the United States of America.
According to the Internal Revenue Service (IRS), LLCs are considered a business structure permitted by the policies and regulations of each State. The owners of LLCs are known as members, and most States allow these to include individuals, corporations, other LLCs, and foreign entities, with no maximum limit on members. Additionally, single-member LLCs are allowed.
It is not necessary to be a U.S. citizen or have Permanent Residence to form an LLC within the State of Texas. Foreigners must follow the same steps as citizens, which include choosing a name for the LLC, filing the Articles of Organization with the Texas Secretary of State, designating a Registered Agent with an address in Texas, and obtaining an Employer Identification Number (EIN) from the IRS. This accessible process allows international entrepreneurs to legally establish and operate their businesses in Texas.
Now, we briefly present the five essential aspects that anyone who is not a citizen or resident of the United States should know and why we recommend this business structure:
- Simplicity in Formation
Creating an LLC in Texas is a simple and straightforward process due to the clarity and accessibility of the requirements. The State provides a business-friendly regulatory framework that includes basic steps such as choosing a unique name, filing the Articles of Organization with the Texas Secretary of State, and designating a registered agent with an address in the state. Additionally, U.S. citizenship or permanent residence is not required, making it easier for foreigners to create an LLC. The absence of state income taxes on personal and corporate income also simplifies fiscal management, making Texas an attractive option for domestic and international entrepreneurs. The basic steps are highlighted below: • LLC Name: Choose a unique name and comply with the state's naming rules. Keep in mind that there are certain special restrictions or additional approval from state agencies for words that imply association with the government (FBI, CIA, etc.), words related to regulated activities (Bank, Trust, Insurance, etc.), words suggesting an incorrect type of entity (Corp, Inc., etc.), offensive or inappropriate words, and words that could cause confusion. It is therefore recommended to review or consult a specialist beforehand to avoid inconveniences.
• Articles of Organization: This is the fundamental legal document for forming the LLC and must be filed with the Texas Secretary of State.
• Registered Agent: Plays an important role in the formation and operation of the business. Their main responsibilities include receiving the legal registration documents, summonses, lawsuits, and ensuring the company's legal compliance. In short, all LLCs formed in Texas must designate a Registered Agent with an address in the same State.
• Operating Agreement: Although not mandatory, it is highly recommended to define the structure and internal rules of the LLC, establishing the structure, rights, and responsibilities of the members.
- Limited Liability Protection
One of the main advantages of an LLC is the limited liability protection it offers its members. This means that the owners' personal assets are protected if the company faces debts or lawsuits. For any foreign entrepreneur, this protection is crucial to minimizing personal financial risk when operating in a new market.
The State of Texas offers a favorable tax environment, with no state taxes on Corporate or Personal Income. This could be advantageous for foreigners, as the LLC structure can simplify tax planning and income management.
- Tax Benefits
Establishing an LLC in Texas offers several significant tax and operational benefits. First, Texas does not impose a state personal income tax, allowing LLC owners to enjoy higher net profits. Additionally, Texas has a business-friendly environment, with a relatively low franchise tax that only applies to LLCs with annual income exceeding a specific threshold. This means that many small businesses may be exempt from paying this tax. Additionally, an LLC in Texas provides limited liability protection, separating the owners' personal assets from the company's obligations, which protects their personal wealth in case of debts or lawsuits against the LLC. The flexibility in management and the operating structure of the LLC, along with the option to choose its tax treatment, makes Texas an attractive jurisdiction to establish this type of entity.
- Management Flexibility
LLCs offer great flexibility in terms of management and operating structure. LLC members can decide how they want to manage the business, either through member-managed management or by hiring external managers. This flexibility allows foreign entrepreneurs to tailor the LLC's management structure to their specific needs and business goals.
- Access to Markets and Resources
Establishing an LLC in Texas offers strategic advantages for international businesses. Texas is one of the largest and most dynamic economies in the United States, with access to a global market through its world-class infrastructure, including ports, airports, and advanced logistics networks. Additionally, Texas is known for its pro-business environment, with less stringent regulations and a favorable tax system that attracts foreign investment. An LLC in Texas also provides operational flexibility and limited liability protection, allowing international entrepreneurs to structure their businesses efficiently and minimize risks. Establishing an LLC in this state also facilitates expansion into the U.S. market and offers access to a diverse network of clients, suppliers, and business partners in one of the most prosperous regions of the country.
Texas has a robust economy and a well-developed business infrastructure, making expansion and growth easier. Additionally, foreign entrepreneurs can benefit from a business support network that includes Chambers of Commerce, Business Incubators and Accelerators, and high-quality professional services.
In our firm, we recommend creating an LLC in Texas to all foreign entrepreneurs for its simplicity in formation, limited liability protection, tax benefits, management flexibility, and access to a prosperous market and abundant resources. This business structure not only facilitates entry into the U.S. market but also offers the tools and protection needed to thrive in a competitive environment.
At CALA, we are here to guide foreign entrepreneurs through every step of the process of creating an LLC in Texas, ensuring they make the most of all the advantages this business structure has to offer. We handle everything from forming the LLC, Articles of Organization, Operating Agreement, to Registered Agent service, Virtual Office, obtaining the Employer Identification Number (EIN), and opening a reliable and secure bank account for your operations without needing to travel to the United States of America.
Partner Director