What You Need to Know about Your Articles of Organization

We frequently recommend limited liability companies (LLC) to our clients as a flexible entity structure among small business owners that provides governance and taxation guidance for multiple owners or families and shields personal assets from business liabilities.

To enjoy the benefits and legal protections of an LLC, however, owners must register their company with the state by filing articles of organization (sometimes called a certification of organization or certificate of formation).

Along with its company agreement, a LLC’s Articles of Organization are a formation document that establishes the company as a distinct legal entity, separate from its owners. This distinction is crucial because it underlies an LLC’s limited liability protection. Articles of Organization also contain basic information about the business, such as its name, location, purpose, and management structure.

Required Information for Articles of Organization

Articles of organization act like a business charter. It officially forms the LLC with the state and serves as the company’s legal and structural backbone. Because LLCs are statutory entities, they are legally formed only when the Articles of Organization have been filed and approved by the Secretary of State.

While the Articles of Organization are typically only a couple of pages long, it contains essential information about the business. The information required in the Articles of Organization in Texas, typically includes the following:

  • the LLC’s name and business address
  • business purpose of the LLC
  • whether the LLC is to be member-managed or manager-managed
  • names and addresses of owners/members (if member-managed) or managers (if manager-managed)
  • name and address of the LLC’s registered agent
  • name and signature of the person filing the articles (i.e., the organizer, who may or may not be an LLC owner; the organizer could also be a third party, such as an attorney)
  • effective start date (if different than the filing date)

An attorney should be consulted to draw up the Articles of Organization in accordance with state law but also to discuss the importance and reasons for a member managed or manager managed LLC. Even if a filing form is used, consulting with an attorney is prudent to ensure that the Articles of Organization are properly drafted.

How to File Articles of Organization

Articles of Organization are filed with the secretary of state.  Filing fees are currently $325.00 for a regular LLC, a series LLC includes additional fillings.

After the Articles of Organization are filed, the Secretary of State will review them. If they are approved, the state issues an official document verifying that the company meets LLC statutory requirements and is authorized to conduct business here. This document is called a Certificate of Filing. It is commonly needed to open a business bank account, apply for a business loan, contract with other businesses, and register an LLC in a different state.

Articles of Organization can be revised once the state has accepted them. This might be necessary if information in the Articles changes, such as the business address or registered agent address, the management structure (e.g., from member-managed to manager-managed), or the name of the LLC. The amendment is also filed with the Secretary of State. Expect to pay an additional processing fee for the amended articles.

Additional Steps for Forming an LLC

Articles of Organization are one of two foundation documents for LLCs.  The other is the LLC Company Agreement, which defines the structure of the company’s finances, functions, and decision-making processes, as well as each member’s duties, powers, and obligations.

Not all state LLC laws require a Company Agreement, but we, of course, highly recommend it. Without a Company Agreement, the LLC lacks a roadmap for how to handle issues such as transfer of interests, voting rights, distribution of profits and losses, the retirement or death of a member, whether and how members may sell ownership shares, member conflicts, and succession planning. In the absence of an operating agreement and bylaws, the LLC would be forced to follow default state operating laws.

Forming an LLC can also include the following other steps:

  • applying for an employer identification number (EIN) for federal tax purposes
  • registering with the state comptroller’s office
  • opening business bank and credit card accounts to separate business and personal finances, which helps to maintain the LLC’s liability shield
  • setting up a merchant account for payment processing
  • registering as a foreign LLC in states outside the state of organization where the company intends to conduct business
  • determining how the business will be taxed (e.g., as a sole proprietorship/disregarded entity, partnership, or corporation)
  • filing an annual PIR report and paying an annual fee
  • purchasing insurance to protect the business and its owners
  • filing a report disclosing certain information, including the beneficial owners of the LLC, with the federal government under a new law called the Corporate Transparency Act (effective January 1, 2024; if the LLC is formed before January 1, 2024, the initial report is due by January 1, 2025)
  • obtaining tax and legal guidance

This last step is crucial to your business’s success. Without professional legal advice, you could end up making a mistake that jeopardizes your LLC before it even gets started. And as your LLC matures, you may need legal help regarding contracts, employees, intellectual property, conduct policies, bylaws, taxation, banking, growth, litigation, and other issues.

Articles of Organization are just the beginning of your business journey. Wherever the road ahead takes you, our attorneys are here to help you navigate it. Small businesses are the heart of our local economy, and we want to make sure you are supported at every step.

If you would like to know more or to take advantage of our complimentary initial meeting call or email our office to schedule – info@tcvlaw.com or (512) 263-5400.