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Reinstate a Texas LLC

How to Start an LLC

If you’re looking to reinstate or reopen a dissolved LLC in Texas, you’ll need to learn about the process and determine whether or not it’s the right choice for you. From weighing the cost of reinstatement to assessing whether or not forming a new LLC might be more beneficial, it takes a good understanding of LLC legislation, including requirements, taxes, and the annual report obligations, to find your answer.

To help you find out if the best path forward is reopening your Texas LLC with an eye towards benefits, including asset protection and possibly an anonymous LLC setup, this article is going to take a look at what goes into this process, including drafting an operating agreement.

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What is an LLC?

A limited liability company (LLC) is a type of business structure used in the USA. It’s predominantly used as a way to help protect a business owner from any liabilities or debts from the business as it keeps them as separate entities.

An LLC is classed as a hybrid entity as it brings together traits from both corporations and partnerships or sole proprietorships. For example, the limited liability aspect of an LLC is similar to that of a corporation, whereas the option for flow-through taxation to members is something you would find in a partnership.

Why would an LLC dissolve in Texas?

There are many valid reasons that you would dissolve an LLC in Texas, so the answer to this question is often case-specific and depends on the nature of the LLC in question. All LLCs are subject to the state laws and requirements for LLCs in that state. So LLCs in Texas will have to abide by the Texas state laws. By adhering to these laws, your LLC has legal permission to operate and function as a legal entity.

Although there are countless reasons why an LLC might decide to dissolve, there are a few common issues that result in this. Some of these include:

  • Failing to file annual reports or pay fees on time
  • Missed tax payments or underpayments of taxes
  • Failing to appoint a registered agent for the LLC, or not updating details about the registered agent. This can cause miscommunication between the LLC and the state, so things like a summons or government letters may be missed.
  • Operating as an LLC without the proper paperwork or state licensing

Compliance regulations and requirements for LLCs vary from state to state. So for example in Texas, almost all LLCs are expected to pay a state franchise tax. If they don’t, then they could fall foul of compliance regulations and requirements, which is a big problem for the LLC.

In some cases, you might not be fully aware of why your LLC was placed under the dissolved status by the state. If you would like more information about this process for your LLC, it’s advisable to speak with the Secretary of State in Texas. Learning about why this has happened can give you a better idea about your next steps, such as choosing to reinstate your LLC or start a new LLC instead.

What does it mean for an LLC to dissolve?

When an LLC is dissolved, it stops the company from enjoying a legal business entity status. This essentially means that they can’t operate anymore, but they also don’t have to pay any fees or taxes either. Although the LLC is dissolved, there is nothing stopping the members of the dissolved LLC from starting a new company or LLC.

Types of dissolvement

As discussed, there are many different reasons why an LLC might dissolve. In some cases, it may be due to some form of negligence like missing tax payments, but in other cases, it might be beneficial for the members to dissolve the LLC if they want to change the structure to something else like a corporation. As a result of this, there are a few different types of dissolvement, including:

  • Judicial: A judicial dissolvement is one brought forth by the courts, usually as a result of the LLC failing to follow state or federal laws. In many cases, these types of dissolvement are the result of a lawsuit brought against the LLC by former members of the company as a way to separate themselves from the business.
  • Administrative: An administrative dissolvement is one brought forth by the Secretary of State. This usually happens when the LLC has failed to comply with certain state laws or if they haven’t filed annual reports. It’s worth mentioning that the Secretary of State has a broad mandate, so dissolvement can happen for many reasons at the discretion of the Secretary of State.
  • Voluntary: A voluntary dissolvement happens when members of the LLC decide to close the business. This happens either when dissolvement triggers happen, like the death of a member, or as a result of a member's vote to dissolve the LLC.

List of reasons why an LLC would dissolve

The reasons behind dissolving an LLC vary depending on the nature of the business and its operations. As a result of this, there are many different reasons why an LLC might dissolve, either voluntarily or involuntarily. Below is a list of common reasons why LLCs would dissolve:

  • Low revenue flow
  • Company mismanagement
  • Poor accounting standards
  • Financial collapse or bankruptcy
  • Issues with products or services offered
  • Disputes between members
  • Failures in succession planning
  • Changes in the business plan or structure

How to reinstate an LLC in Texas

If you want to reinstate an LLC in Texas, you’ll be working towards gaining active status to your LLC that was previously dissolved or revoked. It’s most appropriate to reinstate an LLC if it has a strong existing customer base or if the LLC has rights to intellectual property.

In Texas, reinstating an LLC requires filing for either an Application for Reinstatement alongside a Set Aside Tax Forfeiture (form 801) or obtaining a Texas Certificate of Reinstatement (form 811) from the Texas Secretary of State. If the dissolvement was the result of an underlying issue with the LLC, then this will also need to be addressed before reinstating the LLC.

You’ll also have to update your LLC information so that it’s all up to date and accurate before moving forward with reinstatement. Once all of this is done, you’ll need to submit your application and make payment before the process continues.

The path you take when reinstating your LLC in Texas depends on why your LLC was initially dissolved. If it was due to failure to pay the franchise tax, then you’ll need to file the Application for Reinstatement alongside the Request to Set Aside Tax Forfeiture. If it was for another reason, then you’ll need to use the Texas Certificate of Reinstatement.

To get your Texas LLC back into business, you can apply for reinstatement. Texas has two reinstatement forms. The one you’ll use depends on why your Texas LLC was terminated.

Regardless of the path you take, you’ll also need to submit some paperwork to the Texas Secretary of State, which includes:

  • Texas tax clearance letter from the Comptroller of Public Accounts
  • Texas LLC amendment if you want to change the LLC name or the registered agent
  • Any outstanding fees, fines, or penalties.

How does this process differ depending on the state you operate in?

There are a few notable differences between states when it comes to the reinstatement of an LLC. At its core, the process follows these steps:

  • Filing the appropriate forms and paperwork
  • Filing forms with your state of choosing
  • Paying any associated penalties or fees

There are certain differences between the states though, so in Texas, you’ll need to work with the Secretary of State. Other states might require you to reinstate your LLC through the Department of Revenue or another branch of the government. Another area where things may be different between states is the reinstatement fee, as some states simply ask for any overdue payments to be made. Others, like Texas, have a separate fee attached to the reinstatement of an LLC.

How much does it cost to reinstate your LLC in Texas?

Unlike some other states, in Texas you have to pay a separate fee to reinstate your dissolved LLC. This is a flat rate of $75 for involuntary termination, with the option of expedited reinstatement for an extra $25. For voluntary terminations of an LLC, the fee is lowered to $15 instead of $75.

Where do you file Articles of Reinstatement for LLCs in Texas?

Once you have your filing fee and Articles of Reinstatement ready, you can mail them to the following P.O box:

P.O Box 13697,
Austin, Texas 78711-3697

Alternatively, you can deliver it directly to the following address:

James Early Rudder Office Building,
1019 Brazos,
Austin, Texas 78701

You can also fax in your documentation to 512 563-5709, but you’ll have to include your credit card information.

Is it better to reinstate my LLC or start a new one in Texas?

Determining whether or not reinstatement of your LLC is better than starting a new LLC entirely depends on your situation. Reinstating your LLC gives you a few notable benefits, such as:

  • It’s a faster method compared to creating a new LLC
  • You can retain key LLC information such as the company name
  • You’ll have access to historical documents, records, and paperwork
  • You can retain existing customers and branding elements
  • You’ll get limited liability protection from the date of dissolution, so your personal assets are protected between dissolution and reinstatement of your LLC.

Reinstating your LLC isn’t always the right move, though. Certain situations might make it more advantageous to start a new LLC. Some of the benefits of starting fresh includes:

  • You’re starting with a new business, so it’s a clean slate
  • Useful if you want to target new markets or explore new opportunities.

Frequently asked questions

Yes, you can reinstate your LLC in Texas - provided that you fulfill the following tasks:

  • Filing for annual franchise tax and information report forms
  • Paying any tax, penalties or interest payments
  • Submitting a Tax Clearance Letter Request for Reinstatement
  • Submitting the above documents to the Secretary of State
  • Paying any Secretary of State filing fees

If your LLC expires in Texas, you’ll need to cease company operations. This includes:

  • Signing up new customers
  • Selling products
  • Working on unfinished projects
  • Advertising and marketing

You’ll also have to pay off any outstanding debts, begin the process of distributing any company assets and file your final tax returns.

The costs associated with reinstating an LLC vary from state to state, but in Texas, there’s a $75 fee for reinstating an involuntary termination or $15 for a voluntary termination of an LLC. There’s also the option to pay an extra $25 for expedited reinstatement of an LLC.

Answering this question effectively requires an understanding of your situation and goals for your LLC. Generally speaking, though, it’s best to reinstate your existing LLC instead of starting over. Reinstatement means that you’ll enjoy limited liability during the period of dissolvement, whereas you lose this with a new LLC. It also tends to be faster and gives you a chance to hold onto branding and existing customers more easily.