If you’re starting a new business in Texas, your initial step will be the formation of an Texas LLC. We explain the steps to form an LLC in Texas.
Establishing an Texas LLC not only provides the vital benefit of safeguarding your personal assets, as denoted by the term “limited liability,” but also lends legitimacy to your business in the eyes of prospective customers.
In this comprehensive guide, we will guide you through the entire process of forming your Texas LLC, ensuring that your business commences on a solid foundation. It is advisable to bookmark this page, as the process may span several days from initiation to completion.
To form an LLC in Texas, there are 2 main options to consider:
You can go online and visit the Texas Secretary of State’s website and do it yourself or you can use an LLC service.
Our top 3 recommended LLC services:
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Setting up a Limited Liability Company (LLC) in Texas is relatively straightforward.
Steps to Form an LLC in Texas
Step 1. Choose a Name for Your LLC: In Texas, the name of your LLC must be unique and not be confused with any other entity names currently on record with the Texas Secretary of State. It must end with “Limited Liability Company”, “LLC”, or “L.L.C.”. You can check name availability through the Texas Secretary of State’s website.
Step 2. Appoint a Registered Agent: A registered agent is a person or business entity authorized to do business in Texas who agrees to accept legal papers on the LLC’s behalf if it is sued. They must have a physical street address in Texas.
Step 3. File a Certificate of Formation: You need to file Form 205 (Certificate of Formation) with the Texas Secretary of State. This document establishes your LLC in Texas and includes details like your business name, registered agent information, whether it’s manager-managed or member-managed, and more. There is a filing fee that needs to be paid at the time of submission.
Step 4. Create an Operating Agreement: Even though Texas does not require it, an Operating Agreement is highly recommended for all LLCs. This document establishes how your LLC will be run, including how decisions will be made, how profits will be distributed, and what happens if a member wants to leave the business.
Step 5. Obtain an EIN: Most LLCs are required to get an EIN from the IRS. This is also known as an Employer Identification Number and is used to identify your business for tax purposes. Even if you don’t have employees, LLCs are typically required to obtain an EIN. You can apply for this for free on the IRS website.
Step 6. Register for State Taxes: Depending on your business, you may need to register for one or more forms of state tax. For example, if you will be selling goods in Texas, you’ll need to register for a sales tax permit. Check with the Texas Comptroller of Public Accounts for details.
File Annual Reports: Texas does not require LLCs to file an annual report, but you are required to file an annual Franchise Tax report. Check with the Texas Comptroller’s Office for specifics on this requirement.
This page will provide you with all the necessary steps to do a Texas entity name search, draft a Texas LLC operating agreement, and answer questions like, can I be my own registered agent in Texas? and how long does it take to get a Texas LLC? and ensure your Texas LLC is properly formed.
If you want to use an LLC service, visit our list of the best LLC services in Texas.
How Much Does it Cost to Form an LLC in Texas?
Answer: The Texas state filing fee is $300.
You must file your Certificate to Form an LLC with the State. Additionally, you will need to pay a $300 filing fee to the state of Texas. To get your LLC registered in Texas, there are several steps you need to take.
Hiring a professional LLC formation service is an affordable way to set up an LLC in Texas.
I recommend Northwest Registered Agent for LLC formations in Texas.
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LLCs are subject to pass-through taxation. Hence, your LLC won’t bring you a massive tax burden in Texas. These are the fees and taxes that must be paid when forming an LLC within Texas.
Texas State Fees
|Certificate of Formation Fee
|Name Filing Fee
|Name Reservation Fee (If needed)
Texas does not require you to reserve an LLC name. Your LLC name can be registered at the time you register it.
A Name Reservation is required if you want to keep the name for a long time without having to register your LLC. You can renew it by paying $40 Your LLC name will remain in reserve for an additional 120 days. Name Reservation may be required in some states.
The Franchise Tax rule states that LLCs must pay this tax annually. The annual Franchise Tax report is the LLC’s annual revenue report.
The amount of franchise tax for Texas is lower than other forms of business ownership. There may be tax benefits for women-owned businesses.
Texas State Taxes
|Texas State Tax
|Franchise Tax (For Retail & Wholesaler)
|Franchise Tax (For other than retail & wholesaler)
Steps to Start an LLC in Texas
Step 1 – Name your Texas LLC
Name your company. Once you have chosen a name that you like, make sure it isn’t confusing with another company. Here are some things to consider.
These are the words you need to use
Section 5.5056, Texas Business Organizations Code, provides a simple guideline for naming your company.
Texas LLC names must include one of the following:
- Limited liability company
- Limited company
- Abbreviation of one or more of the phrases above, such as LLC, LC or Ltd. Co.
Texas current regulations prohibit you from using the words “limited” and “company” alone to identify an LLC.
Your LLC must also have a name that is distinct from other Texas businesses. Your company name must be distinctive enough to avoid confusion with other businesses.
Texas Name Search Page
Words You Can’t Use
You’re not quite done yet. Also, you need to make sure you don’t use words that aren’t allowed. These additional rules are listed on the Texas Administrative Code website of Secretary of State.
An LLC cannot use another company’s name. It cannot have a name that could be confused with government agencies or companies.
You are prohibited by the naming rules from using these words:
- Anything that could make people believe your company is part a government
- Any language implying that your LLC does something illegal
- “Grossly offensive” words
- “Olympic” and similar words
- “Bank” and similar words
- “College” and similar words
- “Veteran,” “Disabled,” “Spanish,” and similar words are used if the name suggests that the entity is intended to benefit war veterans and their families.
- “Lotto” and “lottery”
Remember, however, that you must obtain a license to operate your business and/or permission from the governing entity if your business name is anything that would require a professional license.
When naming an LLC in Texas, a good rule of thumb is to not allow anyone to approve the name unless they have provided proof.
Find the right name for your LLC
You will need to search for current business names before you submit your name. This can be done through the Secretary Of State, as you can with most states. To do this, you will need a SOSDirect account. A fee will be charged for each search.
You can also use the Taxable Entity Search, which is easier and more cost-effective. This website allows you to search multiple names or word combinations free of charge. This way, you can submit a name confident that you’ve done all your research and it didn’t cost anything.
Texas DBA: Use a fictional business name
You can change the name of your company after you have named it. To do this, apply for an assumed name (also known by DBA or “doing business as”). These names will help you identify who is the owner of your company. It is also possible to make clear that your company and companies with similar names have different owners.
It is easy to get a DBA. The Texas Business and Commerce Code Chapter 71 provides details regarding assumed business names. An assumed name certificate must be filed with the Clerk of the County or Counties where you intend to do business.
The following should be included in the certificate:
- The DBA that you would like to use
- Name of your LLC
- Texas: Where was your LLC organized?
- The DBA’s life expectancy (not more than 10 years).
- Your principal address, either inside or outside Texas, is the street or postal address.
- The counties where your LLC conducts business with the DBA
The Secretary of State provided a form DBA certificate on its website. Check with your county clerk to see if there are any additional requirements that your certificate must comply with. While the Secretary of State charges a $25 filing fee for the certificate, you should check with your local office to see if there are any additional fees.
Step 2 – Appoint a Registered Agent for your LLC
Each Texas business must choose a person to receive mail and serve process. These individuals, known as registered agents, are the point of contact between your company and the public.
Service by process refers to legal terms for legal documents or business letters. Your agent allows the state and the public to communicate directly with you.
This address will be used if the state has to contact you regarding your business. Your Texas registered agent will receive the paperwork if your LLC is sued.
It’s not as easy as it looks to choose a registered agent. Some owners do it all themselves. However, more experienced individuals hire companies to act as their registered agents. These agents use their offices to receive service of process and mail correspondence.
You might be tempted to become your own registered agent for many reasons.
- It’s affordable: You don’t have to pay someone for something that you can do.
- It’s easy: Your only contact and address information that you need to be current is yours.
- All important documents will be sent to you personally.
However, there are good reasons not to be your own agent.
- No privacy: Your address will be made public on the websites of the Secretary of State and Comptroller.
- Junk mail/spam: Public-facing addresses are subject to junk mail and a limited amount of legitimate mail.
- No breaks: Registered agents must always be available during business hours. They are not allowed to take time off.
- Business interruptions: If the address of your agency is the same address as your business, clients and business could be affected by your duties as an agent. It could be embarrassing for your business if you’re served with a lawsuit right in front of your customers.
- If you forget something: It is your responsibility. Always ensure that your agency address and contact information are correct and current. You are responsible for any mistakes or missing items.
Registered agent service is the best choice. It is their address that people see, and not yours. Their job is to ensure you don’t miss any important information. This will allow you to focus on your business.
If you are looking to register a foreign LLC in another state, a registered agent service may be helpful. Find a company that has business in all of those states and pay one fee for multiple offices and agents. Then let the registered agent handle the details.
Step 3 – File your Texas LLC Certificate of Formation
Your certificate of formation of your LLC is one of the most important documents you will file.
Texas law states that filing a certificate is what brings your LLC into existence. Your company is a concept before the filing. It’s now a legal entity that can sign contracts, and conduct business.
What should I include in my Texas Certificate of Formation
Texas Business Organizations Code Section 3.005 requires that your certificate of formation include:
- Your Texas LLC name
- Your LLC’s purpose (which can also be described as “any lawful purpose”)
- You don’t want your company to be around forever. So you need to decide how long the company should last.
- The LLC’s registered street and postal addresses
- Name and address of the registered agent for the LLC
- Each member of the LLC must provide their name and address.
It’s a good idea, before you file your certificate to inquire about any additional requirements.
A professional LLC formation service is also available if you want to save time and avoid the headache of filing your LLC.
Texas LLC Filing Fee
The Texas Secretary of State fee schedule states that you must pay a $300 fee to obtain your certificate of formation.
After processing, the Secretary’s Office will issue an acknowledgment. This acknowledgment proves that (1) your LLC is valid and (2) it can conduct business.
Learn More: What Does it Cost to Form an LLC In Texas?
Texas LLC Processing Time (Normal and Expedited).
The Secretary’s office estimates a Normal processing time is 5-7 business days. You can request expedited processing for $25 per file if you require it earlier.
Expedited processing in Texas means that the document will be processed within the first business day after the Secretary of State has received it. However, this is not always true.
How you send your certificate may impact the processing time. Documents sent by mail or fax could take up to 40 business days. Documents sent by fax or mail can take up to 4-5 days for expedited service.
Non-expedited documents sent electronically to the Secretary of State (through the SOSUpload System) can be processed within 4-5 days.
These times are subject to change because of their workload. The office informs you that they can’t guarantee accuracy. When you file, be sure to ask about the turnaround times.
The Secretary of State’s Office asks you to include a cover letter along with your certificate requesting expedited processing. Your name and contact information should be included in the cover letter.
Step 4 – Draft your Texas LLC Operating Agreement
Operating agreements, also known as company agreements, are contracts between you (the owner) and other members of your LLC.
These are the rules that govern how your company conducts business. Although Texas LLC law does not require that you have one, we recommend you do so. It is worth the time to create the contract.
You are likely a planner and able to think things through if you form your own LLC. Even the most experienced business owners cannot predict what might happen in the future.
An operating agreement can help you handle unexpected situations before they become a problem.
The operating agreement should contain all relevant information about the LLC. Your company may have six LLC owners (LLC owners), but they won’t all be doing the same thing. One person might put up the most money, and the other might manage the business.
Each person is listed in the operating agreement and their expected work hours. It might be a good idea for an LLC member who is a passive investor to pay more if the company requires more money. Managers might have a responsibility to cut down on business spending.
These contracts are great because you can be as specific as you like for each member of your LLC. You can also set how members can purchase shares in the company or what their rights are.
The operating agreement outlines what happens if someone fails to perform their job. Are they allowed to be fired? You have the right to decide if you have an operating contract. If you don’t have an operating agreement, you leave the decision up to the state law. This could not lead you to the desired result.
These are just a few uses of LLC operating agreements. An operating agreement can also include:
- They set out the rights and obligations of LLC members. The operating agreement should state that one LLC member will be responsible for managing the business or running the books.
- These include whether an LLC has a member manager or non-member manager, and what the manager can do. Managers have particular duties to the company as well as the members. These should be stated in the operating agreement.
- These documents outline the legal rights and obligations of the LLC. The operating agreements should also detail how the company can conduct its business day-to-day.
- These rules outline how new members can join the company. Also, they have rules for how members can exit.
- They determine how and when members are paid their profits. They may also be able to create various types of membership or payment schemes.
- These indicate whether managers or members are in charge. Also, they explain how to fire and hire managers.
- These guidelines outline how and when an LLC should be disbanded. While you may not wish to do so now, it might come in the future. It is best to plan ahead and think about the possibility.
- They explain how to modify the rules. In the future, you may have to modify your operating agreement. You should establish the rules for changing your operating agreement.
Texas Business Organizations Code Section 101.051 allows for you to use your certificate form for the same purposes that an operating agreement. Although you might be tempted not to create an LLC operating agreement, we strongly recommend it.
You don’t need to file an operating agreement with the state, unlike the certificate of formation. It is your contract. These items will be included in your articles. However, you must amend the articles each time the company changes its rules. It is costly, time-consuming, and expensive to file an amendment (with a $150 fee).
After all members have signed it keep it safe and make copies. A good operating agreement should be available as a reference for your business.
Step 5 – Get an EIN (Employer Identification Number) for Your Texas LLC
EINs are numbers used by the IRS to keep track of tax-paying companies. An EIN is your LLC’s social security number. While not all LLCs require one, many do. It is important to know when you will need one.
These are the most frequent reasons you might need an EIN.
- Is there more than one member of your LLC?
- Are there employees in your LLC?
- Does your LLC get taxed as either a C-corporation or an S-corporation?
If you answered yes to any of these questions, then you will need an EIN. Note that banks may require an EIN in order to open a bank account for LLCs.
Never pay anyone to do this for you unless it is part of a larger package.
How Much Does it Cost to Form an LLC in Texas?
Answer: The Texas state filing fee is $300.
An LLC is more cost-effective than any other business structure. To form an LLC in Texas, there are fees and charges. LLCs are subject to pass-through taxation. Hence, your LLC won’t bring you a massive tax burden in Texas. These are the fees and taxes that must be paid when forming an LLC within Texas.
Texas Foreign LLC
You can form a Foreign LLC by filing the Certificate of Foreign LLC with the Texas Secretary Of State. Foreign LLCs permit you to operate your business across multiple states.
To form your foreign LLC in Texas, you will need to submit additional documents such as the Certificate of Foreign LLC and the Certificate of Good Standing.
You must complete the Application for Registration as a Foreign Limited-Liability Company to set up an LLC in another country. For more information, see our guide on Texas Foreign LLC. This will explain the steps involved in filing a foreign LLC.
Steps After Starting Your Texas LLC
Congratulations! Congratulations! Although it may seem small, this is a significant step toward your goal. Do not stop. You have a few other things that you can do to protect your business and yourself.
Register for a Business Bank Account
For several reasons, your company should have its own bank account.
- Accounting: Your goal is to make money. If you don’t know how much money your company deposits and spends each month, you can’t tell whether you’re making any money.
- Credit: Even the most successful businesses need to borrow money. However, you don’t want your personal credit to pay for business expenses. Separating company money helps to build company credit that can be used for business purposes.
- Personal Asset Insurance: Separating your company’s funds from your personal money is what makes an LLC a good idea. You risk losing this protection if you do not have a business bank account.
It should be clear what the accounting reasons for separating money are. Separating money should be obvious. Keeping financial records of income and expenses is a key part of running a business. It is easiest to use different accounts.
This is the most important point. Protecting yourself against legal liability is crucial. Your personal assets are not at risk if your company is financially independent and sued by another party.
Lawyers call this company/individual separation
Get Business Insurance For Your Texas LLC
It can be easy for you to get lost in all the legalities of starting your business. It is important to ensure that your business is protected by obtaining the right insurance policies. Your business will determine the type of insurance you need. However, there are some policies that you might want to consider:
- General Liability Insurance: This insurance is required if you sustain an injury to your property. This insurance covers legal representation and damages.
- Commercial automobile insurance This is similar to your automobile insurance. It covers your drivers and vehicles.
- Workers Compensation Insurance: Workers’ compensation policies cover employees for injuries sustained on the job. Texas law doesn’t require that companies have these policies, unlike many other states. However, it is smart to have it because it protects you against injury lawsuits from your employees.
- Commercial property insurance This covers your property in case of damage. Flood insurance is usually a separate policy.
- Professional liability insurance for lawyers, architects, doctors, and other professionals. It covers legal defense and provides protection in the case of a malpractice lawsuit.
Keep Your Texas Company Licensed
After your Texas limited liability company has been formed, it is important to ensure that you follow the law. Failure to comply with legal requirements can result in your business being stopped by the state. You may also be subject to tax penalties or fines.
Texas Business Permits and Licenses
Texas does not require any general business licenses or permits. This is accomplished by your certificate of formation. Remember that each city or county may have its own rules. Check with the relevant authorities to determine if they require a permit for your business.
Some types of businesses may also need professional licensing. Think doctors, lawyers, or architects. For information on professional licensing requirements for your business, contact the Texas Department of Licensing and Regulation.
Texas Tax Requirements
Franchise taxes are imposed by the state on LLCs. The franchise tax is calculated on the “net surplus” (a number that is difficult to calculate, but roughly translates into the business’s assets minus members’ contributions). This state accountant’s website has forms that will help you determine this amount when it comes to tax time.
Other tax obligations may apply to you. Register for and pay the employment taxes if you have employees. If you sell goods, you must collect sales taxes and pay them to the state. To ensure that these issues are addressed promptly, you should consult a business accountant.
Federal LLC Tax Filing Requirements
Your LLC, whether it is single or multi-member, will be treated by the Internal Revenue Service as a pass-through entity. This means that you company won’t have to pay taxes directly. Instead, income from the LLC will be passed to you, and you will be taxed on it. Your personal federal tax return should include any profits or losses made by your LLC.
Annual Report and other filing requirements
You are not required to file an annual report by the Texas Secretary of State for your LLC. However, you will need to file an annual report with the comptroller regarding your Texas franchise tax.
Texas LLC – FAQs
- What are the essential steps to start an LLC in Texas? To start an LLC in Texas, you must first choose a unique name for your LLC, appoint a registered agent, file a Certificate of Formation with the Texas Secretary of State, obtain an Employer Identification Number (EIN) from the IRS, create an operating agreement, and comply with any other necessary state and local business licenses and permits.
- How do I choose a compliant and unique name for my Texas LLC? Your LLC name must be distinguishable from other entities registered in Texas. It should include the phrase “Limited Liability Company” or its abbreviations like “LLC.” You can check name availability through the Texas Secretary of State’s online business name database.
- What is the role of a registered agent in a Texas LLC, and how do I choose one? A registered agent is responsible for receiving important legal and tax documents on behalf of your LLC. In Texas, a registered agent must have a physical address in the state and be available during regular business hours. You can appoint an individual within the company, including yourself, or hire a professional service.
- What is the process and cost for filing a Certificate of Formation in Texas? The Certificate of Formation is filed with the Texas Secretary of State, either online or by mail. It includes details like your LLC’s name, registered agent, and management structure. There’s a filing fee, which you can confirm on the Secretary of State’s website for the latest amount.
- Is an operating agreement required for my LLC in Texas? While Texas law does not require LLCs to have an operating agreement, it is highly recommended. This internal document outlines the LLC’s management structure and operating procedures, which can help in resolving future disputes.
- What specific business licenses or permits does my Texas LLC need? The requirements for business licenses and permits depend on your LLC’s industry and location. You’ll need to check with local and state agencies like the Texas Department of Licensing and Regulation and your local city or county government.
- What are the ongoing compliance requirements for a Texas LLC? Texas LLCs must file an annual report and pay a franchise tax to the Texas Comptroller of Public Accounts. The report is due by May 15 each year, and the tax amount depends on your LLC’s annual revenue.
- Can a non-U.S. resident start an LLC in Texas? Yes, non-U.S. residents can form an LLC in Texas. The process is similar to that for U.S. residents, though there might be additional considerations regarding international taxation and banking.
- How long does it typically take to form an LLC in Texas? The time it takes to form an LLC in Texas varies. Online filings are typically processed faster than paper submissions. Expedited filing options are available for an additional fee, which can speed up the process.
- What should I do if I decide to dissolve my Texas LLC in the future? To dissolve an LLC in Texas, you must file a Certificate of Termination with the Texas Secretary of State and ensure all taxes and fees are paid. It’s important to follow the proper dissolution process to avoid legal and financial issues.
- Can I file for an LLC in Texas by myself? Yes, you can do it yourself or use a filing service.
- How long does it take to get an LLC in Texas? If you file online, it takes about 3 business days to get your LLC. If you file by mail, it takes about 5 to 7 business days.
- How long does a Texas LLC stay active? In Texas, you need to renew your LLC every year by filing the ‘Annual Report’ with the Texas Secretary of State. Texas does not charge a renewal fee for this report.
Texas Secretary of State Contact Information
Business & Commercial Section
Texas Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
1019 Brazos St.
Austin, TX 78701
Monday – Friday, 8:00am – 5:00pm
Phone: (512) 463-5555
That’s our guide on how to set up an LLC in Texas.
An LLC protects your personal assets and is simpler than other business structures. Thanks to the state’s laws, it is easy to set up an LLC in Texas.
We have additional articles to provide you with all the necessary steps to do a Texas entity name search, draft a Texas LLC operating agreement, and answer questions like, can I be my own registered agent in Texas? and how long does it take to get a Texas LLC? and ensure your Texas LLC is properly formed.
If you want to use an LLC service, visit our list of the best LLC services in Texas.
Brian Wilson is the content manager and founder of LLC Radar.
Brian grew up in North Texas, just outside of Dallas, and has a bachelor’s degree in business journalism from Southern Methodist University. Since graduating from SMU, Brian has gained over 10 years of experience in business writing for several online publications.
Brian resides in Plano, Texas and he can be reached by email: email@example.com