How to Form an LLC in Texas in 7 Steps

While there are several options for business structures, the limited liability company (LLC) is a popular choice for new businesses. An LLC is like a hybrid of a corporation and a sole proprietorship and has most of the benefits each of those business types has to offer. The steps to start an LLC depend on state law, but all states require that you file paperwork with the appropriate government agency. 

7 Steps to Form a Texas LLC

1

Name Your LLC

You'll need to come up with a name for your LLC that both attracts potential customers to your business and complies with the state laws of Texas. Start with a brainstorming session and create a list of several business names you like. You'll want to have a list of several potential names because a name or two on your list might not be available.

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Under the laws of Texas, the name you choose for your LLC must be distinguishable from the other names already registered or reserved with the state. This means your LLC name can't be the same as or similar to a business name that's already on record. You'll need to do a name search to check for name availability.

Also, note that your Texas LLC name must include one of the following phrases or an abbreviation: "limited liability company" or "limited company". Don't use any restricted words (such as "bank" or "attorney") unless you have the required licenses or approvals. Don't use any words or phrases that would lead the public to confuse your organization with a governmental agency.

2

Get a Registered Agent

Texas LLCs must have a registered agent to accept legal documents on behalf of the company if it's sued. Your Texas registered agent could be a person who's a resident of the state of Texas or a business entity that's authorized to do business in the state of Texas. Although an officer, owner, or employee may serve as an entity's registered agent, an entity may not serve as its own registered agent.

Either way, you'll need to ensure that your appointed registered agent can handle service of process during regular business hours and has a physical street address. P.O. Boxes aren't acceptable as registered agent addresses. Many business owners use a professional service as their registered agent to ensure receipt of service of process.

3

File Your Certificate of Formation

While other states require articles of organization, Texas uses a certificate of formation. Filing your LLC certificate of formation with the Texas Secretary of State is crucial because it creates the LLC. Once you're ready to file, you can decide if you'd like to file online or by mail. The filing fee for a Texas certificate of formation is $300, and you'll need to include the following in your filing:

  • LLC name
  • Registered agent name and address
  • Whether the LLC is member-managed or manager-managed
  • Effective date
  • Organizer(s) name and address
  • Purpose of your organization

4

Draft an Operating Agreement

An LLC operating agreement is an essential internal document that outlines how your LLC will be governed. Without an operating agreement, Texas state laws could apply in the event of a dispute or conflict within the organization.

LLC operating agreements tend to cover ownership, rights and responsibilities of the members, voting powers, dissolution, admission of new members, and liabilities. You should have an operating agreement that addresses these topics, even though you don't have to file it with the state.

5

Get an EIN

An EIN (Employer Identification Number) or Tax ID number is a number assigned to business entities by the IRS (Internal Revenue Service). It's like a Social Security Number but for your business. You'll likely need this number to open a business bank account or hire your employees. Get one for free online at the IRS website.

6

Set Up Business and Tax Accounts

LLC owners need to keep their business and personal funds separate. If you don't keep your business funds separate from your personal funds, you could lose your personal liability protection. For this reason, you need to get a business bank account and a business credit card or debit card as soon as possible. It'll also make tax preparation and accounting easier. You may also be required to set up state tax accounts for your LLC with the Texas Comptroller of Public Accounts.

7

File Beneficial Ownership Information Report (BOIR)

After you form your LLC, federal law requires you to file a Beneficial Ownership Information Report (BOIR) with FinCEN. The deadline for your BOIR is determined by the creation date of your LLC. If you create your LLC in 2024, you must file within 90 days from the day your LLC received notice of its creation/registration or 90 days from the day public notice was given by the Secretary of State, or similar office, of your company’s creation/registration. Whichever is earlier. If you form your LLC after January 1, 2025, you must file within 30 days instead of 90. 

Visit www.fincen.gov/boi and select “File BOIR" to prepare and file your report. You will need to provide information regarding your LLC, its beneficial owners, and its applicants. Your LLC could have two applicants: one who filed the document that created or registered the LLC and one who was responsible for and directed the filing. Beneficial owners have substantial control over the LLC and/or own a minimum of 25% of the ownership interests of an LLC.

Note: On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that the Corporate Transparency Act was unconstitutional. At this time, it is unclear if the federal BOIR requirement will be enforceable. Business owners of LLCs formed before January 1, 2024, may want to wait until closer to the January 1, 2025 filing deadline to check if they must file a BOIR for their business. For LLCs formed in 2024, business owners may want to check right before their 90-day deadline to see if the BOIR requirement is applicable.

Business and Tax Requirements in Texas

Business owners in Texas register, report, file, and pay taxes through the Texas Comptroller of Public Accounts. You can set up an electronic account on their website to make managing your business taxes more convenient.

State Business Tax

Your LLC may have to pay the state's franchise tax for the privilege of doing business in Texas. Newly registered LLCs should complete the franchise tax accountability questionnaire to set up a franchise tax account and establish your tax responsibility beginning date.

State Employer Tax

Texas does not have a state income tax. If your LLC has employees who work in Texas, you don't have to withhold state income tax on their wages but still need to deduct federal income tax for those employees.

Sales and Use Tax

If your LLC engages in retail sales, leases and rentals of goods, or certain services, it will likely be subject to the 6.25% state sales and use tax. Cities, counties, and some districts can also impose a local 2% sales and use tax.

Business Licenses and Permits

Texas does not have a general business license requirement. Your LLC's certificate of formation received upon approval from the Texas Secretary of State is sufficient. If you sell or lease tangible personal property, you must apply for a Texas sales tax permit. Your LLC may need to obtain specific permits to operate depending on its location and business activities. The Texas Business Permit Office provides a guide containing information on permits required for specific business enterprises.

Registration in Other States

If you want to do business in another state, you will likely have to apply to do business as a foreign LLC. You may need to show a certificate of good standing as part of the application process. This can be obtained from the Texas Secretary of State.

Annual Requirements in Texas

Texas LLCs are not required to file an annual report, however they must file an annual franchise report with the Texas Comptroller of Public Affairs. They also must file a Public Information Report.

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Texas LLC Formation FAQs

Disclaimer: The information presented here does not constitute legal advice or representation. It is general and educational in nature, may not reflect all recent legal developments, and may not apply to your unique facts and circumstances. Consider consulting with a qualified business attorney if you have legal questions.

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