How to Start an LLC in Texas: If you’re looking to start an LLC in Texas for $0, you’ve come to the right page. Setting up an LLC is easy and cost-effective. To form an LLC, you must follow a few steps that include naming your LLC, hiring a registered agent, filing your formation documents, doing the operating agreement, and finally obtaining the EIN. You can easily set up your LLC for free in Texas. However, you must pay the mandatory state filing fee. These fees and charges can be tax deductible, making the LLC formation cost $0.
On this page, You’ll find all the steps that must be taken to ensure that your Texas LLC has been correctly formed. We recommend you read the whole article very carefully, word by word, don’t miss anything 🙂
On this page, you’ll learn about the following:
- How to Start an LLC in Texas
- After Starting Your Texas LLC
- Texas Foreign LLC
- Texas LLC Formation Review
How to Start an LLC in Texas
An LLC (aka Limited Liability Company) is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. For an LLC, members’ personal assets are not affected by business debts. However, in some cases, if the LLC is sued for business debts, courts might pierce the corporate veil and use the owner’s personal assets to meet their corporate liabilities.
If you wish to start an LLC, you must file your Certificate of Formation with the State and pay a filing fee of $300. While it’s the most important step, it’s not the only one. There are 4 other crucial steps to follow to get your LLC formed in Texas. Below mentioned all 5 steps that explain everything you need to do to start a Texas LLC in 2022. Let’s get started! You can always hire a professional LLC formation service in Texas to set up your LLC instead of doing it alone; a Pro service will ensure everything is done properly.
Step 1: Decide a Name for Your Texas LLC
The first step while forming a limited liability company in Texas is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.
LLC Naming Guidelines in Texas
There are a few specific requirements all the LLCs in Texas have to follow while naming their Company. Some of the most important requirements are as follows:
- Your business name should be available, and no other existing business in Texas can have the same name. If you do it from the Texas SOS website, each search will cost you $1; you can try name search with TailorBrands it’s free.
- “Limited Liability Company”, “LLC”, “L.L.C.”, “LC”, “L.C.”, and “Limited Company” – any one of these has to be used as a suffix in your business name.
- You cannot use any name for your business that is confusing or misleading. Terms such as “Treasury”, “State Department”, “FBI”, “CIA”, etc. shouldn’t be included.
- Terms like “Bank“, “University“, “Attorney“, “Doctor“, etc can be added only after the additional requirements by Texas State Government are fulfilled.
- (Optional) It’s better to name your business something for which your desired domain is available.
|Important Links –||Submit Offline Form to –|
|Texas Business Entity Search – Online Name Search|
Texas Taxable Entity Search – Online Entity Search by Tax ID / EIN
Name Reservation Form – PDF
Name Reservation Form – Online
Texas LLC Name Search Guide – Instructions
Name Availability Standards – Guidelines
|Secretary of State|
P.O. Box 13697
Austin, TX 78711-3697
Reserve Business Name for Future
If you do not wish to file your LLC right now but want to hold the name you have decided, then you can reserve your LLC name for 120 days. To keep the name, you have to file a name reservation application and pay $40 to reserve your name with the Texas Secretary of State.
Doing Business As (DBA) or Trade Name
Once you have a legal name for your LLC, you can register it. However, it is not mandatory. You can, instead, use DBA, Fictitious Name, or Trade Name. In that case, you must register your name with the Texas Secretary of State by submitting Form 503 (Assumed Name Certificate) along with the filing fee of $25.
Recommended: Texas SOS charges $1 for each business name search through their site. You can do it for free with an LLC formation service. Currently the #1 LLC formation service we recommend –
TailorBrands – ($0 for Unlimited Name Search)
Apart from LLC formation, TailorBrands offer DIY website templates and incredible logo designs at a very reasonable price. If you plan to get a website, then it is wise to have a “.com” domain for your business, but these days you can also use other TLDs like “.io”, “.company”, “.xyz,” etc. Here you can get everything you need for your business in one dashboard.
It is not legally mandatory to use the word LLC in your domain name or email. If you want, you can use it. However, it is recommended not to use LLC in the domain name. A domain name should be short and easy to remember.
Step 2: Assign a Registered Agent in Texas
The second step to forming an LLC in Texas is to appoint a Registered Agent. A registered agent is a person or business entity working on your LLC’s behalf. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Texas. Hence, hiring a competent Texas Registered Agent for your LLC is necessary.
Make sure your registered agent is a resident of Texas or has a physical street address. This address will be used as the principal address of your LLC to receive any legal documents. Most LLC formation companies also provide registered agent services. Below are two great LLC formation services; even if you buy their cheapest plan (normally $49/year), you also get registered agent service and other services at a very reasonable price.
These two are our top recommendations for registered agent service, as they are competent and authorized to conduct business in Texas. Some LLC formation services also offer standalone Texas registered agent services. You can purchase only Registered Agent services without purchasing any other LLC formation services. This standalone service might become handy if you are doing it yourself and don’t want to disclose your home address or you don’t want to pierce the corporate veil.
A person above 18 years of age and has a physical address in the state of Texas can be a Registered Agent. A Registered Agent can be an independent person or can be a business entity. One is responsible for handling all the legal documents on the LLCs behalf.
Yes, you can be your own registered agent if you are a resident of the state of Texas and you are above 18 years of age. To become a registered agent, you must have the authority to conduct any type of business in Texas.
There are a few reasons why you shouldn’t be your own registered agent. The address of the registered agent is used to communicate with the SOS or for any legal activities. If you are your own registered agent, you might have to upload your personal address to the public forum. Besides, the registered agent must be at the address during business hours. It won’t be easy for you as you also have to take care of other things in your LLC. Hence, it is wiser to appoint a separate entity as your registered agent.
If an LLC is sued in Texas, in some cases, courts might decide to lift the corporate veil, which means the owners of the LLC will be personally liable for their business debts. They might have to forgo their personal assets to repay their business debts. This is called piercing the corporate veil, where personal and business assets are not separated anymore. Your personal assets can be protected if you have enough capital and all your LLC documents are properly filed.
Registered Agent Consent Application
In Texas, the registered agent can sign a consent letter (online or offline) confirming consent to being Appointed in written or electronic form. This consent must include the following details,
- LLC name
- A letter that says the person gives consent to serve the LLC as a registered agent
- The execution date
- Name of the registered agent
- Signature of the registered agent
This consent letter assures that the Registered Agent has given his nod for the service of process as an Agent. They can reject the appointment, too, by filing a Rejection of Appointment. LLCs don’t need to file this consent letter with the Texas SOS. However, it is recommended to have this letter filed with SOS to avoid any future discrepancy between the Registered Agent and LLC. The Acceptance of Consent (Form 401-A) can be filed by paying a fee of $15.
Step 3: File Certificate of Formation in Texas
The third and most important step in forming an LLC is to file the Certificate of Formation. This Texas Certificate of Formation is a legal document that is required to register your business with the Texas Secretary of State. It costs $300 (online and by mail) to file your formation certificate in Texas.
The Certificate of Formation includes details like the name of the LLC, the registered agent’s name, address, employees’ details, and company structure (member-managed or manager-managed). Before hiring employees in Texas LLC, one should know about the rules and regulations thoroughly. Also, if you are expanding your existing business (an LLC) in other states to Texas, you must register as a Texas Foreign LLC.
How to File Online
Go to the Secretary of State Online Service. You will get the login page. If you are already a subscriber, then log in with your credentials. If not, then you have to request for SOSDirect Account. You can either select the option ‘Request for SOSDirect Account’ from the Login page or click on the button below. Read more about the Texas Certificate of Formation for online registration.
How to File by Mail
If you prefer filing real-life forms for your LLC registration in Texas, you can download form 205. Read the form thoroughly, fill it out, and send it to the address mentioned below.
Mailing Address: Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
James Earl Rudder Office Building
Austin, TX 78701
Fax To: (512) 463-5709
Processing Time: Normally, it takes around 7-10 business days (approx) to get your LLC formed in Texas. The processing time for online filing might be a little faster than offline filing. With an additional cost, you can get expedited filing as well. However, the document processing time can be changed due to various factors.
Recommended: Online LLC Formation service can provide all these documents way faster than usual time with lifetime customer support and 100% accuracy. We recommend using
TailorBrands – ($49 + State Fees) Online LLC Setup
Every LLC owner has to pay the filing fees to register their business in Texas. This fee is mandatory but also tax deductible. If you’re doing it yourself (filing on your own), it will not cost you any additional service fee. However, it is not feasible to do that as the DIY process might be delayed, complicated, and messy, especially if you’re a novice entrepreneur. Hence, it is recommended to get professional guidance to get your LLC formed in Texas.
Step 4: Create Your Texas LLC Operating Agreement
Moving on to the fourth step, filing your operating agreement. An operating agreement is an internal document that legally outlines the proprietorship and operating procedures of your LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, their voting power, business dissolution, and such, thus reducing future conflicts.
When it comes to filing a Texas LLC Operating Agreement, the state does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all the details of your business operation that helps in taking future business decisions, especially if you decide to dissolve Texas LLC later. Hence, having an operating agreement may not be necessary, but it is surely ideal.
Recommended: You can get a professionally made operating agreement for very less cost with TailorBrands. You don’t need to worry about drafting it as they will take care of it on your behalf. We recommend using –
TailorBrands – ($49 + State Fees) Online LLC Setup
The operating agreement draft can be created for free if you don’t hire a professional. However, there is an advantage to appointing a proficient person/service. You will get a businesslike quality operating agreement at a very cheap fee, which will help you in the future. Hiring a professional service means you can sleep well at night 🙂
Step 5: Filing a Texas LLC EIN
The Employer Identification Number or, simply, the EIN is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify the type of business for tax purposes and taxes in general. The EIN is necessary for any active business or any form of business, for that matter.
EIN is needed when the LLC hires employees. Hiring employees in Texas LLC requires following specific rules and regulations. On the other side, EIN for Texas foreign LLC should be obtained if your LLC is based in other states.
To obtain EIN (aka FEIN), one must fill up a form (Online or by mail) and submit it to the IRS. Enter details of your LLC, and finally, complete the form and send it to the address given. You can also get an EIN Assistant to help you with the process.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Recommended: This hassle will be reduced when you hire an LLC formation service. They take care of obtaining EIN and all other things for your LLC. We recommend using –
TailorBrands – ($49 + State Fees) Online LLC Setup
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
Congratulation, you are now done with all the necessary steps to form your Limited Liability Company in Texas. If you do it yourself, it should take a long time to understand and do all the steps properly.
However, if you use TailorBrands it should be way faster. You will always have a live chat option and phone support with experts for any help you need. Their worry-free service will make things easier for you.
After Starting Your Texas LLC
After forming your LLC, there are still some things that you will need. The most important thing is to separate your business and personal assets. LLCs have limited liability protection that protects your personal assets from business liability. This is called a corporate veil. However, the corporate veil can be lifted or pierced by the court if the LLC is sued. In that case, the owners of the LLC become personally liable for their corporate debts. A few things like appointing a legit registered agent, having enough capital, and filing all the major documents with the state can save the LLCs from being pierced into the corporate veil.
Apart from that, there are a few things you need to take note of,
- Get a company business bank account, business credit card, and other business accounts to check up on the business expense and business accounting software if needed.
- File Texas business permits & licenses. For Texas business permits & licenses, we can consider health permits, building permits, and others based on your simple business structure. Besides, look for the details of business licenses, whether you need federal business licenses and what are the fees for business licenses you need.
- Get general liability insurance and professional liability insurance with coverage for employees. Companies with employees must get coverage for employees. There can be meant types of business insurance. If you have a simple business structure like LLC, you can go for basic insurance.
- File a Texas LLC annual report or biennial report
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including penalties for failure of filings, to make sure your LLC is up-to-date. To avoid your penalties or penalty fee, you must renew your LLC on time.
Cost of Starting an LLC in the State of Texas
LLCs can be formed for $0. Apart from the mandatory state filing fees, you don’t have to bear additional service charges if you do it yourself. Following are the fees and taxes LLCs in Texas must pay to register and run a business in the state. Forming an LLC is no doubt cost-effective compared to other business structures. However, the fees and charges (tax-deductible) that you must pay to the state, such as name reservation fee, name filing fee, LLC filing fee, and Franchise Tax & Sales Tax (If applicable). Here are the main fees and taxes you must pay while forming your limited liability company in Texas,
|Fees/Tax||Amount to be Paid|
|Name Reservation Fee (optional)||$40|
|Name Filing Fee||$50|
|Certificate of Formation Fee||$300|
|Franchise Tax (For Retail & Wholesaler)||0.375%|
|Franchise Tax (For other than retail & wholesaler)||0.75%|
In Texas, LLC name reservation is not mandatory. You can register your LLC name at the time of registering your LLC. If you wish to hold the name for some time without registering your LLC, then a Name Reservation is needed. It can be renewed by paying $40. Your LLC name will be reserved for additional 120 days. In some states, Name Reservation is mandatory. Read our guide on LLC costs in Texas for more information.
According to the Franchise Tax rule, LLCs have to pay this tax every year. Annual Franchise Tax reports are considered to be the annual revenue report or annual report of the LLC. If you evaluate LLC costs in Texas, the amount of Franchise tax is not as high as for any other form of business ownership. Besides, if you have a woman-owned business, there might be additional company business tax benefits.
Texas Foreign LLC
If you are interested in forming a Foreign Limited Liability Company in Texas, then you need to file the Certificate of Foreign LLC to the Texas Secretary of State. Foreign LLCs allow you to operate your business in more than one state. Along with the Certificate of Foreign LLC, you need to submit more documents, like the Certificate of Good Standing, etc., to the Texas SOS to form your foreign LLC n Texas. To set up a foreign LLC, you must submit the Application for Registration of a Foreign Limited Liability Company. To know more in detail, check out our guide on Texas Foreign LLC for the process of filing a foreign LLC.
Reasons to Start an LLC in Texas
There can be several reasons to start a Limited Liability Company in Texas. Texas is one of the most prominent states for getting potential customers. It holds the 2nd position in the USA in terms of Economic and Demographic standards. Due to the dynamic and advanced educational and industrial provisions, having a business in Texas will certainly lead to profit maximization within no time.
When it comes to business structure in Texas, a sole proprietorship and an LLC are the two best options. However, single-member LLCs are similar to sole proprietorships. It is much easier for entrepreneurs to get business licenses, permits, and other documents. On the other hand, tax liabilities are much lesser in LLCs. It is easy to get business funding for LLCs. Not only LLCs but any startup can get business funding if they have proper business plans. On the tax front, there are no additional taxes other than federal income taxes levied on individual income. On the other hand, corporations must pay a handful of federal taxes, self-employment taxes, along with federal income taxes.
Having an LLC in Texas is less complicated and has lesser tax burdens than other business structures. There is no direct income tax on business income. Take a look at the Texas Classification of LLC Tax to know more about the tax liabilities in Texas. Here are the reasons to start an LLC in the state of Texas,
Protection to LLC by Texas SOS
A special act started in Texas state for limited liability protection, under which the state will support all the limited liability companies that will form here. The state will protect all the rights of an LLC, and the requirements of the LLC are also well taken care of.
Texas Enterprise Fund
A proper cash flow is the requirement of every business, especially LLCs as they start up at a small scale, and not every entrepreneur has their hands full of cash. That is why an LLC will be the best choice in Texas for them to overcome the shortcomings of the LLC; the state government will help a person take a cash grant through TEF. It is basically a financial incentive scheme under which a grant is given to the selected businesses ready to produce jobs in the sector. Since the time of its establishment, w.e.f. 2004, TEF distributed a grant of around $600 million to many industries around the state.
Tax Climate is favorable for businesses
The biggest reason Texas is in demand to start a business structure like LLC is no personal income tax. The government launching this no-income tax scheme is basically the lack of business in Texas. After that, the footfall of businesses in Texas started to increase. If we study the non-existing personal income tax, then it can be defined as:-
- Any entrepreneur who makes up money through their start-up LLC is not required to pay any money in Texas.
- Businesses can hire the best talent for their industry without profit loss tensions as the amount they earn will not be taxable, due to which they will try to give up the best for getting the best employees.
Moreover, depending on the type of business, the income tax rate that is already lower than other states will shrink more. For example, a woman-owned business or 100% veteran-owned business gets more benefits, like lines of credit, than others. The only situation in which an LLC will be eligible for lower-income tax is eligibility. There is a threshold business value, and if the company doesn’t exceed that value, it will enjoy zero business tax.
Top Businesses in Texas
If you are a new-age entrepreneur and want to form an LLC in Texas, you need to know beforehand about the Texas economy. You should know which are the top businesses of the state and their contribution to the GDP.
The oil and petroleum mining of the state is the most significant contributor to the Texas GDP. It is noticed that these businesses do around $262.2 billion worth of business. 1/3rd of the petrol that is consumed in the country is processed and supplied by Texas. The average annual oil production in the state is around 4.6 billion barrels out of the 187,139 wells in the state. The oil produced in Texas is also known to export to significant parts of the world, from which the state and the center are gaining huge profits.
There is a well-developed tourism business present in the state, which is growing significantly. The highest numbers of visitors that were catered by the state in the previous year were 220 million. Moreover, Texas has also become a tourist place for business meetings and discussions. The total contribution that is made by the tourism businesses to the state is around $164 billion, out of which half is directly spent by the tourists visiting.
Texas is known to be the home of the largest number of cattle found around the state, with about 16 million. This figure makes them a country leader in the production of sheep and goat products. It is also the top manufacturer of cotton crops in the country, grown by most rural dwellers. According to statistics, every seventh person in the state earns money through the agriculture sector, contributing around $22 billion.
Some of the small business ideas that are well implemented in Texas state are:-
- Legal consultancy firm
- Theatrical teacher
- Gift shops
Texas LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in Texas. Click on the steps in this list to read the full detail.
- Name your Texas LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a Registered Agent
In Texas, it is mandatory to select a registered agent for your LLC. Get a professional Registered Agent from LLC formation services to get things done hassle-free.
- File a Formation Certificate
Filing a formation certificate is necessary when forming a Limited Liability Company in Texas. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create an Operating Agreement
An operating agreement is not a strict requirement in Texas but something encouraged when you start an LLC to avoid future conflicts.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
Things to Consider While You Start an LLC in the State of Texas
This article has explained all the important facts about starting an LLC. However, there are a few things that one must consider while setting up their business in Texas. First, the filing process takes time. The formation process, if done online, then it takes lesser time than by mail.
Some of the LLC service providers offer a free LLC formation. But it is not true. You have to pay something to start your business. Apart from the state filing fees, permit charges like building permits, health permits, and some more have different fees for each permit.
Besides, if you miss out on the deadline for your annual report filing or tax return filing, you might have to pay a penalty fee. You must know that LLCs do not have double taxation. Unlike corporations, where a business tax and a personal income tax are both required to pay. For LLCs, it is only income tax and some federal taxes but no double taxation. Hence, it is cost-effective.
As I mentioned, there is no double taxation like corporations, which means there will not be any taxation on the annualized revenue of the LLC. The tax will only be levied on the income of the member and his share of that annualized revenue.
A traditional corporation is also easy to form. However, if you compare an LLC with a traditional corporation, LLCs are much more cost-effective and less complicated than corporations. As we talk about taxation, an LLC with more than one member is taxed as a partnership by default. But as an LLC, you have opinions on choosing the tax structure. Taxation on any LLC is similar to a sole proprietorship and partnership by default for multiple member-LLC. But you can choose from the option whether to be taxed as a sole proprietorship, partnership, C-corp, or S-corp. On the basis of that, your annualized revenue will be taxed.
How Fast Can I Form an LLC in Texas
The online proceedings for an LLC in Texas can be completed in 3 business days. Filing through mail can take up to 5 to 7 business days.
Depending on how fast you get the paperwork submitted and approved, it can take as little as a few days or as long as several weeks to form an LLC in Texas. The speed at which you get your business up and running depends largely on how fast the Texas Secretary of State is able to process your documents and send them back to you.
To form an LLC in Texas, you must first identify the name for your business. You can do this by contacting the Texas Secretary of State Office or by checking their website. The name you choose should be unique and should convey the type of service or product you plan to offer. Also, you should make sure that the name doesn’t conflict with other businesses operating in Texas. This is important because it can raise trademark issues.
When you form your LLC in Texas, you must also file a Certificate of Formation with the state. The Certificate of Formation is a document that states how your LLC will be managed. If you plan to hire a manager, you must include the name and address of the manager on the Certificate of Formation. You will also need to add the word “limited liability company” to the business name.
You can also form your LLC by mail, but it will take up to seven weeks to receive an approval. If you want to be able to file your LLC in Texas faster, you can pay an extra fee for expedited processing. It will cost you $25 and you will need to pay a separate fee per document. Expedited processing will also be sent back to you electronically by the state, so you will receive the documents quicker than if you had filed them by mail.
You must also designate a registered agent for your Texas LLC. You can choose to have your own registered agent or have a business or individual serve as your registered agent. The registered agent is responsible for receiving and distributing legal documents from the state to your business. A registered agent must be a Texas resident or business, and must agree in writing to serve as the registered agent for your LLC. You may also choose to have a professional registered agent for your business. The registered agent will take care of any legal or tax issues that may arise from your business. This service is particularly important if you are a foreign qualified LLC.
You will also need to file a Certificate of Good Standing with the state. This is a certificate that the state of Texas will send to you, which gives you an 11-digit Taxpayer Number. It is important for tax purposes and for potential investors. If you don’t file this document with the state within 90 days of the date you form your LLC, your company will not be able to file for taxes. If you file your Certificate of Good Standing within 90 days of the date you form your company, you will not have to pay any taxes on your LLC for the year.
If you are a resident of Texas, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $300 (domestic LLC) and $750 (foreign LLC), LLC costs in Texas include $0 for Annual Reports every year. LLCs are liable to pay sales tax of 6.25% every year.
It takes 3 business days to get an LLC in the state of Texas if you file it online. For the mail filing, it takes 5 to 7 business days to get an LLC. If you hire a professional LLC service, then it might take less than that. We recommend TailorBrands, which has impeccable turnaround time.
Every year all the LLCs have to submit an Annual Report and pay $0 to the Texas Secretary of State and renew the LLC. It is mandatory to renew your LLC every year.
Generally, for LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens. Read more on the Texas Classification of LLC Tax.
LLCs are easier to establish than other business structures. Small businesses, especially start-ups, can easily start their LLCs in Texas at a bare minimum cost. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. The formation of limited liability companies requires much lesser documents and legal processes. Share your queries with us, and leave a comment below.