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Texas LLC Formation Mistakes: Avoid These Common Pitfalls When Forming a Texas LLC

Karishma Borkakoty
By Karishma Borkakoty
Published on 28 Jan 2025 7 min read
Texas LLC Formation Mistakes: Avoid These Common Pitfalls When Forming a Texas LLC

In 2023 alone, Texas saw the formation of 408,491 new business entities, with 365,507 (approximately 89.5%) of these being LLCs.

But forming an LLC isn’t exactly a walk in the park.

From picking the perfect business name and filing the Certificate of Formation to appointing a registered agent and navigating tax obligations, the process can quickly feel overwhelming. With so many variables, the risk of making mistakes is higher than most would like to admit.

While we don’t have exact numbers on how many people make mistakes, we can tell you this: common Texas LLC formation mistakes can cause real problems. Think delays, extra fees, or even legal headaches. And, nobody wants to start their business on that kind of footing.

To help you avoid these pitfalls, we’ve laid out some clear, actionable steps to guide you through the LLC formation process in Texas.

Why Texas Is a Popular State for LLC Formation

Why Texas Is a Popular State for LLC Formation

Texas is consistently one of the top choices for forming an LLC, and here’s why:

1. No State Income Tax

Texas does not impose a state income tax on individuals or businesses, making it a highly attractive choice for entrepreneurs looking to maximize their profits. This tax-friendly environment is especially beneficial for LLCs, as profits are typically passed through to the owners.

2. Business-Friendly Legal Environment

Texas is known for its business-friendly laws, which include:

  • Flexible LLC Regulations: The state allows LLCs to be managed by members or managers, giving businesses more operational flexibility.
  • Strong Liability Protection: LLC owners in Texas enjoy robust protection from personal liability for business debts and obligations.
3. Low Formation and Maintenance Costs

The cost to form an LLC in Texas is reasonable compared to other states:

  • Formation Fee: $300 to file a Certificate of Formation with the Texas Secretary of State.
  • No Annual Reports: Unlike many other states, Texas does not require LLCs to file annual reports, reducing ongoing administrative burdens.
4. Strong Support for Entrepreneurs

The state offers numerous resources for small businesses, including:

  • Local Small Business Development Centers (SBDCs).
  • Networking opportunities through organizations like the Texas Chamber of Commerce.
  • Access to grants and funding opportunities for startups.
5. Thriving Economy

Texas has one of the largest and most diverse economies in the U.S., providing a strong market for all types of businesses. Its key industries — like technology, energy, healthcare, and real estate — offer opportunities for entrepreneurs across various sectors.

Looking to form your LLC in Texas? Consider doola to handle the paperwork and make the formation process hassle-free!

Common Pitfalls When Forming a Texas LLC

Common Pitfalls When Forming a Texas LLC

Forming an LLC in Texas is a great step for any entrepreneur, but it’s not without its challenges. Many business owners make avoidable errors that can cause delays, legal issues, or extra costs. 

To help you sidestep these issues, we’ve outlined the most common Texas LLC formation mistakes and how to overcome them.

❌ Choosing the Wrong Business Name

Your business name is your first impression, and Texas requires it to be unique and compliant with state guidelines. Many new business owners skip the step of checking name availability, only to discover their desired name is already taken.

👉🏼 How to Avoid This Mistake:

Pick your desired business name. Check its availability. Remember, use tools like the GoDaddy Domain Registrar to register it for your online presence. This can save you time and ensure consistency between your business and domain name.

❌ Failure to Designate a Registered Agent

Every Texas LLC is required to have a registered agent to receive legal and official documents. Some entrepreneurs try to take on this role themselves, but this can lead to missed deadlines or legal notices if you’re unavailable.

👉🏼 How to Avoid This Mistake:

Hire a professional registered agent service to ensure all your important documents are handled promptly and securely. Services like doola not only help you form your LLC but also offer registered agent services to take care of this responsibility for you.

❌ Incomplete or Incorrect Certificate of Formation

Filing the Certificate of Formation with the Texas Secretary of State is a critical step in forming your LLC. Errors or missing information in this document can result in rejection or delays.

👉🏼 How to Avoid This Mistake:

Double-check your forms for accuracy or seek expert assistance. Professional services like doola can handle the paperwork for you, ensuring everything is filed correctly the first time.

❌ Neglecting to Obtain an EIN (Employer Identification Number)

An EIN is essential for tax purposes and opening a business bank account. Many entrepreneurs overlook this step, which can delay their ability to manage finances effectively.

👉🏼 How to Avoid This Mistake:

Apply for an EIN directly through the IRS website or seek help from doola experts. Once you have your EIN, opening a business bank account becomes simple and straightforward.

❌ Misunderstanding Tax Obligations

Texas doesn’t impose state income tax, but there are other tax obligations to be aware of, such as franchise taxes. Misunderstanding or ignoring these requirements can lead to fines or penalties.

👉🏼 How to Avoid This Mistake:

Work with a tax professional or use a trusted service like doola to stay compliant with all state and federal tax requirements. Our experts can help you navigate deadlines and ensure accurate filings.

❌ Not Maintaining LLC Compliance

Forming your LLC is just the beginning. Many business owners neglect ongoing compliance, such as keeping contact information updated or filing required reports, which can put their LLC in jeopardy.

👉🏼 How to Avoid This Mistake:

Set up reminders for compliance deadlines or use a compliance tracking tool to stay on top of requirements. Many services, including doola, offer tools to help you stay compliant year-round.

❌ Ignoring the Importance of an Operating Agreement

While not legally required in Texas, an Operating Agreement is vital for outlining how your LLC will operate, especially if you have multiple members. Neglecting this document can lead to conflicts or misunderstandings down the line.

👉🏼 How to Avoid This Mistake:

Draft a comprehensive Operating Agreement that covers ownership, decision-making processes, and profit distribution. Many templates are available online, or you can work with a legal professional to create one tailored to your business.

Expert Tips to Avoid These Mistakes

Expert Tips to Avoid These Mistakes

Forming a Texas LLC comes with its fair share of hurdles, but avoiding these above common pitfalls can save you time, money, and stress. 

Here are some specific tips to ensure a seamless LLC formation process while avoiding Texas LLC formation mistakes.

🎯 Verify Business Name Availability Early

Before investing in branding or marketing, confirm your business name is unique and compliant with Texas regulations. Many entrepreneurs skip this step, only to find their chosen name is unavailable — a classic Texas LLC formation mistake.

Use tools like the GoDaddy Domain Registrar to check name availability and secure a matching domain.

🎯 Choose Your Registered Agent Strategically

Your registered agent will be your business’s lifeline for legal and official communications. Avoid assigning this role to yourself — it can lead to missed deadlines if you’re unavailable. 

Instead, partner with a reliable service like doola, which offers professional registered agent services as part of their LLC formation package. This eliminates one of the most common Texas LLC formation mistakes.

🎯 Don’t Overlook the Operating Agreement

Even if Texas doesn’t mandate it, an Operating Agreement is essential for defining ownership and management responsibilities — especially if you have multiple members. Failing to create one can lead to disputes down the road.

Templates can help, but working with an expert ensures your agreement is comprehensive.

🎯 Consult Experts Early On

DIY might seem appealing at first, but experienced professionals can catch details you might miss.

For example, incomplete or incorrect filing of the Certificate of Formation is one of the most common Texas LLC formation mistakes.

Services like doola ensure every step — from paperwork to compliance — is done right the first time, giving you confidence and peace of mind.

All in all, by being strategic, using the right resources, and leaning on experienced professionals like doola, you can avoid the most common Texas LLC formation mistakes.

Why Choose doola for Your Texas LLC Formation

When to Choose doola

Whether you’re a first-time entrepreneur or a seasoned business owner, doola takes the hassle out of LLC formation. 

Here’s what doola brings to the table:

  • Hassle-Free Formation: From choosing a business name to filing your Certificate of Formation, doola handles all the complicated parts.
  • Registered Agent Services: We act as your registered agent, ensuring you never miss an important legal document or deadline.
  • Compliance Made Easy: Stay on top of state requirements with our compliance tracking tools and services.
  • Ongoing Support: Whether it’s bookkeeping, tax filing, or business banking, doola has you covered with end-to-end support.

Ready to kickstart your business the right way? Book a free consultation today.

FAQs

FAQ

How much does it cost to form a Texas LLC?

The cost to form an LLC in Texas starts with a $300 filing fee for the Certificate of Formation, which you’ll pay to the Texas Secretary of State. Additional costs may include:

  • Registered Agent Services (if you hire one).
  • Operating Agreement preparation (optional but recommended).
  • Ongoing Compliance Fees, depending on your business needs.

Using a formation service like doola ensures all fees are transparent and handled efficiently.

Do I need a physical address in Texas to form an LLC?

Yes, a Texas LLC must have a physical address in the state for legal and mailing purposes. However, you don’t need to own or rent office space — you can use your registered agent’s address.

By working with doola, you get access to registered agent services that provide a compliant Texas address for your LLC.

How long does it take to form an LLC in Texas?

The processing time to form an LLC in Texas varies depending on how you file:

  • Online Filing: Typically 5–7 business days.
  • Mail Filing: Can take up to 2–3 weeks.
  • If you’re in a rush, expedited filing is available for an additional fee. Partnering with a formation service like doola can help you speed up the process.

Can I change my LLC’s name after formation?

Yes, you can change your LLC’s name after formation by filing an Amendment to the Certificate of Formation with the Texas Secretary of State. There’s a fee associated with this filing, typically $150.

To avoid the hassle of renaming later, ensure your name is available and aligns with your long-term goals from the start. 

Do Texas LLCs have annual filing requirements?

Unlike many other states, Texas LLCs do not require an annual report. However, LLCs are required to file a Franchise Tax Report with the Texas Comptroller annually.

Even if you don’t owe franchise taxes, you must file a “No Tax Due” report to remain in compliance. Failing to file can result in penalties or suspension of your LLC.

Start your dream business with doola today

We form your U.S. business in any of the 50 states and ensure it stays 100% compliant.


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Texas LLC Formation Mistakes: Avoid These Common Pitfalls When Forming a Texas LLC