If you’re forming a small or medium-sized business, an LLC (Limited Liability Company) is one of the best business structures you can consider. It provides the same legal protection as a corporation but with the ease of running it as a sole trader or partnership.
If you call Texas home or plan to do business in the Lone Star State, you’ll need to form a Texas LLC. This guide will take you through the steps explained in easy-to-understand language so you can form your Texas LLC as soon as possible.
The very first step you need to take is choosing your LLC’s name. This step is usually straightforward, but there are a few potential issues. Your Texas LLC must have a unique name from others registered in the state, so you need to do your research to find out if any of your name ideas are available.
Note that Texas is strict about names not being too close to anything that’s already registered. If your name has similarities to others registered or is a common name, it’s best to check with the State Business Information Line before you file your Certificate of Formation so someone can confirm whether or not your name is good to go.
You can call them at 512-463-5555. It’s best to call them early in the day. If you prefer, you can email them at firstname.lastname@example.org, but be aware you may need to wait a little longer for a response.
Your Texas LLC’s name must include a designator identifying it as such. You can choose from any of the following:
Also note that your name cannot include any terms or abbreviations that may mislead someone to think that it’s something it’s not, or affiliated with a governmental agency, such as Inc, LLP, or CIA.
If you aren’t sure what kind of branding you’re going to use for your business, don’t worry too much about choosing your name. You can use a DBA name (“doing business as”) if you decide you need to brand differently down the line.
It’s also worth checking online to see if there is an appropriate domain name available for your chosen LLC name, so you don’t register your business only to find that all domain names related to your name are already taken.
Go here: Texas Comptroller’s Name Search to find out if your name is available.
You can skip this optional step if you’re completing this entire guide as soon as possible, but if you’ve found a name you want to use but can’t complete your company formation immediately, you can file to reserve your name.
To reserve your name, click here, follow the instructions, and pay the $40 filing fee. This will reserve your name for 120 days.
All Texas LLCs require a registered agent in Texas. This is someone (or a business) with a Texas address who can receive legal mail on the behalf of your LLC. This mail will mostly be government notices and tax information, but it will also include court documents if your business is involved in a court case.
You can be your own registered agent if you live in Texas, but it can alternatively be a friend, family member, or commercial registered agent. It cannot be a PO Box or mailbox rental service.
Note that your registered agent’s address will be available publicly. It is for this reason that so many businesses choose to have a commercial registered agent. A commercial registered agent costs around $15 a month and they’ll either physically or electronically forward your mail to you.
If you’re not sure whether or not you should be your own registered agent, see our guide here. If you’re looking for a trusted Texas Commercial Registered Agent, we can be that agent for you. If you’re interested please don’t hesitate to reach out to us and we’ll give you the information you need to move forward.
This is the step you’re likely most excited about, as it’s the one where you get your Certificate of Formation and make your business official. Filing your Certificate of Formation (called Articles of Organization in some states) is straightforward, but the process can be intimidating.
You can file by mail, online, fax, or hand-in. Since most people will be doing the first two, that’s what we’ll focus on, but note that if you do want to hand in your form or fax it, the process is essentially the same as mailing it in.
Filing an LLC in Texas costs $300 and you can pay online or via check. The information you need to have ready includes:
Once you complete your application you’ll hear back in 2-3 days if you file online and 5-7 days if you file an alternative way. You’ll then receive your Certificate of Filing and a stamped Certificate of Formation. If you filed online these documents will be emailed to you. If you filed by mail, they’ll be sent to your registered agent’s address.
To file your Texas LLC online go to: SOSDirect - File Your Texas LLC.
An operating agreement is an “internal” document, meaning you don’t have to share it with any governmental body. That said, this is an essential document you need to create as it records essential information about ownership of the LLC and other information that will ensure the business runs smoothly internally. The operating agreement should include:
Every business needs an EIN - it’s a tax ID number that allows your business to operate in the world (as your social security number does for you). Your EIN will allow you to open a bank account, hire staff, and pay taxes.
The process is free, simple, and fast. To get your EIN, click here.
Note: For those applying from abroad, write “Foreign” on line 7b where it asks for your SSN/ITIN/EIN.
If you need to file by mail for any reason, use Form SS-4. You should be aware, however, that doing so will dramatically slow down your progress as it can take up to 4 weeks for you to get your EIN.
You may not need to worry about either of these requirements right now, but you will soon, so it’s best to learn about them now and put your first deadlines on your calendar so you don’t miss them and end up getting fined. Texas LLCs are required to pay an annual Franchise Tax and file a Public Information Report each year.
While you do need to file, it is unlikely you will actually have any tax to pay.
In most states, the annual report (if required) is filed with the Secretary of State but in Texas, this tax and report are filed with the Texas Comptroller’s Office.
A few weeks after you form your Texas LLC you’ll receive a “welcome letter” from the Comptroller’s Office. This letter will include a unique Texas taxpayer number. You’ll also find an FQ number. This number is required to fill out the Franchise Tax Questionnaire. When you do this, you’ll get another tax number (an XT number) you’ll also need to file your taxes. Make sure you keep these numbers safe.
The Franchise Tax is due annually by May 15. However, you do not need to pay/file this until the year following the year you formed your company. For example, if you form your company in April 2023, you won’t need to pay this tax until April/May 2024.
Note that because Texas has such beneficial taxes for businesses, you won’t actually need to pay any tax unless your annual revenue is over $1,230,000. Your Annual Report will be the “No Tax Due Report”, which is Form 05-163.
Texas does not have a state-wide requirement for a business license, but if you’re doing certain business activities or are in a specific area, you may need additional licenses and permits.
The most common permit needed is a Sales Tax permit. Your LLC needs this permit if:
You can get a Sales Tax permit here: WebFile.
(Helpful note: if you need this permit we recommend using a commercial online inexpensive phone number that only collects voicemails, as it's extremely common to get a ton of spam calls after signing up using your real number.)
You may need a Resale Certificate if you’re selling goods. This certificate will allow you to buy and sell goods without paying sales tax on them. You can find Form 01-339 here.
To check what local licenses and permits you may need, check your local municipalities’ website or give them a call. Here are some helpful links:
A business bank account is not a legal requirement in Texas, but you do need one, even if you’re the only person in your LLC. You likely decided to choose an LLC structure to help you protect your assets in the event your company is sued, but if you don’t keep separate bank accounts, those lines quickly become blurred and you may find yourself arguing in court about what is and isn’t the LLC’s.
Use your newly acquired EIN now to apply for a business bank account to practice good financial hygiene. Believe us, you’ll find it a lot easier and more beneficial come tax time.
This is a step that won’t make a lot of difference to single-member LLCs operating from home, but it is a legal requirement you should know about, regardless of what size your business is. You are legally required to keep certain legal documents on-site at your business’s primary address. The documents you need are:
Congratulations on creating your Texas LLC! You’ve now completed all the steps and your Texas LLC is ready to start doing business.
This 9-step guide aims to make the process as easy for you to follow as possible, but there’s no doubt that this process can be confusing and time-consuming. You’re likely itching to get to making your products and/or services, marketing, and making sales, the last thing you want to do is spend hours filling out forms.
The good news is you don’t have to - we help business owners like you every day form their LLCs and corporations so they don’t have to. We’ll handle everything from registering your name to getting your EIN, and we’ll even act as your registered agent for you if you need us to.