Forming a Limited Liability Company (LLC) in Texas is a fantastic way to start a business. Texas is known for its business-friendly environment, and an LLC offers great protection, tax flexibility, and a simple management structure for small business owners. In this guide, we’ll cover every step you need to follow in 2025 to start an LLC in Texas, from naming your business to filing taxes.
Costs to File an LLC in Texas
| Fee | Amount (in USD) |
|---|---|
| LLC Formation Fee (State Filing) | $300 |
| Registered Agent Fee (Annual) | $50 – $300 |
| Texas Franchise Tax (Annual) | Varies (depends on revenue) |
| Operating Agreement (Optional) | $0 – $100+ |
| EIN (Employer Identification Number) | $0 (if done through IRS website) |
Here are the steps to forming an LLC in Texas
Forming an LLC in Texas may seem like a complex process, but it’s relatively simple when broken down. Follow these steps, and you’ll have your LLC up and running in no time.
1. Search Your LLC Name
The first step in starting an LLC is choosing the right name for your business. In Texas, your LLC name must follow specific rules.
LLC Name Requirements in Texas:
- Uniqueness: Your LLC name must be distinct and not too similar to any other business entity registered in Texas. You can easily check if your desired name is available by performing a name search on the Texas Secretary of State’s website.
- Inclusion of “LLC” or “Limited Liability Company”: Your name must contain the words “Limited Liability Company” or abbreviations like “LLC” or “L.L.C.”
- Avoid Restricted Words: The name should not include any prohibited or restricted words such as “bank,” “insurance,” or “trust,” unless you have special permission from the Texas Department of Banking or other regulatory authorities.
How to Check Name Availability:
- Online Name Search: Visit the Texas Secretary of State website and use their search tool to check if the name you want for your LLC is available.
- Name Reservation: If you’d like to reserve a name while you prepare your filing, you can file a reservation request with the Secretary of State for a fee of $40. The reservation lasts for 120 days.
Choosing the right name is crucial because once you file your Certificate of Formation, your LLC name will be legally registered.
2. Choose a Registered Agent
A Registered Agent acts as the official point of contact for your LLC. They receive important legal documents, tax notices, and other official mail on behalf of your business.
Who Can Be a Registered Agent?
- Individuals: You can act as your own Registered Agent if you have a physical address in Texas and are available during business hours. However, this option is typically not recommended because it compromises your privacy.
- Professional Registered Agent Services: Most business owners opt to hire a professional Registered Agent service to handle these responsibilities. These services also help protect your privacy by keeping your personal address off public records.
Why Choose a Professional Registered Agent?
Professional Registered Agent services ensure that your LLC remains in good standing with the Texas Secretary of State by handling legal documents and official correspondence on your behalf. One of the top services in Texas is Northwest Registered Agent, known for its excellent customer service and affordability.
The fees for Registered Agent services typically range from $100 to $300 per year. While you could serve as your own Registered Agent, outsourcing this task can help you avoid missing important deadlines or legal notices.
3. File a Certificate of Formation
The next step in forming your LLC is filing the Certificate of Formation (Form 205) with the Texas Secretary of State. This is the document that officially creates your LLC. It includes essential information about your LLC, such as its name, Registered Agent, and the address of the LLC’s principal office.
Information Required to File the Certificate of Formation:
- LLC Name: The exact name of your LLC.
- Registered Agent Information: The name and physical address of your Registered Agent.
- Duration: Whether your LLC will exist indefinitely or for a specified period.
- Management Structure: Whether your LLC will be member-managed (run by the owners) or manager-managed (run by appointed managers).
- Organizers: The names and addresses of the individuals who are filing the formation documents. These individuals are typically the LLC’s owners or members.
Filing the Certificate of Formation:
You can file the Certificate of Formation online via the Texas Secretary of State’s SOSDirect system or by mail. It’s important to note that filing online is typically faster.
- Filing Fee: The filing fee for the Certificate of Formation is $308.
- Processing Time:
- Online filings are usually processed within 12 business days.
- Mail filings can take anywhere from 4 to 8 weeks to process.
After your Certificate of Formation is approved, you will officially have an LLC registered in Texas. You will receive a certificate of incorporation confirming the creation of your LLC.
4. Create an Operating Agreement
While not required by Texas law, an Operating Agreement is one of the most important documents for your LLC. It defines the internal workings of your business and outlines the roles and responsibilities of the members or managers.
What Should Be Included in the Operating Agreement?
- Ownership: The percentage of ownership for each member (if applicable).
- Management Structure: Who will manage the LLC – the members themselves or appointed managers.
- Duties and Responsibilities: What each member or manager is responsible for.
- Voting Rights: How decisions will be made within the LLC and what constitutes a majority vote.
- Profit and Loss Distribution: How profits and losses will be distributed among members.
- Dissolution Procedures: How the LLC will be dissolved if necessary, and how assets will be divided.
Why is an Operating Agreement Important?
- Protects Your LLC Status: An Operating Agreement shows that your LLC is a separate legal entity. This is important because it helps maintain the liability protection offered by your LLC.
- Avoids Conflicts: By outlining how your LLC will be managed, how decisions will be made, and how profits and losses will be divided, you can prevent disputes down the line.
- Helps with Banks: Most banks will require an Operating Agreement when you open a business bank account.
Even though Texas does not mandate that you create an Operating Agreement, it’s highly recommended. Many businesses use online templates or work with legal professionals to draft this document.
5. Get an EIN for Your LLC
An Employer Identification Number (EIN) is a nine-digit number issued by the IRS to identify your business for tax purposes. You’ll need an EIN if your LLC plans to hire employees, open a business bank account, or file certain tax forms.
How to Apply for an EIN:
- Apply Online: The easiest way to get an EIN is to apply online through the IRS website. It’s free, and you’ll receive your EIN immediately after you submit the form.
- Form SS-4: If you prefer, you can also apply by mail or fax by submitting Form SS-4 to the IRS.
Why Do You Need an EIN?
- Tax Purposes: Your LLC will need an EIN to file taxes with the IRS and Texas Comptroller.
- Hiring Employees: If your LLC has employees, you will need an EIN to set up payroll and comply with federal and state tax withholding requirements.
- Business Bank Accounts: Most banks require an EIN to open a business checking or savings account.
What Do I Do After My LLC Is Approved?
Once your LLC is approved, there are a few more steps to take to ensure your business complies with Texas law and stays in good standing. These include filing reports, paying taxes, and staying compliant with local requirements.
How Much Do the Franchise Tax Return and Public Information Report Cost?
As part of maintaining your LLC in Texas, you must file an Annual Franchise Tax Report and a Public Information Report (PIR). These reports help the state keep track of your LLC and assess your tax liability.
- Franchise Tax: In Texas, the Franchise Tax is a state-level tax that applies to most LLCs. The amount depends on your LLC’s revenue. If your LLC’s annual revenue is below $1,180,000 (for 2025), you are not required to pay Franchise Tax and can file a “No Tax Due” report.
- Public Information Report: This report is part of your annual filing and includes basic information about your LLC, such as its business address and ownership.
When Are the Franchise Tax and PIR Due?
The Franchise Tax Return and Public Information Report are due each year on May 15. Make sure to file these reports by this deadline to avoid penalties or late fees.
When Are My First Franchise Tax and PIR Due?
Your first Franchise Tax and Public Information Report are due by May 15 of the year following the formation of your LLC. So, if your LLC was formed in 2025, your first reports will be due in 2026.
How Do I File My LLC Franchise Tax and Public Information Report?
You can file the Franchise Tax Return and Public Information Report online using the Texas Comptroller’s Webfile System. This online system is quick, secure, and easy to use.
How Will My LLC Be Taxed?
By default, your Texas LLC will be taxed as a pass-through entity, meaning the LLC itself does not pay federal income taxes. Instead, the profits and losses “pass through” to the LLC members, who report them on their personal tax returns.
However, LLCs in Texas can elect to be taxed as an S Corporation or C Corporation by filing the appropriate forms with the IRS.
Conclusion
Starting an LLC in Texas is a manageable and straightforward process, offering significant advantages for business owners. From protecting your personal assets to providing tax flexibility, an LLC is a popular choice for many entrepreneurs in the state. By following the step-by-step guide outlined in this article, you can easily navigate the essential tasks, such as naming your LLC, selecting a Registered Agent, filing the Certificate of Formation, and obtaining an EIN. While Texas doesn’t require an Operating Agreement, it’s highly recommended to prevent future conflicts and ensure smooth operations.
Once your LLC is approved, remember to file your Franchise Tax Report and Public Information Report annually to remain in good standing. Stay on top of due dates and taxes to avoid penalties. With the right planning, you’ll be able to establish a solid foundation for your business in Texas. Whether you’re starting a small local venture or scaling up, the state’s business-friendly environment makes it an ideal place to form your LLC. By following these steps and keeping compliant with state laws, you’ll be well on your way to success.
FAQs
Do I Need a Business License to Operate My LLC in Texas?
It depends on the type of business you plan to operate. Certain industries in Texas, such as healthcare, finance, and construction, may require specific licenses or permits. You can check with the Texas Department of Licensing and Regulation to determine if your business needs a state license.
Can I Form an LLC in Texas If I’m Not a U.S. Citizen?
Yes! Texas allows non-U.S. residents to form an LLC. However, you will need a valid U.S. mailing address and may be required to appoint a Registered Agent with a Texas address.
How Do I Dissolve My Texas LLC?
If you want to dissolve your LLC in Texas, you must file a Certificate of Termination with the Texas Secretary of State. Before dissolving your LLC, make sure that all taxes and fees have been paid.