How to Start an LLC in Texas

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Contributor, Benzinga
May 22, 2023

Starting a limited liability company (LLC) in Texas means taking advantage of the legal protection and flexibility an LLC offers. Texas is a business-friendly state, and if your LLC meets certain criteria, you can benefit from business and tax incentives, like the Texas Enterprise Zone Program (EZP) that offers sales tax and use tax refunds to companies investing in communities and creating jobs. 

Creating a Texas LLC is fast and easy. It's an ideal business structure for small- and medium-sized businesses. 

Why Start an LLC in Texas?

An LLC in Texas offers legal protection and limits liability on your personal assets. It is also a simple business structure to create and maintain, so you can focus on growing your business. It also allows you to select a NAICS code to help your company qualify for government contracts and grants.

In addition, LLCs provide pass-through taxation, meaning that you can report profits on your individual income tax return rather than having to file separately for the business. Pass-through taxation can simplify filing and administrative paperwork and means you won't be double-taxed. You also have the option to create an S-corp from the LLC and pay yourself as an employee. 

9 Steps for LLC Formation in Texas

Forming an LLC in Texas requires only a few steps. However, there are a few specific requirements you'll need to meet for Texas LLC formation. Here are the steps for creating an LLC in Texas.

1. Choose a Name for Your LLC

Your unique name for the LLC name will make your company stand out. Look for a distinctive, authentic, memorable business name that resonates with your target audience to build business success. For ideas, check the state business formation website and social media availability to confirm that there aren't businesses already using the name. You'll also want to avoid names that are similar or may have trademark issues. 

According to Texas law, your business name cannot share a name with an existing business. Search the Texas Taxable Entity register to see if the name is available. If it's available, you can reserve it for $40 by filing a Reservation or Renewal of Reservation of Name form or Form 501

Texas law sets out other name criteria. The name must include “Limited Liability Company” or “Limited Company” in the name or the abbreviations “L.L.C.,” “L.C.,” or “Ltd. Co.” In addition, you cannot use certain terms, including Treasury, State Department, FBI, CIA and other official terms. In addition, certain restricted words, including bank, lawyer, attorney, doctor or credit union, may require additional documentation and paperwork for licensure. 

Finally, you should also check the United States Patent and Trademark Office (USPTO) database to confirm the name isn't trademarked for the goods or services you plan to offer. 

2. File Your Certificate of Formation with the Texas Secretary of State

The Certificate of Formation, also sometimes called the Articles of Organization in other states, is the document that officially establishes your LLC. You will prepare your Certificate of Formation with the following information:

  • LLC name, including the designation
  • Name and address of the registered agent
  • Purpose of the LLC or reason for the formation
  • Names and addresses of each LLC member
  • The time period for which the LLC will exist if it is not perpetual 
  • Provisions for the regulation of the internal affairs of the company, including management structure

You can file the Certificate of Formation online via the Texas digital portal with a $300 filing fee. You can also fax it to (512) 463-5709 or mail the form to the Office of the Secretary of State at:

Secretary of State

P.O. Box 13697

Austin, TX 78711-3697

After filing the Certificate of Formation, you'll normally get approval within 5 to 7 business days. Texas also offers expedited service for an additional $25 per document.

3. Appoint a Registered Agent

Texas requires you to use a registered agent. A registered agent is a person or entity authorized to receive legal documents and notices on behalf of your LLC. A registered agent can be you, an employee of the LLC or another designated person. According to Texas law, you're required to appoint a registered agent. The registered agent must be available to accept documents and on-site at the business location during regular business hours.  

4. Create an Operating Agreement

An operating agreement improves the daily functioning of an LLC. Texas LLCs don't have to file an operating agreement. However, it offers essential benefits to your business that make it smart to put in place on formation. An operating agreement can simplify operations by ensuring all members are in agreement about hiring, distribution of profits and dissolution. 

Without an operating agreement, in case of a disagreement, the courts make determinations based on Texas law, not necessarily what is in the best interest of the LLC and its members. For that reason, once the operating agreement is complete, have all members review it, suggest any amendments and sign it. 

Elements an operating agreement should include:

  • The LLC's purpose, including products or services offered
  • Names and addresses of all LLC members
  • Each member's role within the LLC, including their stake in the company, profit share and voting rights
  • A schedule of meetings 
  • Voting procedures
  • Procedure for electing a manager or hiring employees
  • Procedure for admitting new members
  • Terms for dissolution of the LLC and relevant procedures

To get started, you can find sample templates of LLC operating agreements online and adapt them to your business needs. You can also ask an online legal service or business lawyer to draft a simple operating agreement. 

5. Obtain all Necessary Permits, Licenses and Tax IDs

To operate in Texas, you may need to obtain permits or licenses. You can find a comprehensive list of Texas business licenses and permits here to determine which permits you'll need to operate the business. In addition, you should file for an Employer Identification Number (EIN) with the IRS. You may need to file for your business's Texas sale tax permit

6. Obtain Business Insurance

Business insurance offers legal protection for the LLC. Depending on the industry, you may be required to obtain business insurance.

For all businesses, commercial general liability insurance can protect business owners against liability claims for bodily injury, property damage and personal and advertising injury or slander. Texas offers insurance resources for small businesses to help you find a reliable provider for your industry. 

7. Open a Bank Account for Your LLC

Once you have registered the LLC and obtained an EIN, you can open a business bank account. A separate business bank account for the LLC makes it easier to manage business finances. Keep personal funds separate from business funds. 

Business bank accounts also often have extra perks like higher savings interest rates, a free debit card, cash back or other incentives. To open a bank account, you'll need:

  • Employer Identification Number (EIN) or Social Security Number (SSN)
  • Personal identification
  • Business formation documents
  • Business license

Research local banks and promotional offers for new business bank accounts to choose the right bank for your LLC. 

You don't have to pay monthly (or annual) fees to maintain your Texas LLC. However, check with the Texas Secretary of State for updated business requirements. You must follow general employer record-keeping requirements to keep proper records in Texas. 

9. Consider Using an Online Formation Service

An online service simplifies filing for an LLC. With a reliable online formation service, you should have your new LLC within two weeks of submitting your information. Using an LLC formation service is usually $39 to $149, but the best online LLC formation services only ask you to pay state fees and don't charge any additional fees. 

Form Your LLC in Texas Today

A Texas LLC offers a flexible business structure. To take advantage of all Texas offers to businesses, check with the Secretary of State for current business incentives as well as required licenses and registration. Texas makes creating and maintaining an LLC easy so you can focus on its unique offerings and building business growth. 

Frequently Asked Questions 

Q

How much does it cost to open an LLC in Texas?

A

It costs $300 to open an LLC in Texas.

Q

Is there a monthly fee for LLC in Texas?

A

There are no monthly fees for an LLC in Texas.

Q

Does my LLC need a business license in Texas?

A

Your LLC doesn’t need a business license in Texas. However, it might need licenses, permits, certifications, registrations or authorizations for a specific business activity at the federal, state and local levels.

About Alison Plaut

Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.