Key Takeaways

  • A Texas LLC (Limited Liability Company) combines corporate liability protection with partnership-style tax flexibility.
  • To form an LLC in Texas, business owners must choose a unique name, appoint a registered agent, and file a Certificate of Formation with the Secretary of State.
  • While not required, drafting an Operating Agreement helps define ownership rights and management duties.
  • Most LLCs need an EIN from the IRS for tax and hiring purposes.
  • Texas LLCs benefit from no state income tax but must file an annual Public Information Report and pay a franchise tax.
  • Compliance requirements include maintaining a registered agent, renewing business licenses, and filing periodic reports.

Forming an LLC Texas requires a business owner to take the following steps with regard to naming, filing, and operating. The first, and one of the most important, steps when starting a business is coming up with a name for your limited liability company (LLC). 

Research Business Names

You should research existing names to make sure the name you want for your business is easy for potential customers to search for and suits your venture.

An LLC name must follow certain guidelines in the state of Texas:

  • Include the words “limited liability company” or one of the acceptable abbreviations.
  • Certain words require the completion of additional paperwork to be used in an LLC name, such as university, bank, or attorney. To qualify, you might also need a licensed professional, such as a lawyer or a doctor, to be part of the business.
  • Certain words are restricted from use in an LLC name, including Treasury, FBI, Secret Service, and other names that could confuse the LLC with a government agency.

The next step is making sure the name you want is available in Texas. If another business already exists with a name that is too similar or identical to the one you want, you'll have to come up with a new option. To do this:

  • Register for an account on the Secretary of State website.
  • Search existing business names. 
  • Use this account to file required business forms online and pay any required filing fees. 

You should also make sure the URL for the business name you want is available. Even if you aren't planning to make a website right away, you might want to obtain the domain name before you register your business name to prevent someone else from taking it. Your LLC will also need a professional email address. Google offers the G Suite professional email system, which includes business tools such as spreadsheets and word processing. It's free to try and also includes impressive security to protect your business information.

Choose a Registered Agent

Every LLC operating in Texas must have a registered agent. The next step is nominating your registered agent and filing the required form in person, by mail, or online. A registered agent is a business or individual that is responsible for receiving and handling any legal documents on behalf of the company. Some of the common legal documents include filings and service of process of legal action, which will be sent to your business if someone sues it.

To qualify as a registered agent, the business or individuals must meet certain requirements:

  • If you designate an individual, he or she must live in the state of Texas. 
  • If you choose a business to serve as the registered agent, it must have current authorization to operate in the state. 
  • An owner or employee of the LLC can serve as the registered agent, but the business itself can't be the registered agent. 
  • Registered agents must agree to their appointment in either electronic or written form. 

Use form 401-A to make sure the agent's acceptance of appointment includes the right language. You do not have to file this form with the Secretary of State.

File the Certificate of Formation

Step three of forming an LLC is filing the certificate of formation. You will submit this document to the state. Before you file the certificate, decide whether members or managers will manage the business. When you file the certificate of formation, you must pay a nonrefundable filing fee of $300 to the Secretary of State's office. It's important to note that if the LLC is being expanded into Texas from another state, the business qualifies as a foreign LLC.

Understand Texas LLC Costs and Filing Requirements

When determining what is an LLC in Texas, it’s important to understand the required fees and documentation. The Texas Certificate of Formation (Form 205) is filed with the Secretary of State, accompanied by a $300 filing fee. You can submit it online via SOSDirect, by mail, or in person.Texas also allows expedited processing for an additional fee. Filers must designate a registered agent, provide a principal office address, and specify whether the LLC will be member-managed or manager-managed.

For foreign LLCs (those formed in another state but doing business in Texas), the filing involves submitting Form 304 (Application for Registration of a Foreign LLC), along with a certificate of good standing from their home state.

Create an Operating Agreement

Although an operating agreement isn't a requirement to form an LLC in Texas, it is smart to have one on file. This legal document will outline the LLC's operating procedures and ownership.

Texas LLC Tax and Reporting Obligations

Content:While Texas does not impose a state income tax, LLCs must comply with the Texas franchise tax, administered by the Texas Comptroller of Public Accounts. This tax applies to businesses with annual revenue exceeding the state’s no-tax-due threshold (approximately $2.47 million as of 2024).Each LLC must also file a Public Information Report (PIR) annually, detailing ownership and management information. The report is due May 15 each year. Failure to file may result in penalties or the forfeiture of the LLC’s right to transact business in Texas.

Other tax obligations include:

  • Sales and Use Tax: Required if the LLC sells taxable goods or services.
  • Employment Taxes: Required if the LLC hires employees.
  • Federal Tax Elections: Single-member LLCs are taxed as sole proprietorships by default, while multi-member LLCs are treated as partnerships. However, owners can elect to be taxed as an S corporation or C corporation using IRS Form 8832 or Form 2553.

Obtain an EIN

Nearly every LLC operating in Texas will need an employer identification number (EIN), also referred to as the federal tax identification number. It identifies the company and serves the same purpose as a social security number for a person.

Annual Maintenance and Compliance for Texas LLCs

Maintaining your LLC in Texas involves more than just formation. To stay in good standing, you must:

  • Keep a registered agent continuously available during business hours.
  • File the Public Information Report and franchise tax annually with the Texas Comptroller.
  • Renew any local business permits or professional licenses applicable to your industry.
  • Update the Secretary of State if there are changes to the registered agent, management structure, or business address.
  • Maintain internal records, such as meeting minutes and membership certificates, even though Texas LLCs are not required to hold formal meetings.

Keeping these records helps preserve the LLC’s limited liability status, protecting personal assets from business debts and lawsuits.

Advantages and Disadvantages of a Texas LLC

Forming an LLC in Texas offers several benefits, but also some drawbacks to consider:

Advantages:

  • Limited Liability Protection: Owners (members) are not personally liable for the company’s debts.
  • Flexible Taxation: LLCs can choose pass-through taxation or corporate taxation.
  • No State Income Tax: Texas does not tax individual LLC income.
  • Business Credibility: Forming an LLC can enhance professional reputation.
  • Simple Management: Fewer formalities than corporations.

Disadvantages:

  • Franchise Tax: Even with no income tax, franchise taxes still apply.
  • Filing Costs: The $300 filing fee is higher than in some states.
  • Annual Reporting: Compliance requires ongoing filings and record-keeping.
  • Complexity for Large Businesses: Corporations may offer better structures for raising capital.

Licenses, Permits, and Local Requirements

Depending on your industry, your Texas LLC may need to obtain specific licenses or permits before beginning operations. These may include:

  • Local business permits from your city or county clerk’s office.
  • Professional licenses for regulated fields such as health care, real estate, or legal services.
  • Sales tax permits for companies selling goods or taxable services.
  • Zoning or home occupation permits for businesses operating from residential addresses.

Business owners can verify licensing requirements through the Texas Department of Licensing and Regulation and their local government websites.

Frequently Asked Questions

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

Online filings are usually processed within 3–5 business days. Paper submissions can take up to two weeks depending on workload and method.

2. Does a Texas LLC need a business license?

Texas does not issue a general statewide business license, but local or industry-specific permits may be required depending on business activities.

3. What is the franchise tax for Texas LLCs?

LLCs with revenue over the annual threshold must file and pay a franchise tax based on a percentage of their margin (revenue minus deductions).

4. Can a nonresident form an LLC in Texas?

Yes. Nonresidents and out-of-state entities can form or register a Texas LLC as long as they appoint a registered agent located in the state.

5. Is an Operating Agreement legally required in Texas?

No, but having one is highly recommended to define ownership, voting rights, profit distribution, and dispute resolution procedures.

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