1. Steps to Form an LLC in Texas
2. Important Steps After Business Formation
3. Avoid Dissolution
4. Steps to Form an LLC in Texas
5. Important Steps After Business Formation
6. Avoid Dissolution

Setting up a LLC in Texas follows general rules for LLCs formation, with a few specific state requirements.

A limited liability company (LLC) is a special business entity, combining the strengths of a partnership and corporation. Its members enjoy favorable tax treatment, structural flexibility, and limited personal liability for company's finances.

Steps to Form an LLC in Texas

1. Choose a business name that is distinguishable from other registered business names. Check the Texas secretary of state website for name availability. Include the words "Limited Liability Company" or the abbreviations "L.L.C.," "LLC," or "L.C." Avoid profanity or obscene language and prohibited words, like “FBI” or “Treasury.” For restricted words, like “bank” or “university,” obtain a permit and hire a licensed individual to work for your business. File a reservation request to reserve a name for 120 days. Submit the request either online or by mail, along with the $40 fee.

2. File a certificate of formation with the Texas secretary of state. Indicate your company's name along with the names and addresses of its governing persons, its registered agent, and the organizer. Specify the certificate's effective date as well as whether your LLC will by managed by the members or managers. File online or by mail along with the $300 fee.

3. Determine your LLC's members and board.

4. Designate a registered agent, responsible for all legal correspondence for your company in the state. This may be a Texas resident or a business entity permitted to conduct business in Texas, except for the LLC itself. A registered agent must agree to the appointment in written or electronic form.

5. Draft an operating agreement. Not required in Texas, this legal document outlines your company's policies and procedures and clarifies the verbal agreements between the members.

6. Adhere to additional tax requirements and regulations.

  • LLCs with more than one member must obtain the IRS Employer Identification Number (EIN). One-member LLCs must obtain an EIN only if they plan to hire employees or if they elect a corporation tax treatment.
  • If you plan to sell goods and collect sales tax, register with the Texas Comptroller of Public Accounts.

7. Open a business bank account to segregate your personal and company's assets and to make accounting and tax filings easier. Get a business credit card to separate personal and business expenses and to start building your company's credit history.

Important Steps After Business Formation

1. File an initial franchise report with a public information report in the first year. Every year before May 15, file an annual franchise tax report with a public information report. Tax rates are generally 1 percent. LLCs with annual revenues below $1,110,000 don't pay any tax but must file a “no tax due report.” LLCs with annual revenues greater than $1,100,000 pay a graduated tax.

Texas charges a $50 penalty for failure to file on time. A late tax payment results in a 5 percent penalty fee, which increases to 10 percent if you pay after 30 days.

2. To do business in Texas, all out-of-state LLCs must register with the Texas secretary of state and appoint a registered agent. Before filing the application, check the Texas business name database for the LLC's name availability. If the name is already taken, the foreign LLC must adopt a different name for use in Texas.

3. Get your books in order, so you can track your business finances and make your annual tax filings simpler.

4. Check with the following agencies for all necessary business licenses and permits:

  • The U.S. Small Business Administration guide
  • Texas.gov's work section
  • The local chamber of commerce

You may consult a professional service or the Texas Department of Licensing and Regulation to find out about all of your business licensing needs.

4. Get workers' compensation insurance, typically required for businesses with employees. Consider getting general liability insurance as well.

5. Adhere to employee hiring compliance rules:

  • Ensure that potential employees are eligible to work in the U.S.
  • Report employees as "new hires" to the state
  • Provide workers' compensation insurance for employees
  • Withhold income taxes
  • Display compliance posters in a conspicuous location
  • Ensure payment of employees in increments specified by the state

Avoid Dissolution

Hire a registered agent service to notify you of upcoming filing deadlines and file the reports on your behalf to avoid any issues.

If you need more information about setting up an LLC in Texas, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Setting up a LLC in Texas follows general rules for LLCs formation, with a few specific state requirements.

A limited liability company (LLC) is a special business entity, combining the strengths of a partnership and corporation. Its members enjoy favorable tax treatment, structural flexibility, and limited personal liability for company's finances.

Steps to Form an LLC in Texas

1. Choose a business name that is distinguishable from other registered business names. Check the Texas secretary of state website for name availability. Include the words "Limited Liability Company" or the abbreviations "L.L.C.," "LLC," or "L.C." Avoid profanity or obscene language and prohibited words, like “FBI” or “Treasury.” For restricted words, like “bank” or “university,” obtain a permit and hire a licensed individual to work for your business. File a reservation request to reserve a name for 120 days. Submit the request either online or by mail, along with the $40 fee.

2. File a certificate of formation with the Texas secretary of state. Indicate your company's name along with the names and addresses of its governing persons, its registered agent, and the organizer. Specify the certificate's effective date as well as whether your LLC will by managed by the members or managers. File online or by mail along with the $300 fee.

3. Determine your LLC's members and board.

4. Designate a registered agent, responsible for all legal correspondence for your company in the state. This may be a Texas resident or a business entity permitted to conduct business in Texas, except for the LLC itself. A registered agent must agree to the appointment in written or electronic form.

5. Draft an operating agreement. Not required in Texas, this legal document outlines your company's policies and procedures and clarifies the verbal agreements between the members.

6. Adhere to additional tax requirements and regulations.

  • LLCs with more than one member must obtain the IRS Employer Identification Number (EIN). One-member LLCs must obtain an EIN only if they plan to hire employees or if they elect a corporation tax treatment.
  • If you plan to sell goods and collect sales tax, register with the Texas Comptroller of Public Accounts.

7. Open a business bank account to segregate your personal and company's assets and to make accounting and tax filings easier. Get a business credit card to separate personal and business expenses and to start building your company's credit history.

Important Steps After Business Formation

1. File an initial franchise report with a public information report in the first year. Every year before May 15, file an annual franchise tax report with a public information report. Tax rates are generally 1 percent. LLCs with annual revenues below $1,110,000 don't pay any tax but must file a “no tax due report.” LLCs with annual revenues greater than $1,100,000 pay a graduated tax.

Texas charges a $50 penalty for failure to file on time. A late tax payment results in a 5 percent penalty fee, which increases to 10 percent if you pay after 30 days.

2. To do business in Texas, all out-of-state LLCs must register with the Texas secretary of state and appoint a registered agent. Before filing the application, check the Texas business name database for the LLC's name availability. If the name is already taken, the foreign LLC must adopt a different name for use in Texas.

3. Get your books in order, so you can track your business finances and make your annual tax filings simpler.

4. Check with the following agencies for all necessary business licenses and permits:

  • The U.S. Small Business Administration guide
  • Texas.gov's work section
  • The local chamber of commerce

You may consult a professional service or the Texas Department of Licensing and Regulation to find out about all of your business licensing needs.

4. Get workers' compensation insurance, typically required for businesses with employees. Consider getting general liability insurance as well.

5. Adhere to employee hiring compliance rules:

  • Ensure that potential employees are eligible to work in the U.S.
  • Report employees as "new hires" to the state
  • Provide workers' compensation insurance for employees
  • Withhold income taxes
  • Display compliance posters in a conspicuous location
  • Ensure payment of employees in increments specified by the state

Avoid Dissolution

Hire a registered agent service to notify you of upcoming filing deadlines and file the reports on your behalf to avoid any issues.

If you need more information about setting up an LLC in Texas, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.