Key Takeaways

  • Texas LLCs require filing a Certificate of Formation and appointing a registered agent.
  • The $300 state filing fee is standard, and an operating agreement is highly recommended.
  • You'll need an EIN, a separate business bank account, and to register for state taxes if applicable.
  • Ongoing compliance includes annual franchise tax filings, maintaining a registered agent, and updating business licenses.
  • Foreign LLCs must register before doing business in Texas.

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.

Benefits of Forming an LLC in Texas

Forming an LLC in Texas offers several advantages for entrepreneurs and small business owners:

  • No state income tax on business or personal income for LLC members.
  • Asset protection through limited liability, separating personal and business finances.
  • Low filing fees compared to other states—$300 for the Certificate of Formation.
  • Simple compliance requirements, such as no need for annual meetings or extensive corporate formalities.
  • Flexible management structure—LLCs can be member-managed or manager-managed.
  • Name reservation and protection through filing with the Texas Secretary of State.

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.

How to Reserve a Business Name in Texas

To reserve your LLC name before officially filing, submit Form 501 (Application for Reservation or Renewal of Reservation of an Entity Name) to the Texas Secretary of State. This reserves your desired name for 120 days and costs $40. This step is optional but can help prevent another entity from claiming your business name during the planning phase.

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

Registering a Foreign LLC in Texas

If your LLC is formed in another state but you want to operate in Texas, you must register as a foreign LLC:

  • File an Application for Registration (Form 304) with the Secretary of State.
  • Provide a certificate of existence or good standing from your home state.
  • Pay a $750 registration fee.
  • Appoint a registered agent located in Texas.
  • Comply with all Texas licensing and tax requirements to legally operate.

Texas Franchise Tax in Detail

All Texas LLCs are subject to the Texas franchise tax, even if they owe no tax. Here's a breakdown:

  • Annual reports are due by May 15 each year.
  • If your total revenue is below the no-tax-due threshold ($2.47 million for 2024), you still must file but owe $0.
  • If revenue exceeds that threshold, the tax rate is:
    • 0.375% for retail and wholesale businesses.
    • 0.75% for other types of businesses.

Failure to file can lead to penalties and losing your good standing with 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.

Common Reasons Texas LLCs Are Dissolved

Texas LLCs can be involuntarily dissolved by the state for the following reasons:

  • Failure to file franchise tax reports or pay taxes.
  • Failure to maintain a registered agent or office in the state.
  • Failure to respond to state correspondence or return required reports.

To avoid dissolution, ensure timely filings, update your registered agent information, and stay on top of all compliance deadlines.

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. Mailed submissions may take up to 2–3 weeks.
  2. Do I need an attorney to start an LLC in Texas?
    No, but consulting one can help ensure legal compliance and protect your interests—especially when drafting an operating agreement.
  3. Can I be my own registered agent in Texas?
    Yes, you can serve as your own registered agent if you're a Texas resident and have a physical address (no P.O. boxes).
  4. Do I need a business license for my LLC in Texas?
    Texas does not issue a general business license, but certain industries and local jurisdictions may require specific permits or licenses.
  5. What is the difference between a member-managed and manager-managed LLC?
    In a member-managed LLC, all owners share in running the business. In a manager-managed LLC, designated managers handle operations while other members are passive investors.

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.