Key Takeaways

  • The Texas Secretary of State oversees the formation of LLCs, including name registration, Certificate of Formation filing, and compliance requirements.
  • Choosing the right business structure impacts liability, taxation, and management flexibility.
  • LLCs in Texas combine limited liability with pass-through taxation, making them popular for small and growing businesses.
  • Successful formation involves reserving a name, appointing a registered agent, filing the Certificate of Formation, drafting an Operating Agreement, and meeting tax and licensing obligations.
  • Post-formation steps — like obtaining an EIN, filing annual reports, and maintaining compliance — are essential to keeping your LLC in good standing.

Texas Secretary of State LLC formation is one option you have when choosing a business structure while setting up a new company. Decisions regarding business structure should be done after consulting with an attorney and accountant. There are a number of issues to take into consideration, including:

  • Personal liability.
  • Management type.
  • Taxation methods.
  • Formality of operations.
  • Business continuity.
  • Ease of ownership interest transfers.

Selecting a Business Structure

Sole proprietorships are considered the easiest and most common type of business structure. There is no need for formal organization, and you can do business under your legal surname. If you want to do business under a different name, you would file for an assumed name or DBA. A DBA needs to be filed in the city or county where the business is maintained. Absent a formal location, it should be filed in all counties where the company conducts business under the DBA.

General partnerships are formed when two or more people create a business designed for profit. They operate under the terms set forth in the partnership agreement; however, there is no requirement to put a partnership agreement in writing. There are no Texas state filing requirements, but if the business operates under an assumed name, it will need to file a DBA. Texas also has an option for a Limited Partnership, which is formed by having one or more general partners and one or more limited partners. To limit the liability of the partners, a general or limited partnership would need to file for a Limited Liability Partnership (LLP).

To create a corporation in Texas, you need to file a Certificate of Formation with the Secretary of State, who then provides the form detailing what the minimum requirements are in Texas. Corporations are considered legal persons, and they offer limited liability, centralized management, perpetual existence, and simple procedures for ownership interest transfers.

What Is an LLC in Texas?

If you want to form an LLC in Texas, you need to file a Certificate of Formation with the Texas Secretary of State. This is a distinct business structure, but it combines the benefits of a partnership and a corporation. Because it's considered an entity, there are formal regulations in regard to formation. Owners of an LLC are called members, and members can be:

  • Individual people.
  • Partnerships.
  • Trusts.
  • Corporations.
  • Any other commercial or legal entity.

Liability of members is typically limited to their investment amounts, and they are able to enjoy the tax benefits of pass-through taxation like a partnership.

Benefits of Forming an LLC in Texas

Forming a limited liability company (LLC) with the Texas Secretary of State offers a flexible and protective business structure for entrepreneurs. Here are some of the most important benefits:

  • Limited Liability Protection: LLC members are generally not personally responsible for company debts or legal liabilities, helping protect personal assets like homes or bank accounts.
  • Pass-Through Taxation: Profits and losses typically “pass through” the LLC and are reported on members’ individual tax returns, avoiding double taxation.
  • Flexible Management: Texas LLCs can be either member-managed or manager-managed, allowing owners to choose the structure that fits their operations.
  • Credibility and Brand Protection: Registering an LLC adds credibility with customers and investors and helps secure exclusive use of your business name in Texas.
  • Business Continuity: LLCs continue to exist even if ownership changes, ensuring operational stability.

Because of these advantages, LLCs are often the preferred structure for startups, real estate ventures, and family-owned businesses.

How to Form an LLC in Texas

Start by choosing your desired name, which must be unique and easily distinguishable from other business entities already on file in Texas. State law requires that you include some version of LLC or Limited Liability Company at the end of your name. To verify that your desired name is available, conduct a search through the Texas Secretary of State SOSDirect website. You can reserve your desired name by filing an Application for Reservation or Renewal of Reservation of an Entity Name. This extends the reservation by 120 days and, as its name suggests, it's also a renewal.

The LLC is created when you file a Certificate of Formation with the Secretary of State's office. It must include all of the following information:

  • LLC's name
  • Address of the LLC
  • Decision on whether it will be manager-managed or member-managed
  • LLC governing person's name and address
  • LLC organizer's name and address
  • Certificate effective date

Every LLC in Texas is required to have a registered agent for service on file. This is a legal entity or individual who agrees to accept any legal documents on the LLC's behalf in the event of a lawsuit. They must be a Texas resident or business that is authorized to conduct operations in the state, and there must be a physical address located in the state.

Texas law doesn't mandate the use of an Operating Agreement, but it's highly recommended. This document sets forth operating guidelines and details for how important situations, like membership transfers, are to be handled.

LLCs with more than one member are required to obtain an EIN, even if there is no plan to have employees. Depending on what type of business you are forming, and where it's located, you may have to apply for specific state and local business licenses. If you are selling goods in Texas, you will be responsible for collecting and paying sales tax as well.

Step-by-Step Guide to Texas Secretary of State LLC Formation

The process of forming an LLC in Texas involves several key steps. Each must be completed in compliance with state laws to ensure your company is legally recognized and protected:

  1. Choose a Unique Name
    • Your business name must be distinguishable from other entities registered in Texas and include “Limited Liability Company,” “LLC,” or “L.L.C.”
    • Check name availability using the Texas SOSDirect database and optionally reserve it for 120 days by filing a Name Reservation Application.
  2. Appoint a Registered Agent
    • Texas law requires every LLC to designate a registered agent — an individual or business entity located in Texas — to receive legal and tax documents.
  3. File the Certificate of Formation
    • Submit Form 205 (Certificate of Formation) to the Texas Secretary of State online, by mail, or in person.
    • The form must include your LLC name, registered agent details, management structure, principal office address, and organizer information.
    • The current filing fee is $300 (subject to change).
  4. Draft an Operating Agreement (Optional but Recommended)
    • While not required by law, an Operating Agreement establishes ownership percentages, profit distribution, decision-making processes, and procedures for adding or removing members. This can prevent disputes and protect your LLC’s limited liability status.
  5. Obtain an EIN from the IRS
    • An Employer Identification Number (EIN) is required if you hire employees, open a business bank account, or have multiple members.
  6. Register for State and Local Taxes
    • Depending on your business activities, you may need to register for sales tax, franchise tax, or employer taxes with the Texas Comptroller of Public Accounts.
  7. Apply for Business Licenses and Permits
    • Local permits or state licenses may be required based on your industry (e.g., food service, construction, healthcare).
  8. File the Annual Franchise Tax Report
    • All LLCs must file an annual report with the Texas Comptroller, even if no tax is owed. Missing filings can lead to penalties or dissolution.

Costs and Ongoing Requirements

Understanding the costs and maintenance requirements associated with your LLC ensures long-term compliance and avoids penalties:

  • Filing Fee: $300 for the Certificate of Formation, paid to the Texas Secretary of State.
  • Registered Agent Fees: If you hire a professional service, expect to pay $100–$300 annually.
  • Franchise Tax: Texas imposes a franchise tax on LLCs with revenue above a certain threshold (currently $1.23 million). Even below that, a “No Tax Due” report must still be filed annually.
  • Annual Report: Due May 15 each year, submitted to the Texas Comptroller.
  • Additional Costs: Name reservation ($40), Certificate of Good Standing ($15), and business licenses or permits as applicable.

Properly budgeting for these costs and meeting ongoing filing obligations is essential to keeping your Texas LLC in good standing and avoiding administrative dissolution.

Frequently Asked Questions

  1. How long does Texas Secretary of State LLC formation take?
    Online filings are typically processed within 3–5 business days, while mailed submissions can take 7–10 business days. Expedited service is available for an additional fee.
  2. Can I form an LLC in Texas without living there?
    Yes. Non-residents can form a Texas LLC, but you must appoint a registered agent with a physical address in the state.
  3. Do I need an Operating Agreement for my Texas LLC?
    It’s not legally required but highly recommended. It helps clarify ownership, operations, and dispute-resolution procedures, protecting your LLC’s legal status.
  4. What happens if I don’t file my annual report?
    Failure to file the annual franchise tax report can result in fines, loss of good standing, and even dissolution of your LLC.
  5. Can I change my LLC’s name after formation?
    Yes. You must file a Certificate of Amendment with the Texas Secretary of State and pay the required fee to officially change the name.

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