Forming a limited liability company (LLC) comes with many benefits. An LLC combines the limited liability of a corporation with the flexibility and lack of formalities provided by a partnership or sole proprietorship. Follow the steps below to form an LLC in Texas. (For more on how to form an LLC in any state, see our article on how to start an LLC.)

1. Choose a Name for Your Texas LLC

Texas, like other states, has rules about what you can and can't name your LLC.

LLC name must be distinguishable. Your LLC's name must be distinguishable from the names of other business entities already on file with the Texas Secretary of State (SOS). In other words, your LLC can't have the same name as another business in Texas. (Tex. Bus. Org. Code § 5.053 (2023).)

You can check which names are already taken by searching the taxable entity database on the Texas Comptroller of Public Accounts (CPA) website. You can also use SOSDirect to search for businesses, assumed names, and trademarks that have been registered with the SOS.

LLC name must include an entity designator. Your LLC's name must include the phrase "limited liability company," "limited company," or an abbreviation of one of those two phrases. (Tex. Bus. Org. Code § 5.056 (2023).)

If you've picked a name for your business but aren't ready to register your LLC, you can reserve your business name for 120 days with the SOS. (Tex. Bus. Org. Code §§ 5.101 and following (2023).)

File an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the SOS to reserve your name. You can file the reservation online through SOSDirect or by mail. As of 2023, the filing fee is $40.

2. Appoint a Registered Agent for Your Texas LLC

Every Texas LLC must have an agent for service of process in the state—known as a "registered agent." A registered agent is an individual or business entity that agrees to accept legal papers on the LLC's behalf if someone sues the company. The agent can be a Texas resident or a business entity authorized to do business in Texas but can't be the LLC itself. The registered agent must have a physical street address in Texas. (Tex. Bus. Org. Code § 5.201 (2023).)

You can find information, including forms and answers to frequently asked questions, on the SOS's registered agents webpage.

3. File a Certificate of Formation

You can create a Texas LLC by filing a Certificate of Formation (Form 205) with the SOS. The certificate must include:

• the name of the LLC
• the type of entity being formed (a limited liability company)
• the purpose the LLC was formed
• how long the LLC will exist, if not perpetual
• the name and address of the LLC's registered agent
• the initial mailing address of the LLC, and
• the name and address of each organizer.

(Tex. Bus. Org. Code § 3.005 (2023).)

You can file the certificate online through SOSDirect or by mail. As of 2023, the filing fee is $300.

4. Prepare an Operating Agreement

An LLC operating agreement isn't required in Texas, but is strongly recommended. The operating agreement is an internal document that details the rules and procedures for how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed.

The agreement can also help preserve your limited liability by showing that your LLC is truly a separate business entity from the owners. Without an operating agreement, state LLC law will govern how your LLC operates.

The operating agreement should include the following:

• the members' percentage interests in the LLC
• the members' rights and responsibilities
• the members' voting powers
• how profits and losses will be distributed
• rules for holding meetings and taking votes, and
• buyout (also called "buy-sell") provisions, which determine what happens when a member wants to sell their interest, dies, or becomes disabled.

For help creating an LLC operating agreement, check out Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo) or use our online LLC formation service.

5. Get an EIN and Comply With Other Tax and Regulatory Requirements

Other tax and regulatory requirements might apply to your LLC. For example, your LLC might need to obtain an EIN, apply for business licenses and permits, and register for business taxes.

EIN. If your LLC has more than one member, it must obtain a federal employer identification number (EIN), even if it has no employees. If you form a single-member LLC, you must obtain an EIN for your LLC only if either you elect to have your business taxed as a corporation instead of a sole proprietorship (disregarded entity) or your single-member LLC has employees. You can get an EIN by completing an online EIN application on the IRS website. There's no filing fee.

Business Licenses. Depending on your LLC's business activities and location, your LLC might need to obtain local and state business licenses or permits.

Tax registration and filings. If you have employees or will be selling goods and collecting sales tax, you'll need to register with a Texas taxing authority. For example, if you'll collect sales tax, you must register with the CPA For more information on Texas LLC tax registration, check out our article on Texas annual tax and LLC filing requirements.

6. Annual Reports

Unlike most states, Texas doesn't require LLCs to file annual reports with the SOS. However, LLCs must file annual franchise tax reports. This report is called a "public information report." The details for computing the tax can be complicated. For more information, check the CPA annual reports webpage and our article on Texas LLC annual tax and filing requirements (see above).

Additional Help Starting Your Texas LLC

The state government offers many free resources to help small business owners. Check out Texas Economic Development's start a business in Texas webpage for a step-by-step guide to business registration. This guide also provides links to other resources.

If you want personalized legal help, talk to a Texas business attorney. A lawyer can help you pick a name, file your certificate of formation, draft your operating agreement, and comply with tax and regulatory requirements.