To form an LLC in Texas, here's everything you need to know.
Here are the steps you need to take to form a limited liability company (LLC) in Texas. For more information on how to form an LLC in any state, see Nolo's article How to Form an LLC.
- Choose a name for your LLC.
- Appoint a registered agent.
- File Certificate of Formation.
- Prepare an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
1. Choose a Name for Your LLC
Under Texas law, an LLC name must contain the words the words "Limited Liability Company" or "Limited Company," or the abbreviations "L.L.C.," "LLC," "LC," or "L.C." "Limited" may be abbreviated as "Ltd." or "LTD" and "Company" as "Co."
Your LLC’s name must be distinguishable from the names of other business entities already on file with the Texas Secretary of State. Names may be checked for availability at the Texas Secretary of State SOSDirect website.
You may reserve a name for 120 days by filing a Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the Texas Secretary of State. The reservation may be filed online through the Texas Secretary of State SOSDirect website, or filed by mail. The filing fee is $40.
2. Appoint a Registered Agent
Every Texas LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it is sued. The registered agent may be a Texas resident or a business entity authorized to do business in Texas. The registered agent must have a physical street address in Texas. The LLC may not be its own registered agent. You can find information on Texas commercial registered agents here.
3. File a Certificate of Formation
A Texas LLC is created by filing a Certificate of Formation for a Limited Liability Company (Form 205) with the Secretary of State. The certificate must include:
- the LLC's name, including the chosen LLC designation
- the name and address of the LLC’s registered agent
- whether the LLC will be member-managed or manager-managed
- if member-managed, the name and address of each initial member
- if a manager-managed, the name and address of each initial manager
- general purpose clause (as provided)
- the name and address of the LLC's organizer
- the effective date of the certificate, and
- signature of the organizer.
The certificate may be filed online through the Texas Secretary of State SOSDirect website, or by mail. The filing fee is $300.
4. Prepare an Operating Agreement
An LLC operating agreement is not required in Texas, but is highly advisable. This is an internal document that establishes how your LLC will be run. It is not filed with the state. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed. It can help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of 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 allocated
- rules for holding meetings and taking votes, and
- buyout, or buy-sell, provisions, which determine what happens when a member wants to sell his or her interest, dies, or becomes disabled.
For help creating an LLC operating agreement, see Form Your Own Limited Liability Company, by Anthony Mancuso (Nolo).
All of the paperwork and procedural steps to start a limited liability company can be done online using Nolo's Online LLC Formation service.
5. Comply With Other Tax and Regulatory Requirements
Additional tax and regulatory requirements may apply to your LLC. These may include:
EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website. There is no filing fee.
Business Licenses: The State of Texas does not require a general “business” license. However, some types of businesses require state-wide licenses. For more informaiton, visit the Texas Department of Licensing and Regulation. You can also download the Texas Business Licenses & Permits Guide. Most Texas cities and counties do not require a local business license. Check with your city or county government website to determine your local requirements.
Comptroller of Public Accounts: In some cases, for example if you will be selling goods and collecting sales tax, you’ll need to register with the Texas Comptroller of Public Accounts. (Texas also imposes an annual franchise tax on most LLCs.) Depending on the tax involved, you may be able to register online, by mail (using the correct form), or in person at a Comptroller field office. For more information on state LLC tax registration, see Nolo's article Texas LLC Annual Filing Requirements.
6. Annual Reports
Unlike most states, Texas does not require LLCs to file annual reports with the Secretary of State. However, LLCs must file annual franchise tax reports. The details for computing the tax can be complicated. Check the Comptroller of Public Accounts website for more information.
Texas LLC FAQs
Should I form an LLC in Texas?
If you are just starting your business or have already been operating as a sole proprietor, you should consider forming an LLC. LLCs limit an owner's personal liability for business debts and lawsuits and offer a lot of flexibility when it comes to ownership, management, and taxation of the business. To learn more about LLCs and decide if it is the right business structure for you, see What is a Limited Liability Company (LLC)?
How do I know if my LLC name is available?
It is important to make sure that your LLC's name is distinguishable from the names of other existing businesses on file with the Texas Secretary of State. You can conduct a name search for free on the Texas Comptroller of Public Accounts website to make sure your proposed name is available. Business name availability can also be checked on the Texas Secretary of State website prior to filing your LLC, although the SOS will collect a $1.00 fee for these searches.
How much does it cost to form an LLC in Texas?
- The Texas Secretary of State charges a $300 filing fee, plus an additional state-mandated 2.7% convenience fee to file an LLC Certificate of Formation.
- It will cost $40 to file a name reservation application, if you wish to reserve your LLC name prior to filing the Certificate of Formation.
Note for veterans: If you are forming a 100% veteran-owned business, the Secretary of State will waive this filing fee for qualifying veterans (honorable discharges only) who file directly by mail, in person, or by fax. For more information, visit the Secretary of State's Business Information for Veterans page.
Filing yourself is often the cheapest option, but completing all of the forms and filing them yourself can be complicated. Hiring a lawyer is another option, but will often cost you hundreds, if not thousands, of dollars in the process. Nolo's Online LLC formation service can complete all of the paperwork and filings for you, with packages starting at just $79.00.
Do I need an operating agreement for my Texas LLC?
Texas does not require LLCs to have operating agreements, but it is highly advisable to have one. An operating agreement will help protect your limited liability status, prevent financial and managerial misunderstandings, and ensure that you decide on the rules governing your business instead of state law by default. For more information, see The LLC Operating Agreement.
Can foreign LLCs do business in Texas?
To do business in Texas, all LLCs organized outside of the state must register with the Texas Secretary of State. Foreign LLCs must appoint a registered agent for service of process. The agent may be a Texas resident or a business entity authorized to do business in Texas.
To register, file an Application for Registration of Foreign Limited Liability Company (Form 304). The application may be filed online or by postal mail. The filing fee is $750.
Before filing the application, make sure the LLC’s name is available in Texas by checking the Texas business name database. If the name is not available, the foreign LLC must adopt an assumed name for use in Texas. The LLC must file online or by mail an Assumed Name Certificate (Form 503), with the Secretary of State and pay a $25 filing fee. For more information on foreign LLC registration requirements, see the information page on Secretary of State's website.
Can I form a single-member LLC in Texas?
For most formation purposes, a Texas single-member LLC is considered the same as a multi-member LLC. The steps to form a single-member LLC in Texas are the same as those listed above.
Single-member LLCs do have additional flexibility when it comes to filing a tax return. To learn more, see Nolo’s article, How Single-Member LLCs Pay Federal Income Tax.
Can I form a professional LLC in Texas?
If you provide a licensed professional service in Texas and want to form an LLC, you will be required to form a professional LLC (PLLC). Examples of professional services include architects, attorneys, dentists, certified public accountants, and more. Generally, if you provide a service that requires you to obtain a Texas state license before practicing, then you are a professional service. Each member of the company must be licensed in order to form a PLLC. To learn more about forming a Texas PLLC, see our article, How to Form a Professional LLC in Texas.
How do I dissolve my LLC when I'm done?
If you reach the point where it is time to close your business and cease all operations, then you will want to properly dissolve your LLC to limit your liability for lawsuits and government fees. Learn about the steps you will need to take in How to Dissolve an LLC in Texas.