How to start an LLC in Texas
Looking to start a new business in Texas? One of the most popular – and best – business structures is the limited liability company or LLC. The advantage of the LLC structure is that it helps shield the owner’s personal assets from liabilities related to the business (unlike a sole proprietorship) – so if the business is ever sued, the owner’s personal wealth is protected. Plus, LLCs are often simpler to set up and maintain, compared to corporations and S corporations.
To start an LLC in Texas, you will need to work with the Texas Secretary of State. The Certificate of Formation is the primary document that needs to be submitted – although there is more to it than just that! In the guide below, learn step-by-step how to start a Texas LLC.
Consider utilizing an LLC formation service
The first decision you will need to make is whether or not you want help with the LLC formation process. There are a variety of business formation services that specialize in helping entrepreneurs form new business entities. These services charge a small fee (starting at $49 in the case of ZenBusiness), and essentially walk you through the entire business forming process.
The advantage of using a service is that you can rest assured knowing everything has been done correctly. It’s also much quicker and requires less effort on your end.
Two great options that come highly recommended are Northwest Registered Agent and ZenBusiness. Northwest is known for exceptional, personalized service. ZenBusiness also has great service and has very affordable prices as well.
If you use a service, simply follow along with their detailed instructions. If you form your Texas limited liability company on your own, keep reading to find out how.
Name your new company
Choosing a name for your business is the first concrete step that you will need to take in forming an LLC in Texas. It starts with thinking about the type of business you want to run, and what may be an appropriate name for it. Try to think of something memorable.
The name must not already be taken – so you will need to search the database of Texas business names with the Texas Comptroller of Public Accounts. This will allow you to confirm whether or not your desired name is available.
Additionally, the name you choose must meet all the naming requirements set out by the Texas Secretary of State. For instance, names must contain the abbreviations “LLC”, “L.L.C.” or “limited liability company”, and must not contain any restricted words.
Using an Assumed Name in Texas
Once your business is registered, you don’t necessarily have to do business under the formal entity name of your LLC. Instead, you also have the option to register an assumed name – otherwise known as a “doing business as” or DBA.
An assumed name is a secondary business name that is attached to your existing business registration. It allows for more flexibility in how your brand operates your business. You must register for an assumed name certificate before you use it – this can be done online.
Appoint a Registered Agent
Under Texas law, you are required to appoint a registered agent for your LLC in Texas. This agent is an individual (or business) that is responsible for receiving important documents on behalf of your company. The most important task of the registered agent is receiving legal notices, in the case of your business being sued.
Any Texas resident can be a registered agent. This means that you can appoint yourself, an employee, or a trusted associate to be your agent. Companies can also be registered agents, but your own business cannot serve as its own registered agent. The registered address must be a physical address, so PO Boxes are not allowed.
If you do use a service, we recommend Northwest Registered Agent (around $125 per year) or ZenBusiness ($49 for the first year). Using a professional service ensures that everything is handled accurately, and also means that you won’t miss anything important when you’re away on vacation.
Create an LLC operating agreement
Note: This step is optional, but recommended.
You are not required to have an operating agreement in Texas, but it’s still a good practice to have one.
An operating agreement establishes the basic operating procedures of your LLC. It lays out key responsibilities and rights for each LLC member, which makes it particularly important for LLCs with multiple members or owners.
You can create an operating agreement using a template, like the one that is provided by ZenBusiness when you use their service to set up your LLC. Alternatively, a local attorney can help you draft one, although this can be costly.
File Texas LLC Certificate of Organization
The Certificate of Organization (which is called the Articles of Organization in many states) is the primary document that is submitted in order to form your Texas LLC. This form can be submitted online or through the mail. There is a $300 filing fee, payable to the Secretary of State.
To file online
File the Texas Certificate of Organization online with the TX Secretary of State. Pay the $300 Texas LLC fee online, using a credit or debit card.
To file by mail
Download and fill out the Certificate of Organization. Include a check or money order for $300, made out to the Secretary of State. Mail the document and the check to:
Secretary of State
P.O. Box 13697
Austin, TX 78711
Alternatively, you can submit the document in person at:
James Earl Rudder Office Building
Austin, TX 78701
Or fax it to (512) 463-5709
Once you have submitted the document, you simply need to wait for Texas to process it. You will be notified when it is complete – or if there are any issues.
Apply for an EIN
Almost every Texas LLC should have an employer identification number or EIN. An EIN is a kind of like a social security number for your business, as it is used to identify the company on tax filings.
This number is required for any business that has employees. It’s also required for multi-member LLCs, even if they don’t have employees. Plus, EINs are required by most banks in order to open business checking accounts. In other words, EINs are quite important!
EINs are issued by the Internal Revenue Service (IRS). To apply, simply fill out this application on the IRS website. The process is completely free, and usually, EINs are issued instantly.
Apply for business licenses & permits
Your business will likely need certain permits and/or licenses in order to operate legally – in addition to your LLC formation documents. Some requirements are on the state level, while others are local or federal requirements.
For Texas state requirements, this Business License and Permits Handbook is a great place to start researching your requirements. Texas does not require a general business license, but certain business activities will require various permits.
There will also be some requirements for tax registration on the state level. For instance, you will likely need to register for unemployment insurance tax, and you may need a seller’s permit if you plan to sell taxable goods and services.
On the federal level, certain regulated industries will require additional permitting.
There are local requirements, as well, which are mandated by county governments, and in some cases city governments, as well. Most counties require a local business license that is general-purpose, meaning all businesses need one. You will need to research requirements in your area or check with your county clerk.
If you have multiple locations, you will need to ensure that you meet requirements in each jurisdiction that you plan to operate in.
Keep your business in good standing
There are many ongoing compliance tasks that business owners must take in order to keep their businesses up-to-date with all requirements. This includes tasks like tax returns, annual reports, permit renewals, and more. It also means that you need to stay on top of requirements on every level of government: local city/county, state, and federal.
Each business will face different requirements, depending on the type of business, its location, how regulated its industry is, etc. With that said, some of the most common requirements that overlap with most businesses include:
Texas LLC annual report and franchise tax return – due every year for all Texas LLCs
Texas franchise tax report (no tax will be due for companies with less than $1,130,000 in revenue. However, a report is still necessary, regardless of revenue level.
City/county tax returns
Federal tax returns
Sales tax returns
Employer taxes/payroll taxes
Annual permit renewals
Annual business license renewals
Annual professional license renewals for employees, if required
This can all feel like a lot to manage – and it can be. But if you start off on the right foot by planning ahead, you can stay on top of everything. It’s a good idea to make reminders of important due dates in your calendar. And don’t just focus on Texas requirements – be sure to also pay attention to federal and city/county requirements.
Using a registered agent service can help, as well. Companies such as Northwest Registered Agent and ZenBusiness can help keep you on track with ongoing requirements, both by helping with certain filings and by informing you of key due dates.
Open a business checking account
Businesses should always keep their finances separate from the finances of the business owner(s). And the easiest way to do that is to use separate bank accounts. Ideally, businesses should start a business bank account immediately after forming, so that all business transactions can be run through that account.
To open a business bank account, you will need an EIN, a small opening deposit, and your business license/formation documents. Some banks may have additional requirements, so call ahead to see what you will need to bring in to open the account.
At this time, it’s wise to also look into other financial products for your business. This could include business insurance, a business credit card or line of credit, etc.