Starting an LLC in Texas is Easy
You can form a Texas LLC (Limited Liability Company) yourself by filing the Texas Certificate of Formation with the Secretary of State. The cost to create an LLC in Texas is $300.
Follow our free How to Set up an LLC in Texas guide below to get started today.
If you are thinking about hiring a professional service to form your LLC, read our Top 7 LLC Formation Services review.
Step 1: Create A Name For Your Texas LLC
First off, in order to launch a successful Texas LLC, you need to give it a name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.
Legally, your business name must:
- Contain the words limited liability company or limited company, or the abbreviation LLC or L.L.C.
- Not contain the words bank, bank and trust, trust, trust company, or a similar term or foreign language word without approval from the state banking commissioner.
- Not contain the words college, university, school of medicine, medical school, health science center, school of law, law center, or law school without approval from the Texas Higher Education Coordinating Board.
- Not contain the words veteran, legion, foreign, spanish, disabled, war, or world war if the name implies the entity is created for the benefit of war veterans and their families, without written approval issued from a veterans organization.
- Not contain the words, Olympic, Olympiad, or Citius Altius Fortius without the authorization of the United States Olympic Committee.
If you’re having trouble coming up with a name that fully captures your desired brand, don’t let that stop you from proceeding with the LLC formation process. For now, you can focus solely on the legal requirements and consider filing for an assumed name certificate after you’ve nailed down your branding.
What To Do:
Once you’ve decided what you’d like to name your Texas LLC, do a Texas LLC name search with the Secretary of State to find out whether or not it’s in the cards. If your business name is available, you’ll be able to lock it down when you file your Texas Certificate of Formation.
Need help naming your LLC? Check out our LLC name generator to find the best name for your LLC.
Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use GoDaddy to search for your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon.
Step 2: Choose Your Texas Registered Agent
When you file your Certificate of Formation, you will need to appoint a Texas registered agent.
Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your Texas LLC. Your registered agent can be an individual resident of the state or a company that’s legally authorized to represent businesses in the state of Texas.
Texas does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead. Here are a few things to think about before you decide to act as your own:
- You’ll have to maintain normal (9 am - 5 pm) business hours at the address you provide.
- If you run your business from home, you’ll be required to make your personal address public.
- You must keep up on important notices, dates, and deadlines.
- You could be served in front of your family or coworkers.
What To Do:
If you’re considering acting as your own registered agent, do some research, starting with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Texas Certificate of Formation.
If you’re leaning toward hiring a professional, we recommend doing so through an online LLC formation service. Many of these companies (like ZenBusiness) offer up to one year of registered agent service free when you form your Texas LLC with them.
A Texas Registered Agent must consent to Appointment in written or electronic form. The statement of consent should include:
- The name of your LLC
- An express statement that the person designated consents to serve as the LLC’s registered agent
- The name of the person designated as registered agent
- The signature of the registered agent
- The date of execution
The consent statement doesn't have to be filed with the Texas Secretary of State. For in-depth information, you can take a look at the Acceptance of Consent Form 401-A.
To learn more about the role of a registered agent and why you should consider hiring a professional service, read our What is a Registered Agent guide.
Step 3: File the Texas LLC Certificate of Formation
Now it’s time to officially form your Texas LLC by filing your Certificate of Formation with the Secretary of State. You can do this on your own, with the help of a lawyer, or through a professional LLC filing service.
What To Do:
If you choose to mail in a hard copy, send the form and payment (payable to the Secretary of State) to the following address:
Secretary of State
P.O. Box 13697
Austin, TX 78711
Or deliver it in person to:
James Earl Rudder Office Building
Austin, TX 78701
Or fax it to:
Processing time is 3 days if filing online or 5 to 7 days if filing by mail.
Sure, you can handle this step on your own, but we still recommend considering the help of an LLC formation service. Why? Not only will they take the reins and make sure you file everything properly, but they’ll also provide other necessary products and services at very competitive prices.
One great option is ZenBusiness. In addition to great service, they give you a free year of registered agent service when you sign up.
Step 4: Create A Texas LLC Operating Agreement
Creating a Texas LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit arises.
Your operating agreement should outline the following:
- each member’s responsibilities
- how new members will be admitted
- how existing members may transfer or terminate their membership
- how profits and dividends are to be distributed
From there, you can add as many provisions as you want, provided they are not in conflict with Texas business law. Learn more about Operating Agreements in Texas.
Quick Note: You can create a custom Free Operating Agreement using our operating agreement tool. No credit card required, ever.
Step 5: Get An EIN For Your Texas LLC
The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is essentially a Social Security number (SSN) for your company. State and federal agencies use this number to track your business activity.
Your EIN will come in handy when it’s time to:
- Open a business bank account
- File Federal and State taxes
- Hire employees
We think the best way to get an EIN for your LLC in Texas is by using the free online application on the IRS website. We prefer this method because it's the most efficient, but you can apply by phone, fax, or mail. You can read our How to Get an EIN guide to find out how.
Personal Asset Protection For Your Texas LLC
Using dedicated business banking and credit accounts is essential for personal asset protection.
Now that you’ve made it through the formation process for your Texas LLC, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your Texas LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can go a long way in protecting your assets with these three steps:
1. Open a business bank account.
A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the The 5 Best Banks for Startups and Entrepreneurs
2. Get a business credit card.
A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.
3. Designate an authorized representative.
Make sure all documents are signed by a representative of your Texas LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.
Reduce the Liability For Your Texas LLC
Business insurance helps you manage risk and focus on growing your business. Carrying the right coverage protects your Texas LLC from liability and keeps you safe in the event of a loss.
The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers claims of malpractice and other business errors.
There are free services available that quickly assess your business’s insurance needs. These services suggest customized policies with various insurance carriers so that you can choose the best value. One such reliable service is CoverWallet.
You can reduce your Texas LLC’s liability by being fully compliant with employment laws such as:
- Verifying new employees are allowed to work in the US.
- Reporting employees as "new hires" to the state.
- Withholding employee taxes.
- Printing workplace compliance posters and placing them in visible areas of your workspace.
If you plan to hire employees, you might also be required to invest in Workers' Compensation Insurance. This type of policy provides coverage for employee job-related illnesses, injuries, or loss of life.
Find out more information from the Texas Workforce Commission website.
As a new LLC in Texas, you will need to stay compliant with permits, licenses, taxes, and state filings. This is serious business; failure to comply can lead to fines, tax penalties, and dissolution (the end) of your LLC.
Business Licenses and Permits
To operate your LLC, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure you research carefully and plan accordingly.
Find out how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:
Federal: Use the U.S. Small Business Administration (SBA) guide.
State: Use Texas Secretary of State's website.
Local: Contact your local county clerk and ask about local licenses and permits.
This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Here’s a sales tax guide to find out more.
If you have employees in Texas, you will need to register for Unemployment Insurance Tax through the Texas Workforce Commission.
The state of Texas requires all LLCs to file an annual report and franchise tax together. If you miss state filings like the annual report, you could face fines or even automatic dissolution. A quality registered agent service can help protect your assets by keeping track of filing requirements for you.
File online using the Texas Comptroller of Public Accounts.
Texas Secretary of State
James E. Rudder Bldg.
1019 Brazos St.
Austin, TX 78701
Due Date: Due by May 15 each year. Reports do not need to be filed in the same year that an LLC is formed. If your LLC was formed in March 2018, then your first report is due on May 15, 2019.
Late Filings: The state of Texas charges a $50 penalty for failure to file on time (whether or not you have tax due). Additionally, a late tax payment is subject to a 5% penalty fee, which increases to 10% if you pay after 30 days.
Reduce Administrative Burden
There will be lots of demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go.
Accounting For Your Texas LLC
It's important to get your books in order — even if you haven't officially opened for business. A well-managed accounting system will help you:
- Track your business finances, including bills, expenses, and income.
- Simplify and file your annual taxes.
You can maintain your accounting in two ways:
- Use DIY accounting software. This can come with an increased risk of errors especially when starting a new business.
- Hire an accounting service. They can provide comprehensive advice to help optimize your bookkeeping and taxes as well as additional services such as payroll etc.
Recommended: For most small businesses, we recommend using a reputable accounting service. Schedule a free tax consultation for your business now to avoid costly errors in the future.
If you have employees for your Texas LLC, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.
Gusto is a reliable and good payroll service for small businesses.
Need Help Forming an LLC in Texas?
Have A Professional Service Form Your Texas LLC For You
If you’ve got too much on your agenda to worry about all the paperwork and state-requirements, there are a handful of LLC formation services that can take care of everything for you.
Here are the two most popular:
– LegalZoom ($79 + state fee) = Best For Brand Recognition