Introduction
Thinking about starting a business in the Lone Star State? Forming a Limited Liability Company (LLC) in Texas is a smart move for entrepreneurs seeking legal protection, tax advantages, and operational flexibility. This guide explains how to set up an LLC in Texas step by step.
Why Choose Texas for Your LLC?
Texas offers:
- No personal income tax
- A strong economy and business-friendly climate
- Low startup costs compared to other states
These benefits make Texas a top choice for new businesses, especially LLCs.
Step-by-Step: How to Set Up an LLC in Texas
1. Choose Your LLC Name
Your LLC name must:
- Be unique within the state of Texas
- Include “Limited Liability Company,” “LLC,” or “L.L.C.”
- Not contain restricted words like “bank,” “insurance,” etc.
Search for name availability on the Texas SOS Direct website.
2. Appoint a Registered Agent
Texas law requires you to have a registered agent with a physical address in Texas who can receive legal documents during business hours.
You can act as your own agent or hire a professional service.
3. File the Certificate of Formation (Form 205)
File Form 205 with the Texas Secretary of State. This document includes:
- Your LLC name
- Registered agent details
- LLC structure and purpose
Filing Fee: $300
File Online: SOSDirect
4. Create an Operating Agreement
Although not required by Texas law, an Operating Agreement is strongly recommended. It outlines:
- Member roles and responsibilities
- Profit sharing
- Operating procedures
This internal document helps prevent future disputes.
5. Get an EIN from the IRS
An Employer Identification Number (EIN) is required to:
- Open a business bank account
- Hire employees
- File federal taxes
Apply online for free at irs.gov.
6. Register for State Taxes and Permits
Depending on your business, you may need to:
- Register for Texas Sales Tax Permit through the Texas Comptroller’s Office
- Apply for professional or local licenses
7. Open a Business Bank Account
To keep your business and personal finances separate, open a dedicated business account using:
- Your EIN
- Certificate of Formation
- Operating Agreement
8. File Annual Franchise Taxes
All Texas LLCs must file an Annual Franchise Tax Report and Public Information Report with the Texas Comptroller each year—even if you owe no tax.
How Much Does It Cost to Set Up an LLC in Texas?
| Item | Cost |
|---|---|
| Certificate of Formation | $300 |
| Registered Agent (optional) | ~$100/year |
| Franchise Tax Filing | Varies annually |
Final Thoughts
Understanding how to set up an LLC in Texas is the first step toward business success. Texas makes it easy and affordable for both U.S. residents and foreign entrepreneurs to launch and grow their companies.
