What Is an LLC?
A Limited Liability Company (LLC) is a popular U.S. business structure that offers the liability protection of a corporation with the tax flexibility of a partnership or sole proprietorship. Forming an LLC in Texas is especially attractive due to its business-friendly environment and lack of personal income tax.
Why Start an LLC in Texas?
- No state income tax
- Affordable formation fees
- Minimal reporting requirements
- Robust legal protection for owners
How to Form an LLC in Texas: 8 Key Steps
1. Choose a Unique Name for Your LLC
Your business name must:
- Include “Limited Liability Company,” “LLC,” or “L.L.C.”
- Be distinguishable from existing Texas entities
- Not use restricted or misleading words
Check name availability on SOSDirect.
2. Appoint a Registered Agent in Texas
Texas law requires every LLC to have a Registered Agent—a person or business entity authorized to receive legal documents on your behalf.
- Must have a physical address in Texas
- Can be a member, employee, or professional service
3. File the Certificate of Formation (Form 205)
This is the official document that registers your LLC with the Texas Secretary of State.
- File online via SOSDirect
- Filing Fee: $300
- Information required includes:
- LLC name
- Registered agent details
- Governing structure (member-managed or manager-managed)
4. Create an Operating Agreement
This internal document is not filed with the state but is crucial for defining:
- Member roles and responsibilities
- Voting rights
- Profit distribution
- Dissolution terms
It helps prevent misunderstandings among members.
5. Get an EIN (Employer Identification Number)
Apply for an EIN from the IRS to:
- Open a business bank account
- Hire employees
- File federal and state taxes
Apply free online at irs.gov.
6. Register for State Taxes (If Needed)
Depending on your business type, you may need to register with the Texas Comptroller for:
- Sales tax permit
- Franchise tax
- Industry-specific permits
Check tax obligations at comptroller.texas.gov.
7. Open a Business Bank Account
Keep your personal and business finances separate. Most banks require:
- Your EIN
- A copy of your Certificate of Formation
- Your Operating Agreement
8. File Franchise Tax and Public Information Report Annually
Even if you don’t owe taxes, you must file these documents yearly with the Texas Comptroller. Deadlines usually fall on May 15th each year.
Cost of Forming an LLC in Texas
| Service | Estimated Cost |
|---|---|
| Certificate of Formation | $300 |
| Registered Agent (if hired) | ~$100/year |
| EIN from IRS | Free |
| Business Permits | Varies |
Conclusion
Knowing how to form an LLC in Texas sets the foundation for a legally compliant and successful business. With low costs, minimal bureaucracy, and strong legal protections, Texas remains one of the best states for entrepreneurs to launch an LLC.
