STEP 1: Name your LLC
This is the first and most important step in starting your LLC. Do some research to make sure the name you choose is suited to your business venture and is easily searchable for potential clients.
- Follow the naming guidelines: Your entity name must contain the words Limited Liability Company or the abbreviation L.L.C. or LLC. Restricted words require additional paperwork (e.g. Banc, Bank, Banque, etc) and/or licensed individuals (e.g. Doctor, Engineer, etc). to be part of the LLC. Prohibited words are those that would confuse the name of your LLC with a federal or state agency e.g. FBI, Secret Service, Treasury etc.
- Is the name available in Texas? Make sure the name isn't already taken by registering for a free account with Texas Secretary of State and doing a name search. Making an account on the Texas SOS website will also grant you access to File any business forms online and make any payments to the State.
- Is the URL available? Check to see if the name of your LLC is available so that you can reserve your domain name. Even if you don't plan to make a website today, you may want to buy the domain name in order to prevent others from acquiring it.
STEP 2: Choose a Registered Agent
You are required to nominate a Registered Agent for your Texas LLC
What is a Registered Agent? A registered agent is a person or business nominated by your company to officially receive and send papers on your behalf including annual state filings.
Who can be a Registered Agent? The registered agent must be a resident of Texas or a corporation authorized to transact business in Texas. You may elect an individual within the company including yourself.
Click here to find out why you may want to use a registered agent service.
Recommended: INCFILE.COM provides free registered agent service for the first year as part of their LLC Packages.
STEP 3: File the Certificate of Formation
How to register your LLC with the State of Texas
Important: If you're expanding your existing LLC to the State of Texas you are forming a Foreign LLC. Learn how.
STEP 4: Create an Operating Agreement
What is an Operating Agreement? An operating agreement is a legal document outlining the ownership and operating procedures of your LLC. This agreement allows you to form financial/working relationships with co-owners into an established system suitable to your business. An Operating Agreement is not required to form an LLC in Texas, but is good practice to have one.
Recommended: We provide a free sample operating agreement however we recommend getting one professional drafted by a lawyer, especially if you are starting a multi-member LLC.
STEP 5: Obtain an EIN
What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.
Why do I need an EIN? An EIN is required for the following:
- To open a business bank account for the company
- For Federal and State tax purposes
- To hire employees for the company
Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done by one of two ways:
Important: An EIN is obtained after the LLC is formed. Obtaining an EIN registers the company for federal taxes.
1. Separate Personal Assets from the LLC
Opening a business bank account is an important first step, as it:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Getting a business credit card allows you to:
- Separate personal and business expenses.
- Build your company's credit history, which can be useful to raise money for your company later.
Proper accounting for a business can avoid future complications and is important for many reasons, including:
- Tracking the financial wellbeing of your business, including assets, expenses and income.
- Also makes filing your tax returns a lot easier.
Bookkeeping and accounting can be daunting to many people. The right accounting software can make the process simple and easy for most business owners.
Recommended: Try Xero Small Business Accounting Software for free, with an easy mobile app to manage your finances on-the-go.
3. Register for State Tax
Do I need to register for State taxes? You will need to register for State taxes if:
- If you have Employees you are required to register for unemployment tax.
- Register for unemployment tax through the Texas Workforce Commission.
- If you are selling a product, you will need to register for sales tax by applying for a Texas sales tax permit.
Retail sales in Texas are subject to a 6.25% sales tax.
Register for Texas sales tax through the Texas Comptroller of Public Accounts.
**Certain Texas business are subject to industry related state taxes. You can learn more about these requirements here.
In addition, all Businesses in Texas need to pay a Franchise Tax. Learn how to file and pay Texas franchise tax
4. Obtain Business Licenses & Permits
Do I need business licenses & permits and how do I obtain them?
To operate your LLC you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc.
Find out what types of special licensing you need by doing the following:
- Fill out the U.S Small Business Administration (SBA) comprehensive guide. Follow the directions to obtaining the correct licenses and permits.
- Contact your local Chamber of Commerce and ask about local licenses and permits.
- Apply for or renew licenses and permits at Texas.gov's Work Section.
The details of business licenses and permits vary from state to state. Make sure you read carefully. Don't be surprised if there are short classes required as well.
Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain.
5. Get Insurance
What is Workers Compensation Insurance? This form of insurance is required for most businesses with employees, but varies by State. Click here to learn more.
What is General Liability Insurance? This is an important service, but is not required in most States. Click here to learn why.
How much will the right insurance cost you? Click here to find out.
6. Employee Hiring Compliance
Once a business decides to hire employees, certain legal obligations are required, such as:
- Ensuring that potential employees are eligible to work in the US
- Reporting employees as "new hires" to the State
- Providing workers compensation insurance for employees
- Withholding income taxes
- Printing compliance posters and place in a conspicuous location
- Ensuring payment of employees in specific increments as required by the state
Learn more about hiring employees for your small business.
State of Texas Quick Links
- Secretary of State Corporations Section
- Texas QuickStart for Businesses
- Official Texas Wide Open for Business
- SBA's Small Business Resource for Dallas / Ft. Worth Dallas / Ft. Worth
- SBA's Small Business Resource for El Paso
- SBA's Small Business Resource for Harlingen / Corpus Christi
- SBA's Small Business Resource for Houston
- SBA's Small Business Resource for Lubbock
- SBA's Small Business Resource for San Antonio
To maintain a Texas LLC, it is necessary to make periodic filings with the State of Texas including the Franchise Tax Public Information Report. Learn how to keep your LLC in good standing and avoid state penalties.
Franchise Tax Public Information Report
Texas requires LLC's to file an annual report called the Franchise Tax Public Information Report (along with the appropriate franchise tax payment, if applicable) with the Comptroller of Public Accounts.
How to File the Annual Franchise Tax in Texas
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 2016, then your first report is due on May 15, 2017.
Late Filings: Texas charges a $50 penalty for failure to file on time. In addition, your business can be automatically dissolved.
Franchise Tax - Texas Comptroller
Each year, thousands of LLCs are unknowingly dissolved or suspended for failing to file an annual report. When this happens, LLC owners risk loss of limited liability protection. A registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and by submitting reports on your behalf.
Recommended: INCFILE.COM offers a reliable registered agent service.
If you have an existing LLC and want to register to do business in Texas, you will need to form a foreign LLC.
File a Foreign LLC in the State of Texas
Download the PDF:
Application for Registration of a Foreign Limited Liability Company
Fee: $750 - Follow the instructions on the PDF
Benefits of Forming a Foreign LLC
The major benefit of becoming a foreign corporation is that it allows your company to operate as one entity in many jurisdictions. For example, if you originally incorporate your LLC the State of Delaware, you can file your existing domestic LLC as a foreign corporation in other states.