Form a Texas LLC
Choosing a company name is the first and most important step in starting your LLC. Be sure to choose a name that complies with Texas naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines:
- Your name must include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
- For a complete list of naming rules in Texas, you can read the Secretary of State's guidelines.
2. Is the name available in Texas? Make sure the name you want isn't already taken by doing a name search on the Texas Comptroller of Public Accounts website.
3. Is the URL available? We recommend that you check to see if your business name is available as a web domain. Even if you don't plan to make a business website today, you may want to buy the URL in order to prevent others from acquiring it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
FAQ: Naming an LLC
What is an LLC?
Do I need to get a DBA or Trade Name for my business?
Most LLCs do not need a DBA. The name of the LLC can serve as your company’s brand name and you can accept checks and other payments under that name as well. However, you may wish to register a DBA if you would like to conduct business under another name. Learn more here.
You are required to nominate a Registered Agent for your Texas LLC.
What is a Registered Agent? A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business' point of contact with the state.
Who can be a Registered Agent? A 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.
A 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 does not have to filed with the secretary of state. For in-depth information on this requirement, as well as a fillable consent form, view the Acceptance of Consent Form 401-A.
Learn more about the role of a registered agent and why you should consider hiring a professional service.
Recommended: Incfile provides the first year of registered agent service free with LLC formation ($49 + State Fees)
FAQ: Nominating a Registered Agent
Can I be my own Registered Agent?
Yes. You or anyone else in your company can serve as the registered agent for your LLC. Learn more here.
To register your LLC, you will need to file the Certificate of Formation with the Secretary of State. This can be done online or by mail.
When filing, you will need to state whether your LLC will be member-managed or manager-managed. We recommend learning more about these two options before you file.
File the Certificate of Formation
OPTION 2: File the Certificate of Formation by Mail
State Filing Cost: $300, payable to the Secretary of State. (Nonrefundable)
Secretary of State
P.O. Box 13697
Austin, TX 78711
James Earl Rudder Office Building
Austin, TX 78701
Fax: (512) 463-5709
If you’re expanding your existing LLC to the State of Texas, you will need to form a Foreign LLC.
FAQ: Filing LLC Documents
What is the processing time to form my Texas LLC?
3 business days online, 5 to 7 by mail.
What is the difference between a domestic Texas LLC and foreign LLC?
An LLC is referred to as a "domestic LLC" when it conducts business in the state where it was formed. Normally when we refer to an LLC we are actually referring to a domestic LLC. A foreign LLC must be formed when an existing LLC wishes to expand its business to another state. If you are filing as a Foreign Texas LLC learn more here.
An operating agreement isn't required in Texas, but it's a good practice to have one.
What is an operating agreement? An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.
Why are operating agreements important? A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict.
For more information on operating agreements, read our Texas LLC operating agreement guide.
Recommended: Use our free Operating Agreement Tool to draft a customized operating agreement for your LLC.
FAQ: Creating an Operating Agreement
Do I need to file my operating agreement with the State of Texas?
No. The operating agreement is an internal document that you should keep on file for future reference.
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 online or by mail.
FAQ: Getting an EIN
How do I get an EIN if I don’t have a social security number?
What tax structure should I choose for my LLC?
When you get an EIN, you will be informed of the different tax classification options that are available. Most LLCs elect the default tax status.
However, some LLCs can reduce their federal tax obligation by choosing S corporation status. We recommend consulting with a local accountant to find out which option is best for you.
Considering Using an LLC Formation Service?
We reviewed and ranked the top 5 LLC formation services.
Find out which is best for you.
Protect Your Business & Personal Assets
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these two steps:
1. Opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Get $200 when you open a business checking account with Chase. Learn more.
2. Getting a business credit card:
- Helps you separate personal and business expenses.
- Builds your company's credit history, which can be useful to raise capital later on.
Business insurance helps you manage risks and focus on growing your business. 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 against claims of malpractice and other business errors.
- Workers' Compensation Insurance: A type of insurance that provides coverage for employees’ job-related illnesses, injuries, or deaths. Get a free quote with ADP.
How much will the right insurance cost you? Click here to find out.
Properly Sign Legal Documents
Improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability. When signing legal documents on behalf of your company, you could follow this formula to avoid problems:
- Formal name of your business
- Your signature
- Your name
- Your position in the business as its authorized representative
See the image below for an example.
This ensures that you are signing on behalf of your LLC and not as yourself.
Learn more on how to protect your business & personal assets by reading our article - How to Maintain your LLC Corporate Veil.
Keep Your Company Compliant
Do I need business licenses and permits?
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.
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.
Find out how to obtain necessary licenses and permits for your business or have a professional service do it for you:
Texas LLC Tax Requirements
Depending on the nature of your business, you may be required to register for one or more forms of state tax:
If you are selling a physical product, you’ll typically need to register for a seller's permit through the Texas Comptroller of Public Accounts.
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.
Read our sales tax guide to find out more.
If you have employees in Texas, you will have to register for Unemployment Insurance Tax through the Texas Workforce Commission on behalf of your employees.
FAQ: Additional Taxes
What is the Texas Annual Report & Franchise Tax?
There is an Annual Report & Franchise Tax for each LLC formed in Texas which varies depending upon your LLC’s income, learn more here.
Federal LLC Tax Requirements
Most LLCs will need to report their income to the IRS each year using:
- Form 1065 Partnership Return (most multi-member LLCs use this form)
- Form 1040 Schedule C (most single-member LLCs use this form)
Read our LLC Tax Guide to learn more about federal income taxes for LLCs.
Texas requires LLCs to file an annual report and Franchise Tax together. The form can be submitted through the Texas Comptroller of Public Accounts website. You will need to create an online account to complete the filing process.
File your Annual Report & Franchise Tax
File Online with the State of Texas
Tax Calculation: LLCs with annualized revenue below $1,130,000 do not pay any tax, but must file a “no tax due report.” LLCs with annualized revenue greater than $1,130,000 pay a graduated tax that is calculated based on a complex formula.
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: 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.
Recommendation: The Texas Annual Report and Franchise Tax are complex, visit the Texas Comptroller website for more information.
Avoid Automatic Dissolution
LLCs may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines, and even submitting reports on your behalf for an additional fee.
Recommended: Incfile offers a reliable registered agent service and excellent customer support.
Make Running Your Business Easier
After starting a business, two of the most important things you can do are get professional accounting and hire the right employees. Streamlining these processes can save you time and money as your business grows.
If you plan to hire employees, stay compliant with the law by following these steps:
- Verify that new employees are able to work in the US
- Report employees as "new hires" to the State
- Provide workers' compensation insurance for employees
- Withhold employee taxes
- Print compliance posters and place them in visible areas of your work space
Find more information at the Texas Workforce Commission website.
Recommended: A payroll service saves you time and makes it easier to follow these requirements.
FAQ: Hiring Employees
What is the minimum wage in Texas
The minimum wage in Texas is $7.25 per hour.
How often do I need to pay employees?
Texas requires employees who are non-exempt from overtime to be paid semi-monthly. Employees that are exempt from overtime can be paid on a monthly basis.
Accounting for your LLC
It’s critical 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 your annual tax filings.
The right software makes accounting easy. Look for software that:
- Syncs with your bank automatically.
- Matches transactions to invoices, bills and purchase orders.
- Can be accessed from your phone.
We understand that creating an LLC and getting your business up and running comes with many challenges. To help you succeed, we compiled the best local resources in every major metro area in Texas. You can get free assistance in the following areas:
Forming a foreign LLC allows your company to operate as one entity in multiple states. If you have an existing LLC and want to do business in Texas, you will need to register as a foreign LLC. This can be done by mail or online.
Register as a Foreign LLC in Texas
OPTION 2: File by Mail
Fee: $750 (Nonrefundable)
P.O. Box 13697
Austin, TX 78711
James Earl Rudder Office Building
Austin, TX 78701
How to Obtain Certificate of Good Standing
A Certificate of Good Standing, known in Texas as a Certificate of Status, verifies that your LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:
- Seeking funding from banks or other lenders
- Forming your business as a foreign LLC in another state
- Obtaining or renewing specific business licenses or permits
You can order a Texas LLC Certificate of Status online.
Order a Certificate of Good Standing
Request a Texas Certificate of Status Online
Fee: $15 (Nonrefundable)
Dissolve Your Texas LLC
If at any point in the future you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:
- Close your business tax accounts
- File the Articles of Dissolution
When you are ready to dissolve your LLC, follow the steps in our Texas LLC Dissolution Guide.