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How to Start an LLC in Texas

Learn to open your own LLC in Texas, step-by-step

Written by Melissa Pedigo – CPA, updated on

Texas State ImageStarting a limited liability company (LLC) in Texas for your business is one of the fastest and easiest ways to get your operations off the ground. An LLC is a cost-effective structure for small to medium-sized companies. And it works well for growing operations too.

It provides the advantages and protections of corporations with less hassle.

LLCs are a type of business entity that provides limited personal liability for its owner. As a result, safeguarding your personal assets is out of reach if your business should land in legal or financial trouble. And LLCs avoid double taxation through a concept called pass-through taxation.

Whether you’re starting a new business or already running a hustle, opening a Texas LLC is simple.

We’ll walk you through the process from start to finish and answer the most common questions about LLC formation in Texas.

Table of contents

  1. Step 1: Decide a name for your LLC
  2. Step 2: Hire a registered agent company
  3. Step 3: File the Texas LLC certificate of formation
  4. Step 4: Obtain an EIN (Employer Identification Number) from the IRS
  5. Step 5: Prepare an LLC operating agreement
  6. Step 6: Open a Texas business bank account

Here's a short video explaining the process of forming an LLC in Texas.

Last updated: Jan 2023

Start your LLC the easy way

Forming your LLC is a checkbox that needs to be ticked. Easy, fast and worry-free. We reviewed the 13 most popular LLC formation services to figure out who truly understands what new founders need. Our recommendation:

LLC Formation: $39 + state fees
Turnaround Time:
Help & Support:
Customer Satisfaction:
Ease of use:

Best LLC Service 2022

  • Formed 1,000,000+ LLCs
  • $39 formation includes registered agent service
  • Fast formation & same day filing
  • Exceptional customer reviews
Last updated: Jan 2023

Step 1: Decide a name for your LLC

Choosing a name for your LLC is the first step of registering a business. You will need to file a name registration application with the Secretary of State (SOS) as part of your company formation.

The name you choose should be recognizable by your clients, distinguishable from other businesses, and compatible with Texas’s state laws for business naming.

When choosing your LLC’s name, keep the following official requirements in mind:

  • Must contain the phrase “limited liability company” or “limited company” or any abbreviation of these phrases like LLC, L.L.C., LC, Limited, Ltd.
  • Avoid choosing a name that can be confused with a governmental entity (e.g., Secret Service, IRS, Homeland Security, etc.)
  • Obtain permission to use certain restricted words (e.g., Olympic requires approval from the U.S. Olympic Committee and using college or university requires approval from the Texas Higher Education Coordinating Board)
  • Foreign words won’t be translated (e.g., Casa Blanca Productions won’t be translated to White House Productions)
  • Avoid words that can be deemed grossly offensive.

Next, check if the selected name is available. You can do so by running a name search with the Texas Comptroller.

Texas Comptroller of Public Accounts Name Search.

If your business name is available, you can reserve it for up to 120 days while you finish the other steps to form your LLC. You’ll need to file an application and pay a $40 fee.

Finally, check if the domain name is available. Be sure to verify that your business name is also available as a domain name. Even if you don’t plan to create a website right away, you may want to snatch it anyway to prevent others from squatting it.

Pro tip: You don't have to use your LLC's official legal name at all times when you do business. For example, if you operate under another brand name (or several), you can also file for a DBA (doing business as), also known as a trade name or fictitious name. Doing so will legally link your LLC with another operating name.

If you want to use an alternate name, file Texas Form 503, Assumed Name Certificate, with both the Secretary of State and the county clerk where your LLC is located.

Step 2: Hire a registered agent company

Texas requires you to have a registered agent for your LLC.

A registered agent is a person or business that receives essential tax and legal communications on behalf of your business.

In Texas, a registered agent can be:

  • A Texas resident, or
  • A business licensed to transact business in Texas with a physical street address. P.O. box addresses aren’t allowed.

You can act as a registered agent yourself, appoint an employee, or someone else in your company. Or you can use a professional service.

Regardless of who you appoint as your agent, you must get written authorization to show they consent to the decision. You can draft your own form or use Texas Form 401-A, Acceptance of Appointment and Consent to Serve as Registered Agent.

Registered agent: DIY vs. hire a registered agent service




  • Cheaper
  • Faster/immediate notification
  • Must be available during regular business hours
  • Must know how to tackle service of process documents

Hiring company

  • Privacy
  • Convenience
  • More expensive

The annual cost of a registered agent depends on the level of service they provide. Some will include the state LLC filing fees in their fee, while others will charge you a la carte for these things. You can expect to spend between $100 and $150 per year to hire a Texas-registered agent.

Step 3: File the Texas LLC certificate of formation

Filing the Certificate of Formation is what makes your LLC official. This application tells the Texas SOS necessary details about your company, including entity name, physical address, registered agent, members/owners and addresses, and general-purpose.

To start the LLC filing process, download and fill in Form 205, Certificate of Formation Limited Liability Company. Then mail it to the Secretary of State in Austin and pay a $300 state fee. You also have the option to file the Certificate online via the SOSDirect website.

Texas Secretary of State Form 205 Certificate of Formation.

Once the Secretary of State receives your Certificate of Formation, it can take as little as four or five business days to process it if you file electronically. But if you send the documents by mail, the LLC registration process can take up to four to five weeks.

After your certificate has been approved, you’ll receive a stamped copy, which means you’re officially allowed to do business in Texas. Congratulations!

But this isn’t the end of the road. There are a few more steps to take to get your LLC up and running.

Step 4: Obtain an EIN (Employer Identification Number) from the IRS

An EIN is the identification number the IRS uses for your business. Think of it as your business’s Social Security Number.

You need an EIN to report federal taxes. Also, it’s used on company tax returns and for paying employment taxes if you have employees. However, you will not need an EIN if you're the only member of your new Texas LLC. That’s because the IRS disregards the business and sees you and the business as the same taxpayer. Therefore, you’ll use your Social Security Number on your LLC’s federal tax documents.

Still, getting an EIN for your single-member LLC is a good idea. You’ll need it to open a business bank account, and it can help prevent identity theft by keeping your Social Security Number off your business documents.

You can apply for your number online using the IRS’s Internet EIN application, and it’s free. You’ll answer a few questions about your business and instantly receive your EIN.

If you’d rather do things old school, you can use Form SS-4, Application for Employer Identification Number, and mail or fax it to the Internal Revenue Service. It’s still free, but it can take up to four weeks to get your EIN.

IRS Form SS-4 Getting an EIN.
A snippet of IRS Form SS-4 – Application for Employer Identification Number. Source: IRS.

Step 5: Prepare an LLC operating agreement (optional)

Although Texas doesn’t require your LLC to have an operating agreement, it’s a best practice to put one in place to prevent any misunderstandings among the LLC members.

LLCs use an operating agreement to outline the rules, regulations, and procedures for how the business will operate and be managed. The agreement includes details on financial and operational decision-making. Think of it as a roadmap for preventing and resolving operational issues.

A standard operating agreement will address issues such as:

  • Who has decision-making power? What happens if there’s a disagreement?
  • What happens if one member wants to leave the business? What happens to his stake? How can the member leave?
  • What if the LLC wants to bring on another member? How will the new member’s powers differ from the original members?
  • What happens when the members want to end the LLC?

If you don’t create an operating agreement for your LLC, your business will be governed by the default Texas laws, which might produce unintended consequences.

Step 6: Open a Texas business bank account

Once you have your EIN, you can open a business bank account. Keeping your business finances separate from your personal is critical for an LLC.

Here’s why a business bank account is essential:

  • Simplifies business record keeping
  • Eases tax preparation
  • Prevents commingling of funds (that’s a big no-no in the eyes of the IRS)
  • Preserves personal liability protection

Since banks have different requirements for opening and maintaining accounts, it’s wise to call around to see who has the best propositions.

As you shop around, compare the following:

  • Monthly service fees
  • Miscellaneous fees (e.g., wire transfer fees, overdraft fees)
  • Minimum required balances
  • Minimum initial deposits
  • Interest rates

Be sure to confirm with your bank what documents you’ll need to open your business bank account.

Tip: Consider getting a corporate credit card in your company’s name. You’ll be able to accrue rewards or cashback while keeping your business and personal finances separate.

Texas LLC taxes, costs, and fees

There are three different “buckets” of taxes your LLC may need to pay in Texas.

3 different groups for taxes.

Federal taxes

One of the benefits of registering an LLC is its pass-through taxation. If you stay with the default tax classification, your LLC won’t need to pay tax on its profits. Instead, the member(s) will only pay personal income tax. However, you can also choose to report taxes as an S-corporation or a C-corporation. In that case, pass-through taxation will cease to work.

However, your company will need to pay federal payroll taxes, including FICA and federal unemployment tax, if you have employees.

State taxes

Texas has two main types of state taxes — franchise tax and sales tax. Most LLCs are bound to pay these.

But depending on your industry, your business may be subject to other state taxes like the battery sales fee, hotel tax, or oyster sales fee. So be sure to verify that!

Franchise tax

All LLCs registered in the state will need to file a Texas franchise tax return every year.

The good news is that many LLCs don’t end up paying annual state taxes because they fall below the $1,180,000 “no tax due” annual revenue threshold.

However, if you’re going to make above that, be ready to pay a progressive tax, ranging from 0.331% to 0.75%.

Keep in mind a “no tax due” tax return still needs to be filed online using the Texas Comptroller’s web file service by May 15 every year.

LLCs need to file an annual Public Information Report with the Comptroller’s office along with the franchise tax return. This report operates like an annual report that updates the LLC’s business address and owner information.

Sales tax

Depending on your business type, you may need to collect and pay sales tax.

State sales tax: Texas imposes a 6.25% state sales tax on retail sales, some leases and rentals, and several other taxable services.

Local sales tax: Some cities, counties, and municipalities in Texas may charge taxes on businesses operating in their jurisdiction. The local sales tax can be up to 2%.

Texas business permits and licenses

Texas doesn’t require a general business license or permit to start a business.

However, certain businesses may need a license to operate. For example, breweries will need a permit from the Texas Alcohol and Beverage Commission.

And your local city or jurisdiction may require a general or a specific permit or license. So check with your local authorities to determine if your business needs any type of license to operate.

Application and licensing fees vary depending on the industry and type of license required.

Pros and cons of opening an LLC in Texas

Pros and cons of forming an LLC in Texas.

Choosing the correct legal structure for your Texas business is essential. Consider these pros and cons when considering forming a Texas LLC.

The good:

  • Provides legal liability protection for business owners
  • Avoids double taxation
  • Allows for flexible membership and management
  • Pay no state franchise tax if revenue is below $1.18 million per year

The bad:

  • Members pay self-employment tax
  • Registration fees can add up
  • Initial and ongoing paperwork obligations
  • Increased recordkeeping to maintain personal/business separation

Commonly asked questions for opening an LLC in Texas:

Below are some of the most frequently asked questions (FAQs) about forming an LLC in Texas.

Last updated: Jan 2023

Start your LLC the easy way

Forming your LLC is a checkbox that needs to be ticked. Easy, fast and worry-free. We reviewed the 13 most popular LLC formation services to figure out who truly understands what new founders need. Our recommendation:

LLC Formation: $39 + state fees
Turnaround Time:
Help & Support:
Customer Satisfaction:
Ease of use:

Best LLC Service 2022

  • Formed 1,000,000+ LLCs
  • $39 formation includes registered agent service
  • Fast formation & same day filing
  • Exceptional customer reviews
Last updated: Jan 2023
Melissa Pedigo

Article by:

Melissa Pedigo


Melissa Pedigo is a US CPA with more than 20 years of experience. She’s worked at Big 4 firms, for the government, and internationally. Now a full-time writer, she enjoys translating complex financial and tax topics into plain English. When she’s not keeping current reading IRS rules or tax legislation, you’ll find her studying foreign languages or playing tennis.

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