How to Form a Single-Member LLC in Texas

Starting a business in Texas? A single-member limited liability company (SMLLC) might be a great business structure for you. In this guide, we’ll cover everything you need to know about the Texas SMLLC: what it is, its benefits, how to form one, and more.

Ready to form an LLC? Starts at $0 + state fees and only takes 5-10 mins

Excellent 4.8 out of 5 stars 14,308 reviews

A single-member LLC is a limited liability company (LLC) with only one member (member is another name for an LLC’s owner). Many LLCs have multiple members, but this Texas business entity has a single owner.

Is a Texas SMLLC the same as a sole proprietorship?

In short, no. Like the single member of the Texas SMLLC, a sole proprietor is the only owner of the business. But that’s largely where the similarities end.

The most important difference between these business types is personal asset protection; only the SMLLC has it. If a sole proprietor’s business runs into legal trouble or defaults on a debt, their personal assets can be confiscated to pay what’s due. In contrast, for the SMLLC, the owner’s belongings are secure; collectors can only claim assets that belong to the SMLLC itself.

In legal terms, the SMLLC is a separate legal entity from its owner; the single member usually doesn’t have personal liability for any business debts. That’s why a lot of Texas entrepreneurs decide to form an LLC.

Start a Texas SMLLC in 5 Steps

Starting any Texas LLC is a crucial process, but we’ve got a detailed roadmap to help you out. In Texas, there are 5 major steps to get your SMLLC up and running.

Before we dive in: if you’re part of a licensed profession like dentistry or accountancy, you might form a professional limited liability company instead. We don’t offer formation services for PLLCs, but we can help you understand the process here.

Step 1: Pick a name for your single-member LLC in Texas

What will your customers call you? It’s time to decide. Ultimately, you’ll want to create a memorable, descriptive name that you like. But you’ll also want to craft a name that meets state and practical criteria. By Texas law, your name is required to:

  • Be “distinguishable” from other names in Texas
  • Contain a designator indicating that it’s an LLC. You can use “limited liability company,” “limited company,” or an abbreviation of either of those phrases. “LLC” is most common, but you can also use LC, L.C., L.L.C., Ltd. Co., Ltd. Company, Ltd. Liability Co., or Ltd. Liability Company. Note that Texas code won’t let you use the words “limited” or “company” by themselves in your LLC’s name.
  • Avoid profanity and offensive language
  • Not imply affiliation with the government

Ideally, your LLC’s name will also match up with an available domain name so that you can have a memorable URL for your business website.

Once you’ve brainstormed a few names, you can check your Texas name availability with our helpful business name search tool. Two other helpful searches are the Texas Comptroller’s website and the United States Patent and Trademark Office. Please keep in mind that your name isn’t officially yours until you register your business with it.

We can buy you some time with our name reservation service, which will protect your name for 120 days. And if you need to register a domain name to establish your online presence, we can help for just $25 a year.

Step 2: Get a registered agent for your Texas SMLLC

Every Texas SMLLC needs to appoint a registered agent. In Texas, this individual accepts service of process on behalf of your business along with any state and legal correspondence. That doesn’t sound glamorous, but it’s an important role for any compliant business.

In Texas, a registered agent must be an individual or organization (like us) who’s agreed to serve as your agent. They must maintain a physical address in the state, and they — or one of their employees — must be present at that address during all regular business hours. P.O. boxes do not count.

Step 3: File your Texas Certificate of Formation

Once you’ve picked a name and appointed an agent, you’re ready to file your formation documents. Texas calls this document the Certificate of Formation. You can file online or by mail. Keep in mind that this document goes on the public record, visible to anyone.

What to Include in Your Certificate of Formation

There are quite a few pieces of data you’ll need to include on your Certificate of Formation. You’ll need to list important details like your registered agent and their address, your initial mailing address, your business name, and information about the organizer (the person completing the Certificate of Formation). There are also other items like your business purpose and the effectiveness of your filing. If this red tape stresses you out, we can complete this form for you.

Step 4: Create a single-member LLC operating agreement

An operating agreement acts like a charter or constitution for an LLC; it describes the specifics of how the business operates. Traditionally, it lays out the responsibilities of the members, how profits will be distributed, and what happens if and when ownership changes in the business.

Even though you’re the sole owner of the SMLLC, you may find it helpful to create an operating agreement. Not only does an operating agreement help maintain your personal liability protection, but you also never know how your business might grow in the future.

Are you unsure as to how to create an operating agreement for your LLC? We offer a guided customizable template to help get you started. Our chatbot walks you through the process of creating your agreement and allows for e-signature of the document.

Step 5: Get a single-member LLC EIN

An EIN, or Employer Identification Number, acts like a Social Security number for a business. It’s a nine-digit code that the IRS uses to identify your business for federal tax purposes. You can obtain one for free online with the IRS.

If you intend to hire employees, get a business bank account, or add members to your SMLLC later on, you’ll need an EIN.

Texas Single-Member LLC Taxes

We’ll start out by saying that it’s a good idea to enlist the help of a CPA or tax lawyer to tackle your taxes. Business taxes are quite complicated. That said, we can give you an idea of what to expect.

By default, a Texas LLC is considered a “disregarded entity” for federal income tax purposes. In a disregarded entity, the business doesn’t pay income taxes; instead, the SMLLC’s owner pays taxes by reporting any business income they get on their personal tax return. You can also expect to pay self-employment taxes.

Normally, this process repeats on the state level, but Texas doesn’t charge a corporate or personal income tax. Instead, SMLLC owners will pay the state’s franchise taxes. This tax essentially acts as your fee for the privilege of doing business in the state.

Benefits of a SMLLC in Texas

Still wondering why you should form an SMLLC in Texas? Here are some benefits to forming an SMLLC.

Flexibility and Simplicity

On the whole, a Texas SMLLC is very simple to run. Your annual compliance to-do list is pretty small. Generally speaking, you’ll have to pay your annual taxes, file an annual franchise tax report, and maintain any business licenses you’re required to have. Other entity types, especially corporations, have a lot more complicated requirements.

Autonomy

Running a business on your own is a big undertaking, but you also have the freedom to call all the shots. You won’t have to answer to shareholders, other members, or a board of trustees.

Personal Asset Protection

Personal asset protection is a huge advantage of a Texas SMLLC. In the eyes of the law, the SMLLC is a separate entity that must pay its own debts and face its own lawsuits. In most cases, the business owner won’t be personally liable.

Taxation Options

In some cases, electing to be taxed as an S corporation gives an SMLLC certain tax breaks, like reducing self-employment taxes. In Texas, the lack of income taxes makes this option a little less appealing, but it still might be an advantage for federal tax purposes. But the major advantage of a Texas LLC is that you have that option.

Extra Legitimacy

Sometimes, customers feel more comfortable doing business with Texas-recognized businesses. Running a sole proprietorship is perfectly legal, but gaining the designator “LLC” adds some respectability to your name.

We can help!

Not a fan of paperwork? Feeling overwhelmed by the red tape? Worried about long-term compliance? Whether you need a zero-cost formation service, worry-free compliance, or help filing a DBA, ZenBusiness has your back. We’ll take the stress away so you can focus on what matters: your business.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

Single-Member LLC Texas FAQs

  • Yes! Texas does not have any laws requiring an LLC to be owned by multiple members.

  • Texas charges notable filing fees for starting LLCs. The minimum formation cost is $300 to submit the Certificate of Formation. SMLLCs that reserve a business name can expect to pay at least $40 extra.

  • At minimum, you’ll be responsible for the state sales tax. You may also be subject to the state’s franchise taxes if your revenue meets the tax-due threshold (currently $1,230,000). Texas does not currently charge an income tax.

  • Texas is one of just a few states under community property law. Under these statutes, both partners in a marriage relationship have joint ownership of their property, especially assets acquired during their marriage. The exact terms are a little tricky, but this law does allow a married couple to be joint owners of a single-member LLC. This status is also recognized on the federal level.

    Note: if you decide to expand to another state that doesn’t have a community property law, you’ll be regarded as a multi-member limited liability company in that state.

Start Your Single-Member LLC in Texas