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Want to launch your business as an LLC? Texas is a business-friendly state, just as the limited liability company (LLC) is a business-friendly concept. It allows entrepreneurs to have liability protection without the cumbersome structure of a corporation. It’s sort of like getting the best plate of barbecue in town without having to wait in a long line.

Still, forming an LLC in Texas requires you to follow certain steps and meet certain requirements, which can be scary if you’ve never started your own business before. That’s why we’re here to walk you through the entire process.

How to Start an LLC in Texas in 5 Steps

Forming an LLC in Texas

The Texas Secretary of State has a few rules to follow if you want to form your LLC smoothly, quickly, and without costly fines. To show you how to start an LLC in Texas, we’ve put together five basic steps (think of it as the Texas Two-Step plus three):

  1. Choose a unique name for your LLC in Texas
  2. Appoint a registered agent to receive important notices for your business
  3. File a Certificate of Formation with the Texas Secretary of State
  4. Create an operating agreement to establish the rules for your LLC
  5. Register your business with the IRS and review your tax requirements

If that sounds like a lot, don’t worry. We’ll walk you through how to start an LLC in Texas in this article. What’s more, for those who aren’t fond of government bureaucracy (and who is?) we’ll show you how our services can help you start, run, and grow your business, including filing the paperwork to establish your LLC with the state of Texas.

Note that these guidelines are for starting a domestic LLC, which is one started within the state you’re residing in. A foreign LLC is one that originates outside the state. To register a foreign LLC in Texas, you would complete an Application for Registration of a Foreign Limited Liability Company and follow a different process.

If the purpose of your proposed business is to provide a licensed professional service (such as medicine, architecture, accounting, etc.), a Texas professional LLC (PLLC) might be an option for you. We don’t offer PLLC formations, and they follow a slightly different process than other Texas LLCs. However, you can visit our Texas PLLC page for more information.

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1. Name your Texas LLC

The first step is finding a name for your LLC. Texas is a unique state, and your Texas limited liability company needs to have a unique name. It must be different from any other existing business name in the state. It must also follow Texas limited liability company naming guidelines.

How do you know if the name you want is available? Follow the instructions on our Texas Business Entity Search Page and do a search for your desired LLC name. If no one’s taken it, great! If not, keep looking.

Once you’ve found a name that’s unclaimed on the website, it’s a good idea to also call to verify that the name really is available because the system isn’t perfect, unfortunately. The Secretary of State can give you a preliminary determination of whether your name is available if you call (512) 463-5555 or e-mail corpinfo@sos.texas.gov. Even then, they caution you not to spend any money or do any business under the name until your Certificate of Formation is approved.

Note that Texas law requires your name to be “distinguishable” from other business names, which means minor changes like punctuation, capitalization, or adding “the” in front of your LLC name aren’t going to cut it. Sounding alike is also a problem (e.g., “Express Auto” vs. “Xpress Auto”) unless there’s a clear difference in meaning (e.g., “Jones Tires” vs. “Joan’s Tires”). Common sense will likely guide you here, but you can also review the state’s naming rules on the Secretary of State website.

Other Requirements for Naming an LLC in Texas

Some Texas business naming laws are meant to protect the public. You can’t use words implying your LLC is a government agency or was created for an illegal purpose.

Certain words can only be used in your company’s name if you have the appropriate paperwork. If you’re a banker, lawyer, engineer, doctor, college, architect, insurer, or in another profession requiring licensing of some sort, the state will want proof that you’re appropriately licensed before you put words like that in your Texas limited liability company name.

Texas also disallows any business name that is “grossly offensive.” The state law doesn’t spell out exactly what qualifies as this (but we are, of course, curious). See what we said above about letting common sense guide you.

Choose a designator

Ever wonder what those words or abbreviations (for example, “Inc.”) after a business name are called? They’re designators, and they indicate what kind of legal business entity you are. You’re required by Texas to have one after your LLC’s name.

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.

Having a different designator isn’t enough to distinguish one business name from another in the eyes of the state. If Kramer wants to call his LLC “Kramer’s Kolaches, LLC,” but there’s already a Kramer’s Kolaches, Inc., he’ll have to get more creative. Similarly, you can’t tack on a misleading designator, such as adding “Inc.” if you’re an LLC or “Non-profit” if you’re a for-profit business.

Federal and State Trademarks

The state-level search doesn’t take into account trademarks. The state could approve your LLC’s name and you can spend big money on signage, business cards, advertising, etc. only to have someone serve you notice that you’re infringing on their trademark.

To see if any words in your LLC name are trademarked on a national level, do a search at the U.S. Patent and Trademark Office website. You can also try applying for a trademark of your own, but this can be a long process.

To see if your name is trademarked at the state level, go to the Trademarks and Service Marks section of the Texas Secretary of State website. For a fee, the office can do a state trademark search for you. Call 512-463-9760 or email trademarks@sos.texas.gov for more information.

You can also apply for a state trademark of your own. This kind of trademark would only apply within the borders of Texas, but it’s easier to get than a federal trademark.

We should mention here that neither of the methods above is a guarantee that no one will file a trademark infringement lawsuit against you. The more research you can do on your desired business name (Googling, looking through phone books, or even consulting a trademark attorney, etc.) beforehand, the better.

Business Name Reservation

If you settle on the perfect name for your LLC but don’t want someone else to nab it before you’ve officially launched your company, you can reserve the name for 120 days. Go to the Secretary of State website, fill out the application, and pay the required fee.

Easier still, you can use our business name reservation service. We’ll not only reserve a name for you, but we’ll also first perform a search to make sure it’s available.

Get a domain name for your LLC in Texas

Even if your business has little to do with the internet, having an online presence is still important. When your customers seek your business or businesses like yours, they’ll usually be looking online. So, when you’re deciding on your LLC’s name, consider choosing one that pairs well with an available domain name you can use for your website.

In fact, if your first choice of name doesn’t have any available domain names but your second choice does, you might want to seriously consider using your second choice.

Is your LLC name available as a web domain?

When weighing your business name options, consider whether your desired name is available as a domain name on the web. Having a business name that’s also available as a URL means you’ll have a website that’s easier to find and remember for potential customers.

Our domain name search tool can help you see if the name you want is available as a URL. When you find an available domain name you like, it’s wise to secure it before someone else does.

You may also want to keep social media in mind and see what handles are available. Many businesses market on Facebook, Instagram, and similar sites, so having the appropriate social media names can help your online marketing.

If you need assistance, we have a domain name service to help you find and purchase a domain name for your company. We can also help you create a business website and provide domain name privacy.

Filing for an Assumed Name in Texas

If you plan to do business under a name different from your company’s legal name, you’ll need a DBA or “doing business as” name, which is called an “assumed name” in Texas.

You can register a DBA by completing an Assumed Name Certificate and submitting it to the Texas Secretary of State with a small fee.

Businesses sometimes use a DBA if they want to open a new store or launch a new product line under a different name. We can handle the process for you with our DBA service.

Still having trouble coming up with the right name for your new venture? See How to Name Your LLC for more guidance.

2. Appoint a registered agent for your LLC in Texas

Next, designate a registered agent for your business. The government has to be able to reach your LLC. They need a contact (an individual or business entity) and a Texas street address for your business so they can send official government correspondence, tax forms, and legal documents, such as a summons if the business is sued.

This contact person or business entity is called the “registered agent” in Texas. The official registered agent address for your business is called the “registered office.” The registered office doesn’t have to be where your business is actually located, but it does have to be a physical street address in Texas. You can’t use a P.O. box because notices like subpoenas must be delivered in person.

What if a process server can’t find my registered agent?

Serving as your own registered agent or appointing someone you know could be a serious problem if a process server (someone who delivers notification of a lawsuit) can’t find you or your agent when they need to.

It’s easy to see how this could happen if you or your appointee isn’t in the office when the process server comes around. It can also happen if the agent moves or quits and you fail to appoint a new agent or update the Secretary of State office about the new address.

If a process server can’t find the registered agent for your business, a lawsuit against you could go forward without your knowledge, which will often lead to a default judgment against you.

The state also has the option of dissolving your LLC for not being in compliance, which would, among other things, mean losing your liability protection.

So, who do you choose to be your registered agent? You have three options here. You can be your own registered agent, appoint another person as your agent, or use a registered agent service. A few states will allow an LLC to be its own registered agent, but not Texas.

Here are some things to think about for each option:

  • Being your own registered agent – While it initially might seem simplest and cheapest to be your own agent and use your home or business address, consider this: First, you must always be available during normal daytime business hours, which could be a problem if you’re out of the office frequently, go on vacation, work at night, etc. Second, if the business is sued, it can be embarrassing to have papers served to you in front of customers.
  • Appointing another person – As long as they’re a resident of Texas with a physical address in Texas, you can have a friend or family member serve as your registered agent. As with the above option, they’ll need to be available during business hours and be willing to have their address made public. Of course, whomever you choose needs to know that they’re your registered agent and agree to it. (Otherwise, it’s “Surprise, Grandpa, here’s a subpoena!”) Texas requires your agent to sign Form 401-A, which states that they consent to being your registered agent. You usually don’t have to submit this form to the Secretary of State with your other paperwork, but you are expected to keep it in your own records.
  • Using a registered agent service – Although you pay a fee for this option, using a service alleviates the problems listed above. You can avoid being served papers in front of clients and have a flexible schedule so that you don’t have to constantly be in the office during business hours. Plus, if your business moves to somewhere else in Texas, you won’t have to worry about filing more paperwork to change your registered agent address.

It’s important to remember that you must always have a registered agent. If the agent moves, quits, etc., you need to get a new one immediately and update your paperwork with the Secretary of State or risk having the state shut down your Texas limited liability company.

ZenBusiness can provide your registered agent

We can provide registered agent services, meaning that there will always be someone available to receive important legal, tax, and other notices in person.

This gives you the peace of mind of knowing you’re in compliance with the registered agent requirements. Plus, it helps avoid embarrassing situations where you could be served papers for a lawsuit in front of clients and employees.

As a bonus, our service also keeps you organized. When you get important documents, we will quickly inform you and keep them together in your online “dashboard” so that you can view, download, and/or print them whenever you want. It beats rummaging through piles of papers to try to find misplaced critical documents.

3. File Texas Certificate of Formation

File your Certificate of Formation with the Texas Secretary of State. This is the step in which you apply to the state to register an LLC in Texas. Once approved, your LLC is official. The Certificate of Formation is referred to as the “Articles of Organization” in most states.

We know that filing government documents like this can be nerve-wracking for many. That’s why we’re here. With our LLC formation service, we handle this critical filing for you to make sure it’s done right the first time. But, even though we can do this for you, we’ll show you how the process works below.

To file online, go to the Texas Secretary of State website. There you’ll be asked to create an SOSDirect Account with a username and password. You’ll also have to give your credit card information for the filing fee at this time.

The filing fee you’ll pay for launching your LLC in Texas is a one-time fee of $300 (tack on a 2.7% charge if you’re paying by credit card).

Processing Times

The processing time for filing online will vary depending on how busy the office is, but, as of this writing, the Secretary of State page estimates that it will take 10 to 12 business days. Texas does still allow for filing by postal mail and fax, but this is quite a bit slower (the current estimate is 70 to 72 business days).

Are you in a hurry and doing your filing through us? Get our faster filing service, and we’ll make your filing a top priority. Plus, having it done by our formation experts makes it much less likely that your filing will be rejected, which would cause a major delay.

What Information to Provide About Your LLC in Texas

Before you begin the Certificate of Formation form, have the following information on hand:

  1. Entity name and type – Put your company name here, followed by “limited liability company,” “limited company,” or an abbreviation of either of those phrases.
  1. Registered agent and registered office – Here you’ll have to indicate whether your registered agent is an individual or a business and list their name and address. Remember, it must be a physical address in Texas, not a P.O. box or something similar. As we said in Step 2, you can’t put your LLC’s name down as the registered agent, and you’ll need to get the registered agent’s consent to serve as agent in writing, even though you don’t need to file the consent statement with the state.
  1. Governing authority – The state wants to know which of two management methods your LLC will use. The first option is to be “manager-managed,” meaning that the LLC will be governed by an appointed or hired manager. This can be a member of the LLC (“member” is another name for an owner of the LLC) or an outside party hired to run the company. The other management structure, “member-managed,” means that the owners of the LLC will run and make decisions for the business. Whichever option you choose, you’ll be asked to supply the names and addresses of the people responsible for running the LLC. It’s important to note here that the information you put in the Certificate of Formation will be public record. If you’re worried about sharing the members’ home addresses, you do have the option to list P.O. boxes instead.
  1. Purpose – This is asking for your LLC’s reason for being. You don’t have to be very specific here (though you can be, if you like). Something general like “any and all lawful purposes” will do.
  1. Initial mailing address – Starting in 2022, Texas wants you to provide an “initial mailing address” where the Comptroller of Public Accounts can send tax information and correspondence to your business. This address can be either a post office box or street address.
  1. Supplemental provisions/information – This is an area of the form where you can list any additional provisions to your filing. Most people leave it blank unless their attorney suggests adding some provisions for special circumstances.
  1. Duration – In Texas, an LLC exists perpetually unless you say otherwise in this section.
  1. Organizer – The LLC organizer is the person who’s actually completing the form/filing the papers for the LLC. The organizer doesn’t have to be a member of the LLC (though they usually are) as long as they’re authorized by you to file the paperwork and at least 18 years of age. It could be an attorney, document filing company, accountant, etc.
  1. Effectiveness of filing – In this section, you get to decide when your LLC will go into effect. Think of it as your LLC’s birthday. Most choose to have this happen as soon as it’s filed by the Secretary of State, but you also have a couple of other options. You can decide the date the filing goes into effect by entering it here, so long as it’s not more than 90 days from the day you signed it. Texas also lets you choose a “future event or fact” at which time the LLC becomes official, and you can list that here. It still can’t be more than 90 days from the signing, though.
  1. Execution – This is just a dramatic way of saying date and signature. You’re verifying that everything you’ve put on the form is correct (including that your LLC’s registered agent has consented), so it’s a really good idea to go back over the form and make sure you’ve got everything right.

If all goes well, you’ll soon (usually 10 to 12 business days for online filing) get a stamped and approved Certificate of Formation from the state of Texas. Congrats, you officially have an LLC! There’s still more to be done, though.

What is a governing authority for an LLC?

The “governing authority” in your Certificate of Formation refers to how your Texas limited liability company will be run. Like many states, Texas asks you to decide how you plan to govern your LLC, by the members/owners (member-managed) or by a manager (manager-managed).

Most LLCs choose to be member-managed because there are only a few owners or just one. In those cases, it usually makes sense for the LLC owner(s) to do member-management because they’re running the business themselves. All of the owners are sharing in running the business and making decisions for it.

But some LLCs prefer to appoint or hire a manager instead. In the manager-managed option, one or more LLC members can be appointed to make management decisions, or someone from outside the LLC can be hired to manage the company.

Manager-management can be helpful when some of the LLC members only wish to be investors in the company as opposed to running the business and making decisions about it. LLCs that have many members also sometimes find it easier to have a manager because it’s difficult to get all the LLC members together to make decisions.

How to Amend Your Certificate of Formation

You only need to file your Certificate of Formation once. But if any of the original Certificate of Formation information needs to be updated, altered, or expanded, your business is required to inform the state about the changes.

You would report these changes by filing a Certificate of Amendment and paying a small fee. If your Certificate of Formation isn’t current, it could impact your ability to get a Certificate of Fact – Status (called a Certificate of Good Standing in most states). This document isn’t required to conduct business, but it’s important for business accounts, members, and potential investors. Essentially, failure to keep your business up to date with state requirements can severely limit your LLC’s potential future growth.

Need help amending your Certificate of Formation? We have an amendment filing service that can handle it for you as well as our Worry-Free Compliance service, which includes two amendment filings every year.

Keep your LLC in Texas paperwork organized

If you have ZenBusiness handle filing your Certificate of Formation, once the state approves your LLC, your paperwork will be available digitally from your ZenBusiness dashboard. In the dashboard, you can keep this and other important paperwork digitally organized.

Once you get your physical paperwork back from the state approving your new LLC, keep it in a safe location along with your other important documents, such as your LLC operating agreement, member certificates, contracts, transfer ledger, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.

Why would I delay the LLC filing date?

Some entrepreneurs, especially if it’s near the end of the calendar year, will delay their LLC filing date to January 1 of the coming year. This way they can avoid the hassle and cost of having to pay taxes on their LLC in the current year. This is especially true if the future LLC owners don’t need to establish the company right away.

In most other states, but not Texas, small business owners will also employ this strategy to delay having to pay the LLC annual fee, which can be pretty hefty in states like California ($800). Fortunately, Texas is one of the few states that doesn’t charge this fee.

Delayed filing is something else we can help you with. When you form your LLC in Texas with us, we give you the option of paying an extra fee to have your LLC’s effective date delayed. (This service is only offered from October to January.)

4. Create an operating agreement

Make an operating agreement for your LLC. Texas doesn’t require you to create an operating agreement, but trust us when we say you absolutely should, especially if you’re not the only LLC owner. This is the critical document that establishes the rules for how your LLC will be run and much more.

The nice thing is that you can really take advantage of how flexible the LLC structure is here. You can customize the agreement to spell out the roles of everyone involved in the LLC, ownership percentages, voting rights, and anything else you want to specify. You’ll also avoid future conflict with the other owners by putting everything in black and white.

Do I need an operating agreement if I’m the only owner?

Many things in operating agreements are geared toward avoiding disputes among the LLC members, so you may think you don’t need one for a single-member LLC. But operating agreements offer benefits to single-member LLCs, too.

Potential investors, future business partners, and others may want to see your operating agreement. Some banks won’t let you open a business bank account for your LLC without one. Your operating agreement can also spell out what you want to happen to the business if you die or become incapacitated.

Further, if you end up in court, having an operating agreement will help further demonstrate that you and the business really are separate entities, thus giving you better personal asset protection.

Here are some things you may want to include in your Texas LLC operating agreement:

  • Ownership – You’re not required to divide the ownership equally among the owners, so if you want some to have more than others, you can put it in the agreement. Typically this is measured in percentages.
  • Management – As we explained in the previous step, you can have your LLC managed by its members or by a manager. But operating agreements allow you to be more specific. If you want some LLC members to have more voting power on important business decisions than others, you can stipulate that.
  • Initial contributions – You can list how much capital each LLC member contributed to the LLC at the time it was formed.
  • Profit distribution – If you don’t want the LLC’s profits to be divided evenly among the members, you can decide what percentage each member gets.
  • Taxes – With an LLC, you have options as to how you want the business to be taxed. It’s taxed as a sole proprietorship or a partnership by default, but you can also choose to have it taxed as a C corporation or an S corporation. You can specify that in this agreement.
  • Ownership changes – What happens if a business owner wants to leave or sell their portion of the company? You can specify what happens in that event here. You can also cover contingencies such as a member dying or becoming incapacitated.
  • Dissolving the business – You’ll need a plan in case you and the other members decide to terminate the LLC.

✓ If you’re not sure where to begin with writing an operating agreement, then check out this guide. Make note that, if you decide to form your LLC with ZenBusiness, all our plans include a customizable operating agreement template to save you time researching and crafting the agreement yourself.

5. Apply for an EIN

Obtain an Employer Identification Number (EIN) from the IRS. An EIN is like a Social Security number for your LLC. Unlike your other dealings with the IRS, it’s free, which is good because you’ll probably need one for your business.

You get it from the IRS by going to their website and filling out an application. If you’d rather do it by mail, you can fill out a form and send it to the Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999. It will likely take four weeks, whereas the online version is immediate.

If you’d rather deal with the IRS as little as possible, we can get your Employer Identification Number for you. Our EIN service is quick and eliminates the hassle.

Most kinds of LLCs are required to have an EIN. The only exception would be a single-member LLC with no employees; in some cases, even those LLCs would be required to have an EIN. There are still other reasons you may want one, even if it’s not strictly required.

Any of the following will require an Employer Identification Number:

  • Having more than one member in your LLC
  • Having employees
  • Opening a bank account for your LLC (most banks require an EIN)
  • Having your LLC taxed as a corporation
  • Obtaining loans, lines of credit, or a credit card for your LLC
  • Applying for certain business licenses and permits

So, even if you think you don’t need an EIN right now, it’s likely you will in the future.

Here are a couple of things we want to clarify about EINs that sometimes cause confusion: First, even though it’s called an Employer ID Number, that doesn’t mean it’s only for companies with employees. Second, because sometimes other names are used for an EIN, such as “Federal Tax Identification Number” or similar names, it’s important not to confuse the EIN with the 11-digit Taxpayer Number you’ll get from the Texas Comptroller (which we’ll cover next).

Our LLC formation service includes obtaining an EIN for your LLC but we can also help you get an EIN for an existing company

Texas Taxpayer Number

After your LLC is approved, the Texas Comptroller of Public Accounts will send you (after two or three weeks) the Franchise Tax Responsibility Letter (Form 05-280). This letter gives you an 11-digit Taxpayer Number that will be used for your LLC’s state taxes. It also tells you about the Texas Franchise Tax, which is a tax you pay for the “privilege of doing business” in the state (more on that later).

Open a business bank account with your EIN

Once you’ve secured an EIN, you’ll be able to open a business bank account. Having separate accounts for your business and your personal banking is critical for sorting out your finances at tax time. It helps you avoid commingling funds.

Commingling funds not only makes your taxes more difficult, but it could also be used against you if someone takes you to court to challenge whether you and your LLC are truly separate entities.

We have partnered with LendingClub to offer a discounted bank account for your new business. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process. You may also want to get a business credit card to make small purchases and start establishing your company’s credit score.

For further help managing your new LLC’s finances, try ZenBusiness Money. It can help you create invoices, tag deductions, and receive payments all in one place.

Can filing as an S corp lower my taxes?

The LLC business structure was created to be flexible, and one of those flexibilities comes in how you can choose to have your LLC taxed. One method of taxation could save you thousands over another method, so you’ll want to consider this carefully before you start an LLC in Texas.

By default, you’re taxed as a sole proprietor if it has only one member or a partnership if it has multiple members. This appeals to most owners of LLCs because it avoids “double taxation” of C corporations (the default form of corporation), in which a business pays taxes at both the business level and again when the income is paid to the individual owners. But some LLCs opt to be taxed as a C corporation or an S corporation because it works to their advantage.

Being taxed as a C corporation does mean facing double taxation, but, for certain LLCs, the pros can sometimes outweigh the cons. C corporations have the widest range of tax deductions, which could be an advantage in some scenarios. For example, the cost of certain benefits can be written off as a business expense.

S corp is short for “Subchapter S Corporation” and is geared toward small businesses. Having your LLC taxed as an S corp in Texas has pass-through taxation like a standard LLC, but there’s another potential advantage: It could save you money on self-employment taxes. 

It does this by allowing you to be both an owner and an employee of your LLC and split your income into your salary and your share of the company’s profits. In this way, you pay self-employment taxes on your salary, but not your profits.

The drawback is that the Internal Revenue Service scrutinizes S corps very closely, meaning you’re more likely to get audited. S corps are also harder to qualify for.

While it’s possible that one of the above options could work better for your LLC, we don’t need to tell you that taxes are very complicated. They’re also very specific to your situation. That’s why you really need to consult a tax professional to see which taxing method works best for your LLC in Texas.

If you do decide that filing as an S corp is right for your Texas limited liability company, we have an S corp service that can help you do that at the time of your formation.

We can help

Once you’ve finished the steps above, you’re (literally) in business! You’ve taken the first steps to building your dream company. But there’s a lot more to know than just how to start an LLC in Texas.

You need to know about things like hiring employees, getting business licenses and permits, getting additional financing if you need it, how to make changes in your business, and how to stay in compliance with the government.

Our many services can not only help you form your LLC, but our business experts can also give you long-term business support to help start, run, and grow your business. In other words, it’s not our first rodeo.

So, if starting an LLC in Texas feels like putting socks on a rooster, we can help. Let us take care of formation, compliance, and more. That way, you can get back to running your dream business, whether it’s a tourism agency in Corpus Christi or a food truck in Austin.

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.

Start your LLC in Texas today!

Texas LLC FAQs

  • Which licenses and permits are required for an LLC in Texas?

    The licenses and permits your business requires will depend on factors like your industry and location. Some states require a statewide general business license just to conduct any business in the state, but not Texas. Still, your local governments could require a general business license to operate in its jurisdiction.

    Most businesses will need a Texas sales and use tax permit if they sell tangible personal property, lease or rent tangible personal property, or sell taxable services in Texas. You can apply for a sales tax permit through the Texas Online Sales Tax Registration Application System on the Texas Comptroller website.

    Different industries require different business licenses. You can visit the Texas Economic Development website and the Texas Department of Licensing and Regulation to understand what your business will require at the state level, but remember that licensing and permitting also happen at the federal and local levels and vary across industries, so you’ll need to do some research to find out what your business needs.

    If all that research sounds daunting, we recommend using our business license report, which will provide you with a comprehensive report of all the licenses and permits required for your LLC in Texas.

  • How much does an LLC cost in Texas?

    Texas’s $300 LLC filing fee may cause you some sticker shock, as it’s substantially higher than most states. But as you’ll see on our Texas limited liability company filing costs page, most of the other fees aren’t as drastic.

    As you’re forming your LLC, you’ll want to know what you’ll be charged at each stage, allowing you to plan. To get the most current fees, you’ll need to check the Texas Secretary of State website. However, we’ve compiled a list of the kinds of administrative charges you may encounter below:

    • If you decide to reserve a name for your new business, you’ll have to pay a fee to submit the name reservation application online or by mail. While you aren’t required to take this step, it might be worth the cost to ensure that no other business snags your preferred name before you can.
    • If you want to use an assumed name when operating your business, you’ll need to pay a fee to file your assumed name certificate online or by mail. Again, this cost is not mandatory for all LLCs, but it is required for businesses that decide to adopt an assumed name.
    • When filing your Certificate of Formation with the Secretary of State, you’ll need to pay a substantial filing fee ($300 as of this writing), whether you file online or by mail. If you pay by credit card, a convenience fee will also be charged. There’s no way around this sizable fee: All LLCs are required to pay it.
    • If you choose expedited processing for business filing paperwork, you’ll need to pay an extra fee for each document submitted.

    Of course, this list doesn’t include other potential fees that Texas might require from your business, such as the cost of specific licenses and permits.

    Additionally, these prices don’t account for the time and effort you’ll spend preparing and submitting the paperwork required. There can be many competing demands on your attention during the critical stages of starting your business. If you’re stressing out about filing official paperwork, you’re not focused on planning for the business’s future — a pretty high price to pay.

  • What are the benefits of a Texas LLC?

    LLCs are popular for several reasons: The majority of our clients choose this structure for their businesses because they appreciate the legal and tax advantages it can provide. If you’re unsure whether to form your business as an LLC, consider the following benefits:

    • LLCs provide legal protection for business owners. By establishing your company as a distinct and separate business entity, you separate your personal assets from your business’s legal liabilities and debt obligations. This “limited liability” in the name refers to this important benefit.
    • LLCs protect business owners from “double taxation.” As we’ll discuss in more detail below, LLCs do not pay federal income tax; profits from the LLC are taxed only at the individual owners’ level. A C corporation pays federal income tax at both the business level and the individual shareholders’ level. But with an LLC, the IRS takes a slice of your LLC profits just once, not twice.
    • LLCs can accommodate more flexible management structures. Corporations are required to maintain specific forms of oversight and management, including appointing a board of directors. LLCs have no such requirements, meaning they can customize their management structures to meet the business’s needs.
    • LLCs require less “red tape” than corporations. Most states require corporations to jump through certain hoops, including more detailed reporting on the finances of their business, holding an annual board of directors meeting, and fulfilling other administrative obligations. LLCs have far fewer stringent requirements, meaning you’ll spend less time navigating red tape.
  • How is an LLC in Texas taxed?

    LLCs in Texas will need to pay taxes at the state and federal level (and sometimes local). With each, there are multiple elements to consider, so we’ll address them separately below. For local taxes, you’ll need to consult your local taxing authorities.

    Federal Taxes

    By default, if your LLC consists of one person, it’s taxed as a “Disregarded Entity,” meaning it’s taxed as a sole proprietorship. This means that profits aren’t taxed at the business level, but only when they “pass through” to become your income.

    If your LLC has more than one member, it’s taxed as a partnership by default, which also means the income is taxed at the individuals’ level and not the business’s. This avoids the “double taxation” that corporations pay, in which profits are taxed at the corporate level and again when they’re paid out to the owners (“shareholders”). 

    Single-member LLCs don’t have to file a separate federal return for their LLC; they report the LLC income on their personal income tax return (Form 1040). But LLCs with multiple members must file a separate federal return for the LLC, Form 1065. Then each LLC member reports their share of the profits on Schedule K-1 and attaches it to their own personal federal tax return.

    Members of LLCs can also elect to be taxed as corporations. Some LLC members choose to classify their businesses as an S corporation or a C corporation, which can be advantageous in some cases. In particular, many LLCs elect to be taxed as S corporations because it can seriously lower their self-employment taxes. You can learn more on our What Is an S Corp? page.

    There are also a few other forms of federal taxation to keep in mind. For example, you will likely need to pay certain kinds of employment taxes, such as Social Security, Medicare, and unemployment.

    Even for business entities like LLCs, taxes can get very complicated very fast. Don’t be afraid to seek out a tax professional for guidance. They could potentially find tax savings you weren’t aware of as well as keeping you out of trouble with the IRS.

    Texas Sales and Use Tax

    Finally some happy news: Texas has no personal state income tax. There is state sales tax, though, and (as we mentioned earlier) you’ll need a permit to collect it.

    The sales and use tax for Texas is 6.25%, but local taxing jurisdictions (cities, counties, etc.) can add up to an additional 2%. Speaking of which, those localities may require tax filings of their own. You’ll have to familiarize yourself with any such requirements in your area. Bear in mind that those taxes often revolve around what products/services you’re selling.

    There are many, many additional taxes the state charges for a wide range of goods and services. Take some time to peruse the list of these on the Texas Comptroller’s website to see if any of them will apply to your business.

    Texas Franchise Tax

    The Texas Franchise Tax is a tax you pay for the “privilege of doing business” in the state. That may sound pretty pretentious for Texas, but the good news is that about 90% of LLCs won’t have to pay it.

    Only LLCs above the “No Tax Due Threshold” pay the franchise tax, meaning that if your LLC’s annualized total revenue for the tax year is less than $1,230,000 (as of 2022), you don’t need to pay it.

    However, the state does want you to tell them that you don’t owe anything for this tax by filing a No Tax Due Report (Form 05-163) and a Public Information Report (Form 05-102) every year (due May 15).

    Do you think your LLC will be making enough to pay the franchise tax? If so, you’ll still file the Public Information Form, but instead of the No Tax Due Report you’ll file either the EZ Computation Report or the Long Form, both of which can be found on the Texas Comptroller website.

    Texas annual franchise tax reports are due by May 15 each year.

    Determining which form you need to use and how to calculate your tax payment gets complex very quickly, so this is another one of those times you’ll want to consult an accountant. You can also seek info on the comptroller website or call them at 800-252-1381.

    Employment Taxes

    If you hire employees, you’ll need to register for Unemployment Insurance Tax on the Texas Workforce Commission website. You must do this within 10 days of becoming liable for unemployment insurance tax. This happens after you’ve paid, in a calendar quarter, $1,500 or more in gross wages or you’ve had at least one employee working for the LLC during 20 different weeks in a calendar year, regardless of the amount of wages. It doesn’t matter if the employee is full- or part-time or even if it’s the same employee for those 20 weeks.

    Other Taxes

    We wish we could say that your business’s tax liabilities are limited to what we list in this article, but we can’t. In fact, the Texas Comptroller’s office says on its website that they collect more than 60 separate taxes, fees, and assessments, including local sales taxes collected on behalf of more than 1,400 cities, counties, and other local governments around the state.

    That’s a lot, which is why we keep referring you to a licensed tax professional. They can help you figure out what you owe and when to keep you out of trouble. The Texas Comptroller’s office also has a customer service line you can call at 888-334-4112. 

  • What is the processing time to form my Texas LLC?

    According to the Texas Secretary of State, the standard processing time for business formation documents when you file online is 10 to 12 business days from the day they receive your submission. The agency also cautions that timelines can fluctuate based on demand and staffing capacities, meaning you could wait even longer for your Certificate of Formation to be approved.

  • Do I need to file an operating agreement with the state of Texas?

    No, you don’t need to file your operating agreement with any state office. Just keep it in a safe place with your LLC’s other important legal documents.

  • Can you change the name of an LLC in Texas?

    You can change the legal name of your LLC in Texas at any time (so long as another business is not using the new name). To do so, you’ll need to file a Certificate of Amendment with the Secretary of State, which you can do through the Texas SOSDirect website or by mail. The Certificate of Amendment has a filing fee.

    If you want to call your business something new but don’t care much about your LLC’s legal name, filing an Assumed Name Certificate will be far more cost-effective. This form costs a smaller fee to submit and enables your company to interact with the public under a different name than its official one.

  • How do I dissolve my LLC in Texas?

    To dissolve an LLC in Texas, you’ll need to submit a Certificate of Termination to the Secretary of State. This form can be submitted through the SOSDirect website or by mail, with an associated fee.

    However, you can’t submit a Certificate of Termination without first getting proof that your business’s tax obligations are fulfilled in the state of Texas. You’ll need to apply for and receive a Certificate of Account Status from the state comptroller’s office before you can officially terminate your business. When terminating your LLC with the Secretary of State, you’ll be asked to append this document to your forms.

    For more information, visit our Texas business dissolution guide.

  • Can a foreign LLC do business in Texas without registration?

    No. Before conducting any business in Texas, a foreign LLC must file Form 304, Application for Registration of a Foreign Limited Liability Company, with the Texas Secretary of State. You’re also required to pay a substantial filing fee and follow all the associated laws for a foreign LLC doing business in Texas.

    Getting permission to conduct business in a state other than your state of origin is called a foreign qualification. Texas imposes penalties for those who fail to register.

  • How do you get an LLC in Texas?

    To get an LLC in Texas, you’ll need to follow the steps we’ve outlined above. Most importantly, you’ll complete and submit your Certificate of Formation to the Texas Secretary of State. Once the state approves your Certificate, your LLC is official.

  • Can you file your own LLC in Texas?

    Yes, you can complete the necessary paperwork yourself and submit it to the Secretary of State office, which will either approve or deny your LLC formation. You aren’t required to use a lawyer or another third party.

Texas Business Resources

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