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.
The Texas Secretary of State has a few rules to follow if you want to form your Limited Liability Company 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):
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.
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 firstname.lastname@example.org. 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.
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.
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.
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 email@example.com 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.
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.
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.
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 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.
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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.
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:
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.
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.
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.
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).
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.
Before you begin the Certificate of Formation form, have the following information on hand:
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.
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.
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.
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). Compare member-managed vs 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.
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.)
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.
Here are some things you may want to include in your Texas LLC operating agreement:
Feeling unsure as to how to create an operating agreement for your LLC? You can help with that, too. 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.
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.
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:
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
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).
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.
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.
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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 business financing if you need it, how to make changes in your business, and how to stay in compliance with the government.
Our many business 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.
Once you’ve rounded up the process of forming your LLC in the Lone Star State, there are several essential steps you should consider to help ensure your business rides smoothly. Let’s explore these important aspects.
After the celebration of establishing your LLC, it’s crucial to keep an eye on those calendar dates. In Texas, LLCs are required to file an annual report called a “Public Information Report” in association with the Texas annual franchise tax. This isn’t just a one-time task but a yearly responsibility.
Why’s this so essential? The annual report keeps the state updated about key aspects of your business, such as management structure and operational insights. Not only is it legally mandated, but it also ensures you maintain a good standing with the state authorities. Missed deadlines can lead to penalties or, worse, the dissolution of your LLC.
The vast terrain of Texas is diverse, and so are its business requirements. Depending on your business’s nature and its specific location in Texas, you might need additional permits or licenses. For instance, if you’re opening a restaurant in Austin, you’ll need health permits, signage permits, and possibly liquor licenses.
Do your homework by checking with local city and county regulations. While your LLC status provides a legal shield, operating without necessary permits can poke holes in that protection.
When it comes to business, it’s better to be safe than sorry. Acquiring business insurance is a prudent step for every LLC. Depending on the nature of your business, here are some types to consider:
General Liability Insurance: This is the most common type and covers many accidents or damages that might occur on your business premises.
Professional Liability Insurance: If you’re in a service-providing business, this insurance covers you against errors or negligence claims.
Commercial Property Insurance: If you own a physical location, this type of insurance covers damages to your property from events like fires, storms, or theft.
Remember, while not all insurance types might be mandatory, they provide a safety net for your LLC. In a state where everything’s bigger, ensure your peace of mind is, too.
With Texas’s vast opportunities come changes in regulations, business trends, and networking possibilities. Engage with local business groups, chambers of commerce, or even online forums that cater to Texas entrepreneurs. This not only keeps you updated with the latest in business laws but also provides an excellent opportunity to network and grow.
Your LLC journey in Texas is more than just formation. It’s about growth, stability, and ensuring that your business dream doesn’t just survive but thrives.
Choosing an LLC structure in Texas isn’t just about following a trend; it’s a strategic move. The state’s business-friendly environment, coupled with the inherent advantages of an LLC, offers numerous perks. Here’s a closer look at why one might opt for one in Texas:
At the heart of an LLC is the protection it offers. When you form an LLC, your personal assets (like your home, car, or personal bank accounts) are usually shielded from business debts and lawsuits. In the event that your Texas LLC faces financial hardships or legal disputes, your personal belongings are usually safe.
Here’s a Texas-sized benefit — flexibility in how your LLC is taxed. You can choose between being taxed as a sole proprietorship, partnership, or corporation. But there’s a cherry on top: Texas doesn’t slap a state income tax on LLCs. So, while you’re enjoying your BBQ, you can also relish the fact that you’re keeping more of your hard-earned money.
Anyone who’s looked at setting up a corporation knows that the paperwork can be thicker than a Texas T-bone steak. With an LLC, you’re in for a leaner experience. The administrative process is more straightforward, which is a godsend for budding entrepreneurs eager to get their business off the ground without drowning in red tape.
Sure, “John’s Barbecue” has a nice ring to it. But “John’s Barbecue, LLC” just sounds more official, doesn’t it? Those three letters, “LLC,” can add a layer of professionalism to your business. It signals to customers, suppliers, and partners that you’re serious about your business.
Texas allows you to structure your LLC’s management the way you want. Whether you prefer member-managed or manager-managed, the choice is yours. This adaptability ensures that you can operate your business in a manner that best fits your vision and goals.
One of the unique features of Texas law is the strong protection of assets. For instance, Texas offers robust homestead protections, meaning your primary residence is typically safeguarded from creditors.
With its booming economy, diverse industries, and thriving cities like Austin, Dallas, and Houston, Texas presents vast opportunities for business growth. Being an LLC in such a dynamic state means you’re well-positioned to capitalize on these opportunities.
In Texas, as the saying goes, “Everything’s bigger.” And that includes the benefits of setting up an LLC. Whether you’re a local or someone looking from the outside in, Texas provides a fertile ground for your business dreams to take root and grow.
Everything’s bigger in Texas, including the business opportunities. Across the sprawling plains, from the urban hustle of Houston to the serene landscapes of the Hill Country, Texas provides diverse options for entrepreneurs. Let’s delve deeper into the types of LLCs the Lone Star State offers:
Picture a lone ranger, galloping across the vast Texan landscapes with a vision and determination to carve out a niche in the business world. For those individual trailblazers looking to harness the benefits of an LLC without sharing the reins, a single-member LLC is the perfect fit. It grants you the freedom of solo entrepreneurship with the shield of limited liability, helping your personal assets stay secure amidst the business rodeo.
Just as a group of cowboys makes a round-up smoother, a multi-member LLC is designed for teams. Whether it’s a dynamic duo or a larger posse of partners, this structure allows members to pool their resources, skills, and visions. Every member gets a seat around the campfire, sharing the profits, losses, and decision-making, helping ensure collaborative growth in the Texan business frontier.
A unique gem in the Texan business arsenal, the Series LLC is a forward-thinking structure that the state offers. Imagine a ranch with multiple herds, each distinct yet part of the same property. Similarly, a Series LLC lets you operate several distinct LLCs under one overarching master LLC. Each “child” LLC can manage its finances, members, and operations while enjoying the safety net of the larger “parent” LLC. It’s an excellent setup for entrepreneurs with diverse interests and ventures.
A professional limited liability company (PLLC) is a business entity tailored for licensed professionals, such as doctors and lawyers. Its primary purpose is to provide liability protection, similar to a regular LLC, while also meeting professional licensing requirements. Note that a PLLC doesn’t shield its members from personal malpractice claims. It can, however, protect the members from malpractice claims against the other members.
Disclaimer: The content on this page is for information 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.
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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.
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:
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.
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 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.
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 and our LLC vs. S corporation and LLC vs. C corporation pages.
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 Report, 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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