Thinking about setting up your new business in Texas? Before you do anything else, set up your LLC. By doing this, you will ensure that no matter what your business financial situation is like, your personal assets remain safe and protected.
In this guide, we will tell you all you need to know about forming your Texas LLC, from step one till you have your LLC up and running!
Without further ado, let’s get started!
For the best overall value, ZenBusiness is our recommended LLC formation service. Great price of $49 (plus state fees) and everything you need to start your business.
For the cheapest LLC formation service and great customer support. You can get your LLC formed for free (plus state fees).
Don’t have the time to go through the complete review as you have pending business tasks? We understand that as a new business owner, you have loads of responsibilities to take care of. Read these quick highlights to know how to form an LLC in Texas.
To form an LLC in Texas, you have to follow these steps.
- Choose a Business LLC Name
- Designate Registered Agent
- Create and File Articles of Organization
- Form a Business Operating Agreement
- Acquire an EIN
- Pay the Franchise Taxes
You can form your LLC in Texas all by yourself, but we don’t recommend it. Not only is there a lot of room for error, but it will take up a lot of your precious time. Instead of getting lost down the rabbit hole of legal paperwork, you should take the help of professional LLC formation companies who will get your LLC up and running quickly, efficiently, and perfectly!
- ZenBusiness is our top recommendation when it comes to a professional LLC incorporation service. Not only do they have affordable rates, but their feature-full packages and friendly customer services also make them an instant favorite!
- IncFile is the best affordable LLC formation service. If you are on a tight budget and can’t spare money for professional formation services, IncFile is your best friend since they offer to form your LLC in Texas free of service charge!
What is an LLC
A few of you don’t know what an LLC is and what benefits it offers to its owners. Before moving on to forming an LLC in Texas and its advantages, let’s take a quick look at what an LLC is in the first place.
A Limited Liability Company is a business structure that combines amazing liability protection with the flexibility of running a sole proprietorship. Even if your business is sued in the future, only your business assets will be at risk, Your personal possessions, such as your house, car, etc., will be safe and protected no matter what happens.
Form an LLC in Texas
No matter which state you form your LLC in the basic steps is going to be the same. The taxes, licenses, filing procedures, and charges, etc. differ from state to state. A Texas LLC is a business structure that provides you with personal limited liability protection in case of a legal issue such as a lawsuit, etc.
It is easy to form an LLC in Texas. Let’s see all the steps that you need to go through to get your Texas LLC up and running.
Texas LLC Name
What is the thing that will give your company, your business, your brand, a unique identity? Its name would do that. The name of your business is the most important thing because it will be the face of your services and products.
Name Availability Search
Therefore, the first thing that you have to do is select a unique, catchy name for your business so that you can use it when you create your LLC officially. However, before you file your Texas LLC formation documents with the state, you have to ensure that the LLC name you want is available for use.
To do that, you will have to search whether that name is up for grabs or not. To search for an LLC name in the state of Texas, you have 3 options.
- Give the State Business Information Line a call.
- Write an email to [email protected]
- Search the Texas State LLC database from their official website.
To ensure that your LLC filing doesn’t get rejected due to a name issue, you should make sure to call and ask the officials even if the name seems to be available after you have conducted your search. A pro-tip: Call early in the morning and you won’t even have to wait for a long time to get hold of an official!
Once you have selected an LLC Name and checked for its availability, you have to go through the Texas LLC Name guidelines and laws to ensure that your name doesn’t go against any rule. Texas law states that your LLC name should have a designator at the end of it.
The following designators are permitted by Texas law:
- Ltd. Co.
- Ltd. Liability Co.
- Ltd. Company
- Ltd. Liability Company
- Limited Company
- Limited Liability Company
You cannot use any designator that makes it sound like a different type of business entity such as Inc, Corp, LLP, Non-Profit, etc.
You can always change the name of your LLC if you want. However, it will cost you $150 additionally and you will have to change the LLC name everywhere else as well – the Comptroller, the IRS, the online registrations, the bank, etc.
We also have a guide to the Texas LLC costs which go into more details on the specific costs involved.
Therefore, it is better to come up with a good LLC business name from the start and then go from there. What if you have selected a name that is available, but your articles of organization are not ready as yet?
This means that any other entity can take the name you have so passionately chosen. To prevent this, you have the choice to reserve the name that you have selected for your LLC. By paying a name reservation fee of $40, you can reserve your LLC name.
Once your documents are ready, you can go ahead with the filing of your Texas LLC easily!
Texas LLC Registered Agent
You are legally required by the state of Texas to designate a registered agent for your company and mention their details of the articles of organization. Don’t know what a registered agent is? Well, a registered agent is a person or a company that will receive all the legal mail, notices, documentation, etc. on your behalf from the state.
The registered agent should have a physical street address in Texas to qualify as your registered agent. You can’t simply use a PO Box address or a mailbox rental service as your registered agent.
In Texas, there are 3 options when it comes to choosing your registered agent.
- Becoming your own registered agent
- Designating a friend or family member as your registered agent
- Hiring a professional registered agent
You need to know that the person you choose your registered agent will have to sign a consent form to become your registered agent.
We don’t recommend that you become your own registered agent or choose your friends to become one for your LLC due to a multitude of reasons. Firstly becoming a registered agent means that your address will be a part of the public records and you will have zero privacy.
Moreover, since we are all humans, it is very likely that you or your friend will forget important deadlines and documentation, which will have a negative consequence for your LLC. Therefore, we suggest that you go with the best option that is to hire a professional registered agent.
Not only will your address remain private, but you will also no longer have to worry about losing important mail. Northwest Registered Agent is one of the best-registered agents out there. They have excellent one-on-one customer service, which you will definitely like!
Filing Articles of Organization
The most important step is filing your articles of organization. These are basically the official documents that form your Texas LLC and help you get the certificate of formation. The Texas articles of organization are 4 in number and they each ask for specific information
- Article 1. In this section, you have to list the name of your LLC along with the type of entity you want.
- Article 2. This section consists of the name and address of the registered agent you selected. You can’t give a virtual address or a PO Box. Only an actual physical address will be valid.
- Article 3. Next, you have to give information regarding your LLC’s structure to the state. You have to select whether your LLC will be managed by the members or you will appoint managers. You are legally obligated to list down the names and addresses of the members/managers.
- Article 4. You don’t have to add anything on your own to this section as it is already filled with state LLC law. However, if you want to add something regarding the purpose of the formation of your LLC here, you can do so.
After the articles, you have to add information regarding the execution of the formation. You would need the signature of an organizer. The organizer is simply the person who has prepared and filed your documents for you, and it can be you or a professional LLC incorporation company such as ZenBusiness.
The filing fee for your certificate of formation in Texas is $300. You can complete the filing process online or post the documents to the Secretary of State, Moreover, you can fax your documents as well.
If you file the documentation online, it will take 2 to 3 business days for your LLC to be approved. If you file by mail, it can take 5 to 7 business days. Once your LLC gets approved, you will get a Certificate of Filing along with the approved Certificate of Formation. If you have filed online, these documents will be sent via email. Otherwise, they will be sent to the address of your registered agent.
Texas LLC Business Operating Agreement
A business operating agreement is a written, legally binding contract between the LLC members that details the LLC ownership structure, rights, and responsibilities, along with laying down various rules for the proper functioning of the LLC, from splitting the profits to rules on how to dissolve the LLC in the future.
Whether you have a single-member LLC, or a multi-member LLC in Texas, you should have an operating agreement in place. This document plays an integral part in outlining that the owners and the LLC are separate from each other – this will help you maintain the personal liability protection that an LLC provides.
This business operating agreement is basically an internal document and you don’t have to send a copy of it to the state. You only need to keep it with all your other business records and use it whenever applicable.
You can create a business operating document yourself, but how will you make sure it's legally correct and binding? To fix this issue, you can take the help of professional LLC incorporation services such as ZenBusiness who creates customized LLC operating documents as per the needs of your LLC!
Getting a Federal Tax ID Number – EIN
Do you have a social security number? If you are an American citizen, you definitely have one. Similar to the social security number, businesses have EINs. EINs help the IRS identify your LLC for tax and filing purposes.
An EIN is necessary for filing your taxes, hiring employees, opening business bank accounts, etc. You can apply for an EIN online on the IRS website once your LLC is approved. If you fill in the application for an EIN yourself, you won’t have to pay anything.
However, getting an EIN is a technical thing and it's likely that you will mess something up while filling the application – we are not all lawyers, after all! Therefore, we recommend that you leave this process in the hands of professionals and experts from service providers like ZenBusiness or IncFile!
Paying the Texas LLC Franchise Taxes
No matter what kind of business you are running, you will have to file a public information report as well as a Texas Franchise Tax Report every year with the Texas Comptroller’s Office. The franchise tax reports have to be submitted every year by May 15th.
Once your Texas LLC is approved, you will get a Welcome Letter from the office of the comptroller along with your taxpayer number. This is different from the Federal Tax ID (EIN) that you have to get.
You use this taxpayer number when you file your franchise tax report annually. If your LLC has an annualized total revenue of $1,180,000 you will not have to pay the tax, but simply file a no-tax due report.
If your revenue is more than that, then you have to pay the franchise tax. Figuring out the right amount of tax that you owe is something better left in the hands of professionals! The state of Texas doesn’t have a general business license that you can use. You have to check with your local city to check if you need a license to do business there.
Advantages of LLC in Texas
Texas is a business-friendly state and there are many advantages of forming your LLC in Texas. Let’s briefly take a look at a few of them.
The members of the LLC are not liable for any debts that the LLC may have, or be responsible for any lawsuits that the business is facing. An LLC is less formal than a corporation but provides the most amazing personal asset protection that you should avail.
The registration process in Texas is simple and fast. You prepare and file your articles of organization, pay the $300 filing fee, and your LLC will be up and running in a couple of days. Moreover, the state of Texas doesn’t ask for an annual Texas LLC registration fee which is a huge bonus!
If you form an LLC in Texas, you will have the flexibility of choosing the way your LLC gets taxed. You can elect to be taxed as a sole proprietorship, a partnership, an S-corp, a C-corp, as per your needs and requirements.
There are minimal formalities to keep your LLC compliant with the state of Texas, You don’t have to hold meetings, keep detailed minutes, etc. Moreover, there is no restriction on the number of members that your LLC can have.
LLC in Texas – Final Word
An LLC is the best way to ensure that no matter what happens in your business world, your house, your car, and your other prized possessions will remain safe and protected. Forming an LLC in Texas is easy, simple, and straightforward.
You can always form your LLC on your own by following the steps that we have mentioned above. However, we suggest that you save your time and energy, and focus on making your business a success.
A professional LLC incorporation service can easily take care of your LLC formation process and you can focus on your company!
- ZenBusiness is the perfect choice for entrepreneurs who are looking for an expert, highly-qualified, affordable LLC incorporation service with excellent customer service!
- IncFile is a great option for business owners who are working under a tight budget and don’t want to spend a lot of money yet want top-notch service. Choose the free package available at IncFile and form your LLC in Texas free of cost!
Here’s to you having a successful LLC in Texas, folks!