How To Start An LLC In Texas (2024 Guide) (2024)

It isn’t complicated to start an LLC in Texas. Follow these steps to get your company established and ready for business in the state.

Step 1. Name Your LLC

You need to name your business. As already discussed, the name should include one of the following terms:

Limited Liability Company
Ltd. Co.
L.L.C.
L.C.
Limited Company

It should also be a unique name that passes the business entity search test on the Secretary of State’s website; you cannot form an LLC with the same name as an existing entity doing business in Texas. You may also want to weed out names that look or sound similar to an existing business’s name, especially if it’s operating in your industry or locality. Deceptively similar names can raise trademark issues. And competing with another company with the same name can be bad for business—it confuses consumers, which is never good.

Just as you must include certain terms in the name, you cannot include certain terms. Some of these include:

Treasury
State Department
FBI
CIA
Olympic
Trust
Bank
College

You may use terms such as bank, university, attorney or doctor as long as you meet the Texas State Government requirements for such entities. Fulfill those first before adding any of these terms to your LLC in Texas.

Buy a Domain Name (Optional) for Your LLC in Texas

It’s a good idea to consider an online presence for your business, as it allows you to have a website and email address associated with your LLC. This enhances your online visibility and makes it easier for potential customers to find you on the internet.

Step 2. Hire a Registered Agent

As you already know, a registered agent is required to open an LLC in Texas. This is the time to hire one. You will need a registered agent who has a physical address in the state of Texas. This person must be available at that address regularly during business hours to receive personal service of legal documents.

Who Can Be a Registered Agent in Texas?

An individual resident in Texas, or an organization that is authorized to do business in Texas with a business office located at the same address as the entity’s registered office, can serve as the registered agent. In addition, an officer, owner, employee, friend or family member may also serve as a registered agent as long as they are a resident of Texas with a physical address in Texas.

Alternatively, a Registered Agent service provider can be hired to provide registered agent services. It’s important to note, the entity itself cannot serve as its own registered agent.

Step 3. File the Texas Certificate of Formation—Limited Liability Company

Below are links to the necessary forms for filing your LLC as well as the related filing fees.

Form 205: The “Certificate of Formation—Limited Liability Company” is the most crucial paperwork needed for getting your LLC off the ground. It’s available for download or can be completed and filed online through SOSDirect. The filing fee is $300.
Form 304: An “Application for Registration of a Foreign Limited Liability Company” form must be filed by LLCs established outside of Texas that want to operate in the state. The filing fee is $750.

Completed physical forms should be mailed in duplicate to PO Box 13697, Austin, Texas 78711-3697.

Additional costs related, filing fees or hiring a registered agent can range between $100 and $1,000. LLCs don’t file annual reports or pay reporting fees in Texas, but they are subject to a state franchise tax.

How To Complete the Certificate of Formation

When providing information about your LLC, you need to have the following details ready in order to complete the Certificate of Formation accurately.

LLC Name: Provide the full legal name of your LLC, including any designations such as “LLC,” “Limited Company” or “Limited Liability Company.”
Registered Agent: Include all information such as individual or business name, physical address and phone number of the assigned registered agent for your LLC. Make sure to also have the registered agent consent to serve in writing.
Management Structure: Specify whether your LLC is member-managed (managed by its members) or manager-managed (managed by appointed managers). List the names of the managers. Include the addresses of the managers. Take note, this will be public information so you have the option of using a post office box if desired.
Purpose: Briefly describe the purpose or nature of your LLC’s business activity. This can be something general.
Mailing Address: If the mailing address is different from the principal place of business, provide the mailing address where official correspondence and important tax documents should be sent.
Supplemental Provisions/Information: You have the option to include any additional provisions that you would like to be included in your LLC filing. Typically, this section is left blank unless you have specific instructions from your attorney.
Duration: In Texas, an LLC exists perpetually, but you have the option to indicate whether it is formed for a specific time period.
LLC Organizer: The organizer is an appointed individual or entity that takes on the responsibility of forming and filing the necessary documentation for the LLC with the state and other relevant agencies. The organizer plays a crucial role in initiating and completing the legal requirements for establishing the LLC, ensuring compliance with state regulations and guidelines.
Formation Date: State the date when your LLC was officially formed, established or will go into effect. You can opt to have this happen as soon as it is filed with the Secretary of State or choose a “future event or fact” but it cannot be more than 90 days from the signing.
Execution: After careful review, verify with your date and signature that everything stated on the form is correct including that your registered agent has consented.

After the filing has been submitted, you will receive a stamped and approved Certificate of Formation from the state of Texas (10-12 business days if filing online).

What if You Need To Amend Your Certificate of Formation?

The Certificate of Formation for an LLC only needs to be filed once during the initial formation process. However, if any of the information provided in the original Certificate of Formation needs to be updated, modified or expanded, the LLC is required to inform the state of Texas by filing a Certificate of Amendment.

To report these changes, you need to file a Certificate of Amendment with the Texas Secretary of State and pay the associated fee of $150. It is important to keep your Certificate of Formation up to date as it may impact your ability to obtain a Certificate of Fact-Status that is official evidence of your company’s ability to transact business in Texas. Failure to comply with state requirements and keep your LLC’s information current can greatly limit your LLC’s potential.

Step 4. Obtain a Texas LLC Employer Identification Number (EIN)

An EIN is free to obtain. It is a nine-digit number given to your Texas LLC by the IRS. This number serves as an identification number when getting bank accounts, credit accounts and filing taxes. It is an essential part of your Texas LLC.

Apply for the free EIN directly with the IRS. This application takes just a few minutes to complete and the EIN is issued immediately.

It’s worth noting that your LLC only needs an EIN if you:

Hire employees
Operate as a business or corporate partnership
File tax returns for Employment, Excise or Alcohol, Tobacco and Firearms
Withhold taxes on income, other than wages, paid to a non-resident alien
Have a Keogh plan

Moreover, if your LLC is involved with any of the following types of organizations, you’ll need to get an EIN:

IRAs, Exempt Organization Business Income Tax Returns and Trusts (except certain grantor-owned revocable trusts)
Estates
Real estate mortgage investment conduits
Non-profit organizations
Farmers’ cooperatives
Plan administrators

Step 5. Create an LLC Operating Agreement

Every Texas LLC should have an operating agreement that outlines the following:

Purpose and Structure: The operating agreement should clearly state the purpose of your LLC and outline its organizational structure. This includes the roles and responsibilities of each member and how the LLC will be managed, whether by members or appointed managers.
Membership Details: Include detailed information about each member, such as their ownership percentage, initial capital contributions and how profits and losses will be distributed. This section also addresses the process for admitting new members and handling the departure of existing ones.
Decision-Making Process: Specify how decisions will be made within the LLC. This can include voting rights, procedures for holding meetings and how major business decisions will be approved.
Management Duties: Outline the duties and powers of managers if your LLC is manager-managed. This section should clarify the extent of their authority and any limitations.
Financial Matters: Detail how the LLC’s finances will be managed. This includes accounting methods, fiscal year definitions and procedures for distributing profits to members. Also include guidelines for handling financial records and annual reporting requirements.
Conflict Resolution: Establish procedures for resolving disputes among members. This can include mediation or arbitration clauses to handle conflicts without resorting to litigation.
Amendments: Provide a clear process for amending the operating agreement. This ensures that changes to the LLC’s structure or operations can be made with the agreement of all members.

While this is an internal document, it is an important one to running the business. The operating agreement will outline things so that members and managers aren’t confused about who will do what in the business. Ultimately, it will help reduce conflict. Check out our Texas LLC Operating Agreement Template.