How to Form an LLC in Texas

How to Form an LLC in Texas

A step-by-step guide to forming a Limited Liability Company (LLC) in the state of Texas.

steps to form an llc in texas

To form an LLC in Texas you need to file the Texas Certificate of Formation with the Texas Secretary of State. The Certificate of Formation can be filed online, by mail or in person. The filing cost is $300. Once filed with the state, this document officially creates your Texas LLC.

To create an Texas LLC, follow the step-by-step guide below.

Step 1. Name Your Texas LLC

Selecting a name for your business is the first step to forming an LLC in Texas. When selecting a name for your LLC, be sure it complies with all Texas naming requirements and can be searched by prospective clients.

1. Follow Texas LLC naming guidelines:

  • LLC name must include the words “limited liability company,” or “LLC, L.L.C., Limited, Ltd., Company or Co.”
  • The name must not include any words that could cause your LLC to be confused with a state or federal government agency.
  • Avoid using restricted words (e.g. Attorney, Bank, University, Doctor). Using restricted words in your business’ name may require additional paperwork, licenses and approvals.
  • For a comprehensive list of Texas business naming rules and regulations, read the Texas Secretary of State’s entity naming guidelines.

2. Is the name available? Before filing documentation to form an LLC in Texas, make sure your business name isn’t being used by another entity. You can perform a name search on the Texas Comptroller of Public Accounts website to verify name availability.

3. Is the domain name available? While not necessary to form an LLC, we recommend checking to see if the domain name for your proposed LLC name is available. Even if you don’t currently plan on taking your business online, you may want the domain name for your business to prevent another entity from acquiring it.

The majority of LLCs do not require a DBA. The name you select for your LLC can serve as your brand name. It can serve for advertising, transacting business, and accepting and making payments. If you are considering conducting business under a name different than your LLC, then a DBA may make sense. To operate under a DBA, you must register an Assumed Name Certificate (Form 503) with the Texas Secretary of State and with the county clerk in the county where your LLC’s place of business is located. You can also register online through the SOSDirect website or by mail to Secretary of State, P.O. Box 13697, Austin, TX 78711-3697.

A business name can be reserved for 120 days by filing a Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the Texas Secretary of State. Name reservation can be filed online through the Texas Secretary of State SOSDirect website, filed by mail to
Secretary of State, P.O. Box 13697, Austin, TX 78711-3697, or by fax at 512 463-5709.

Step 2. Choose a Registered Agent in Texas

To form an LLC in Texas, you must appoint a Registered Agent. A registered agent is an individual or legal entity responsible for receiving important communications, including legal documents and notices, tax forms, and official government correspondences.

A registered agent must be a resident of Texas or a legal entity authorized to conduct business in Texas, such as a registered agent service. You may also elect a member of your LLC, including yourself, to act as registered agent.

A Registered Agent must consent to serve as the Registered Agent in written or electronic form by completing an Acceptance of Appointment and Consent to Serve as Registered Agent (Form 401-A). The consent to serve form should include:

  • The LLC name
  • A statement that the designated person or authorized entity consents to serve as the registered agent for the LLC
  • The signature of registered agent
  • The date of execution

The Consent to Serve form does not have to be filed with the secretary of state. For more information on Registered Agent requirements for the state of Texas, as well as how to fill out the consent form, view the official Acceptance of Consent Form 401-A for Texas.

You can find more information about Texas registered agents at Texas Secretary of State Registered Agents.

Step 3. File the Certificate of Formation

To register your LLC in the state of Texas, you must file the Certificate of Formation with the Secretary of State.

The Certificate of Formation is the legal document that officially establishes your LLC as a legal entity in Texas. The certificate will require the name of your LLC, the name and address of your register agent, the purpose of the company, the filing date, the name of the LLC’s Organizer, and the state filing fee.

When filing the Certificate of Formation, you’ll need to indicate whether your LLC will be member-managed or manager-managed. Manager-managed LLCs typically have a large number of members. Members of manager-managed LLCs do not wish to be involved in the day-to-day management and operations of the LLC. Alternatively, Member-managed LLCs usually have a relatively small number of members who are able and willing to be involved in the day-to-day affairs of the LLC.

Registering a Domestic LLC in Texas

A “domestic LLC” conducts business in the state where it is formed. When we refer to LLC we are usually referring to a domestic LLC.

To register a domestic LLC file the Certificate of Formation online, by mail, via fax, or in person.

State Filing Cost: $300, payable to the Secretary of State (Nonrefundable) plus an additional state-mandated 2.7% convenience fee to file an LLC Certificate of Formation.

Processing time: 3 business days online, 5 to 7 days by mail.

Registering a Foreign LLC in Texas

If you have an existing LLC and want to do business in Texas, you will need to form a Foreign LLC. Forming a foreign LLC allows your company to operate as one entity in multiple states. You can register a foreign LLC in Texas by mail, online via fax or in person.

Fee: $750 (Nonrefundable)

Step 4. Create a Texas LLC Operating Agreement

Unlike other states, in Texas an operating agreement isn’t required to form an LLC, but it’s highly recommended.

The operating agreement in an internal legal document that outlines ownership structure, manager responsibilities and operating procedures of an LLC. It sets clear expectations of LLC members. The operating agreement should include:

  • the members’ percentage interests in the LLC
  • the members’ voting powers
  • the members’ rights and responsibilities
  • how profits and losses will be allocated
  • rules for holding meetings and taking votes
  • buyout, or buy-sell, provisions, which determine what happens when a member wants to sell his or her interest, dies, or becomes disabled.

An operating agreement is important because it ensures all business owners and LLC members are on the same page. A comprehensive operating agreement reduces the risk of misunderstandings and future conflict.

Step 5. Get an EIN

The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is issued to by the IRS. The Employer ID Number is used to identify and track a business’s tax reporting. It’s like a Social Security number (SSN) for your LLC.

The IRS requires any LLC with employees, or with more than one member, to have an EIN. An EIN can be obtained free of charge from the IRS online or by mail.

How to apply for an EIN

An EIN can be obtained online, by mail or via fax.

When you apply for an EIN, you’ll be informed of different tax classification options that are available for your LLC. Most LLCs opt for the default tax status. However, you may be able to reduce your federal tax obligation by choosing to be taxed as an S-corp. To determine which option is best for you consult a qualified accountant.

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