How to Start an LLC in Texas | 2023 Guide

How to Start an LLC in Texas: If you’re looking to launch a business in Texas, starting a Limited Liability Company (LLC) may be the right choice for you. An LLC provides personal liability protection for its owners while giving them flexibility in managing and taxing the business. This guide provides a step-by-step process for starting an LLC in Texas. From choosing a unique name to registering with the state and obtaining necessary licenses and permits, Webinarcare Editorial Team will walk you through setting up your new business entity. So grab a pen and paper, and let’s get started!

What is a Limited Liability Company?

A Limited Liability Company (LLC) is a type of business entity that combines a corporation’s limited liability protection with a partnership’s tax benefits. LLCs are popular among small business owners for their flexibility and ease of formation. In Texas, an LLC must have a unique name and file Certificate of Formation with the Secretary of State. Depending on their business needs, LLCs may also elect to be taxed as a corporation or an S-corp. Owners of an LLC, called members, are not personally liable for the company’s debts and losses, and the company’s profits and losses are passed through to the member’s personal tax returns. This makes an LLC an attractive option for those seeking personal liability protection and simplified taxation.

To accomplish the steps in starting an LLC, you can hire an LLC Formation Services that will help you build your desired business. We reviewed some of the best LLC formation services and provided features as an add-on with their packages for you to check out.

Steps on How to Start an LLC in Texas

To form an LLC for your business, you must follow the guidelines that include naming your LLC, hiring a Registered Agent, filing your Certificate of Formation, creating your LLC operating agreement, getting an employer identification number, opening a bank account and getting business licenses and permits.

Step 1: Name your LLC in Texas

After you have decided on the idea to form an LLC in Texas, deciding the name for your LLC is significant. There is a complete guide on LLC name guidelines for you to have a proper LLC business name. Here are some regulations you must follow while naming your LLC,

• The name should not be confused with a government entity.
• The name should be unique.
• The name should be available to use.
• Any other business does not use the name.
• The new name must include “LLC” if it is a limited liability company.

In Texas, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 120 days. You must file a name reservation application in Texas Secretary of State to keep the name. 

Recommended: We recommend a professional service that can offer you unlimited name search, trademark and copyright registration at a reasonable price. We recommend using –

LegalZoom – ($0 + State Fees for LLC Formation)

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for filing Texas DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail, and in person. However, before filing a DBA, you should know that you need to renew your DBA for up to ten years, which costs varies by county.

Step 2: Hire a Registered Agent in Texas

Hiring a Registered Agent in Texas is a must since a Registered Agent is a person or business entity responsible for receiving important legal documents on behalf of your Texas LLC. Most states require you to designate a Registered Agent when forming your LLC. 

The qualifications of a Registered Agent vary depending on the jurisdiction. Still, generally, a Registered Agent must meet the following criteria:

• Availability: A Registered Agent must be available during regular business hours to receive and process legal documents and official correspondence.
• Physical Address: A Registered Agent must have a physical street address within the state where the LLC is registered. This address, known as the registered office, cannot be a P.O. Box.
• Residency or Authorization: For individuals serving as Registered Agent, they must be residents of the Texas where the LLC was formed. A business entity acting as a Registered Agent must be authorized to do business within that state.
• Age: A Registered Agent must be at least 18 years old.
• Good standing: A Registered Agent should not have any legal or financial issues that impede their ability to fulfill their duties.

Choosing a reliable and responsible Registered Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. Some businesses use professional Registered Agent services to ensure compliance and proper handling of legal matters.

However, if you would like to have an easier process in filing the necessary documents, you can get Texas Registered Agent Services.

Step 3: File your Certificate of Formation in Texas

The Certificate of Formation for an LLC is an important document to start your limited liability company (LLC). Texas Certificate of Formation is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. 

Here are the guidelines and specific requirements in filing your Certificate of Formation in Texas.

1. Obtain the Necessary Forms: Visit the Texas’s business filing office website, usually the Texas Secretary of State’s office, to download the required forms or file online. 

2. Provide the Required Information: Fill in the necessary details in the form, which typically include:

• The name of your LLC (must include an LLC designator such as “LLC,” “L.L.C.,” or “Limited Liability Company”)
• The purpose of your LLC (a general statement or specific business activities)
• The address of your LLC’s principal place of business
• The name and address of your registered agent (the person or business entity responsible for receiving legal documents on behalf of your LLC)
• The management structure of your LLC (member-managed or manager-managed)
• The duration of your LLC, if not perpetual
• The names and addresses of the LLC’s organizers or members

3. Sign and File the Form: Submit the completed form in the {state} state office, either by mail, in person, or online. You may mail it at Secretary of State, P.O. Box 13697, Austin, TX 78711-3697.

4. Pay the Filing Fee: When you submit your Certificate of Formation, you’ll need to pay a filing fee of $300. Make sure to check and include the correct payment with your submission.

5. Receive Confirmation: After your Certificate of Formation have been filed and processed, you’ll receive a confirmation from Texas, typically a stamped and approved copy of the document or a Certificate of Formation.

Recommended: Filing formation papers is easy and hassle-free if you hire a professional service. We recommend using –

LegalZoom – ($0 + State Fee)

Once you have successfully filed your Certificate of Formation and it has been approved, your Texas LLC is officially formed. However, remember to complete additional steps, such as creating an Operating Agreement, obtaining an EIN, and registering for any required licenses and permits.

Step 4: Create Your Texas Operating Agreement

An operating agreement is a document that contains all of your company’s organizational details. Drafting an operating agreement in most states is not required. Yet, having one as an internal document is strongly advised. An operating agreement includes information like-

• About Business
• Members and management
• Capital contribution
• Profit Distribution
• Change of membership
• Dissolution

To understand how an operating agreement works, you should check out how to create an operating agreement in Texas.

Recommended: Get oprating agreement drafts ready on your table with a help of a professional service. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

Step 5: Get an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN) in Texas. An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website. 

The application of an EIN in Texas can be through the following:

• Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
• Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
• Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
• Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

In obtaining an EIN for your LLC, you should be aware to ensure that your LLC is eligible for an EIN. You need an EIN if you have employees, operate as a corporation or partnership, or meet other specific IRS criteria. Before applying, gather the required information, including your LLC’s name, mailing address, and the responsible party’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Also, you can apply for an EIN through various methods, including online, by fax, mail, or telephone (for international applicants).

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

Step 6: Open a Bank Account and Prepare for Taxes

After you have filed for and received your Employer Identification Number, you should open a bank account because you will use this account for yourself, your clients, and your employees.

Your business dealings in Texas might be simpler with a US business bank account because it boosts your company’s legitimacy and liquidity. Most banks demand an EIN to create a business bank account for firms other than sole proprietorships. Also, having an EIN makes tax preparation easier. You can anticipate paying employment and corporate taxes with Texas LLC.

Opening a bank account is necessary for Texas business. If you are still wondering where to open an account in your Texas, you should check the Best Bank for Small Business in Texas.

Step 7: Get a Business and License Permit

You must get a business license in Texas before establishing your LLC. A business license is a legal document granted by a state government body that permits you to conduct business within the area under its jurisdiction. The price of business licenses and permits in Texas ranges from $50 – $300. If there is a requirement for a specific license or city-based permit, you must inquire with the Texas Secretary of State.

Cost to Form an LLC in Texas

Even if you have a business name and structure in mind, you should consider whether you can afford the costs of forming an LLC in Texas. Certificate of Formation costs around $300. The initial filing fee is $300, and the annual fee is $0 because it is not mandatory. 

If you forget to pay the annual fee for your Texas LLC, you will have a penalty of $50. However, you can check the Texas LLC Cost for additional information.

Advantages of Creating Texas LLC

Even though some people decide on what to do with their businesses, some choose to put it in their own individual name, while others still choose to set it up via LLC in Texas. Important benefits will help you set up an LLC in Texas. 

• Pass-Through Taxation: The pass-through structure will make the company not pay twice the tax. Most start-ups and entrepreneurs in Texas apply for an LLC because of this structure. Pass-through taxation refers to how income and losses from an LLC (Limited Liability Company) are passed through to its members (owners) for tax purposes rather than being taxed at the business entity level. This means the LLC does not pay federal income taxes; the members’ profits and losses are allocated based on their interests. Each member then reports their share of the LLC’s income or losses on their personal tax returns and pays taxes at their individual tax rates.
• Ownership Flexibility: If you need sole and primary control over your company’s operations, a sole proprietorship will allow you to do so. If you apply for an LLC in Texas with flexibility, you will have default rules set by law and need an operating agreement.
• Personal Liability Protection: Personal Liability Protection protects your business from damage, debts, or legal obligations. In personal liability protection, the company’s profits and earnings will stay as is even if your company is about to be sued. This protection of having an LLC in Texas can also be extended to the company’s properties and assets. Many start-up companies will benefit from this since most are starting to build a company. Even if liability exists, the LLC in Texas will protect its assets. 

FAQs

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How Fast Can I Form an LLC in Texas

First and foremost, it’s important to understand what exactly an LLC is and why it might be the right choice for your business. An LLC is a flexible legal entity that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protection of a corporation. Choosing to establish an LLC can provide you with protection against personal liability for business debts, obligations, and other legal actions. This means that your personal assets won’t be at risk if your business encounters financial trouble or legal issues.

Now, let’s delve into the main topic at hand: how fast can you form an LLC in Texas? Generally speaking, Texas is known for having a business-friendly climate, and the process to establish an LLC can be relatively fast and efficient. However, it’s important to note that the specific time it takes to form an LLC can vary depending on various factors, such as the completeness of your application and other administrative requirements.

The first step in forming an LLC in Texas is to choose a name for your company. Make sure the name you select complies with Texas naming rules, including using specific words (e.g., “Limited Liability Company” or its abbreviations) in your business name. This step is crucial but shouldn’t take too long as long as you have a clear plan in mind.

The next step involves filing your Certificate of Formation, the official document required to establish your LLC with the Texas Secretary of State. In this document, you’ll need to provide essential information, such as your company’s name, purpose, registered agent details, management structure, and more. This process can typically be completed online or by mail. Fortunately, Texas also allows for expedited filing services, which can expedite the approval process by up to a few days.

After the Certificate of Formation is successfully filed, it’s highly recommended to draft an Operating Agreement. While not required by state law, having an Operating Agreement in place is crucial for outlining how your LLC will be run and managed. It can help avoid future conflicts or disagreements among members by clearly defining the rights, roles, and responsibilities of each individual involved.

While the overall process of forming an LLC in Texas can be relatively swift, it’s essential to remember that every business is unique, and unforeseen circumstances may arise. It’s wise to set yourself a realistic timeline and familiarize yourself with the intricacies of forming an LLC. This will ensure you complete all the necessary steps promptly and correctly, enabling you to officially launch your business and embark on your entrepreneurial journey.

In conclusion, establishing an LLC in Texas generally provides a relatively fast and efficient path to officially start your business. By meticulously completing the necessary paperwork, adhering to Texas regulations, and considering drafting an Operating Agreement, you’ll be able to launch your LLC with confidence and stay protected under the state’s business-friendly climate.

Conclusion

In conclusion, starting an LLC in Texas is a strategic choice for entrepreneurs seeking a flexible, straightforward business structure with limited liability protection. By following the essential steps, including choosing a business name, filing Certificate of Formation, appointing a Registered Agent, creating an Operating Agreement, obtaining an EIN, and securing the necessary licenses and permits, you can successfully establish your LLC. This business structure offers numerous advantages, such as pass-through taxation and ownership flexibility, making it an attractive option for small business owners looking to grow and protect their ventures. As always, consult legal and business professionals for guidance specific to your situation and state requirements.