How to Start an LLC in Texas | 2024 Guide

Start a LLC in Texas

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.

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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

How do I start an LLC in Texas?
To start an LLC in Texas, file a certificate of formation with the Texas Secretary of State and pay the filing fee.
What is a certificate of formation?
A certificate of formation is a legal document filed with the Texas Secretary of State that officially forms an LLC.
How much does it cost to file a certificate of formation in Texas?
The filing fee for a certificate of formation in Texas is $300 as of 2021.
How do I check if a business name is available in Texas?
You can check if a business name is available in Texas by searching the Texas Secretary of State’s business name database.
Can I reserve a business name in Texas?
Yes, you can reserve a business name in Texas for up to 120 days by filing an application with the Texas Secretary of State and paying a fee.
Does Texas require an LLC operating agreement?
No, Texas does not require an LLC operating agreement, but it is recommended for legal and business reasons.
Do I need a registered agent for my Texas LLC?
Yes, all Texas LLCs need a registered agent to accept legal documents on behalf of the company.
Can I be my own registered agent in Texas?
Yes, you can be your own registered agent in Texas, as long as you have a physical address in the state and are available during business hours.
How do I change the information on my Texas LLC?
You can change the information on your Texas LLC by filing periodic reports and annual statements with the Texas Secretary of State.
How much does it cost to file periodic reports and annual statements with the Texas Secretary of State?
As of 2021, the fee to file periodic reports and annual statements with the Texas Secretary of State is $0.
Does Texas have an annual report requirement for LLCs?
No, Texas does not have an annual report requirement for LLCs, but companies must file a periodic report every four years.
How long does it take to form an LLC in Texas?
It typically takes 2-3 business days for the Texas Secretary of State to process a certificate of formation.
Can I form a Texas LLC online?
Yes, you can form a Texas LLC online through the Texas Secretary of State’s website.
Do I need an EIN for my Texas LLC?
If your LLC has more than one member, you will need an EIN from the IRS for tax purposes.
How do I get an EIN for my Texas LLC?
You can get an EIN for your Texas LLC from the IRS website, by mail, or by fax.
Are LLCs taxed in Texas?
Texas does not levy an entity-level income tax on LLCs, but companies must pay a franchise tax.
What is the franchise tax in Texas?
The franchise tax in Texas is based on the LLC’s gross receipts or taxable margin, whichever is higher.
How often do I need to file a Texas franchise tax return?
Texas LLCs must file a franchise tax return annually.
What are the reporting requirements for Texas LLCs?
Texas LLCs must file periodic reports every four years and an annual statement of information with the Texas Secretary of State.
Can I dissolve my Texas LLC online?
Yes, you can dissolve your Texas LLC online through the Texas Secretary of State’s website.
Does Texas require LLCs to have insurance?
While Texas does not require LLCs to have insurance, it is recommended to protect the company from liabilities.
What is the liability protection for Texas LLCs?
Texas LLCs have limited liability protection, meaning members are generally not personally responsible for the LLC’s debts or obligations.
Can I convert a Texas LLC to another type of business entity?
Yes, Texas LLCs can be converted to other business entities like corporations or partnerships.
What is the minimum number of members required to form an LLC in Texas?
There is no minimum number of members required to form an LLC in Texas.
Are Texas LLCs required to hold annual meetings?
The Texas Business Organizations Code does not require LLCs to hold annual meetings, but it is recommended for corporate formalities.
How do I open a business bank account for my Texas LLC?
You will need to provide your LLC’s certificate of formation and EIN to a bank to open a business bank account in Texas.
Can I operate a Texas LLC from another state?
Yes, you can operate a Texas LLC from another state, but you will need a registered agent in Texas.
How do I run my Texas LLC?
To run your Texas LLC, you should follow your operating agreement, keep accurate records, and comply with all state and federal laws.
What is an LLC?
Limited Liability Company or LLC is a business structure that provides limited personal liability protection, tax benefits, and flexibility for its owners.
Why should I start an LLC in Texas?
Texas is a business-friendly state with no state income tax, simplified regulatory laws, flexible business policies, and a large consumer base.
How do I choose a name for my Texas LLC?
The name you choose should be unique, distinguishable, and meet the state’s name requirements for LLCs. You can use the Texas Business Organizations Code website to search for available names.
Do I have to use a business attorney to form an LLC in Texas?
No, you do not need a business lawyer for formation, but consulting with one can ensure that you meet all requirements and reduce the risk of errors.
How much does it cost to set up an LLC in Texas?
The filing fee to apply for an LLC certificate of formation is $300, plus a $1 file-endorsement fee, plus any applicable franchise taxes ($0.25 per $100 above $1,110,000).
What are the requirements to form an LLC in Texas?
You must provide a valid company name, appoint a registered agent, file a certificate of formation with the state, and pay the filing fee.
How long does it typically take to form an LLC in Texas?
The average processing time can take up to 10 business days or 24-48 hours for an expedited processing LLC certificate of formation request (for additional $25 fee).
Is forming an LLC in Texas difficult?
No, the process of forming an LLC can be simple and straightforward, providing you research the requirements and file all necessary forms.
What is the highest requirement to set up an LLC in Texas?
Apart from initial formation requirements, an ongoing requirement of an LLC in Texas is an annual franchise tax which ranges from $0 to $165k, and a public information report detailing organizational and structure changes within your LLC.
Do I have to live in Texas to have an LLC in Texas?
No, there are no residency or citizenship requirements to form a Texas LLC.
Do all LLCs need an operating agreement in Texas?
It is not required by Texas law, but an operating agreement is highly recommended. It outlines important details such as how profits are shared, member duties, and voting rights for major LLC decisions.
How and when do I file for an EIN or Employer Identification Number for my Texas LLC?
You can easily apply for your EIN number online through the IRS after your certificate of formation gets processed.
Does Texas have any special tax considerations for LLCs?
One of Texas’s advantages is that there is no state income tax on businesses entities like LLCs, but there is a franchise tax as mentioned earlier.
What are the ongoing reporting requirements for Texas LLCs?
A Texas LLC must file an annual public information report, monthly sales tax reports (if selling taxable products), and payroll tax returns (if you have employees).
If I am a single-member LLC, can I be taxed as an S-Corporation in Texas for tax benefits?
Yes, you can.
Can an out-of-state LLC file in Texas as a foreign LLC?
Yes, TX Secretary of State allows foreign businesses to register in the state as a foreign LLC.
Are LLC dissolution requirements different in Texas?
No, Texas law dissolution follows the same process as other states. An LLC may dissolve if all members consent, agreed-upon end date qualification is achieved, or court-ordered cancellation.
What is a Certificate of Formation?
A certificate of formation recognizes that you have officially registered your Texas LLC and authorizes its legal existence.
Should I name my LLC after myself or select an alternative name?
It is important to select an appropriate name which reflects your company value and allow for easy branding. Personal names may or may not make good LLC names it depends on long term vision and selected niche.
What is a registered agent for an LLC in Texas?
It is a person or a business entity that accepts lawsuits and other official government documents on your behalf.
Can a Texas LLC have unlimited members?
No, a Texas LLC can’t have more than 100 members generally and four members if it’s an LLP corporation.
How is the management of LLC in Texas conducted?
The management can be done either directly or member-managed or using managers (excluding non-primary members).
Do I need a lot of capital to start an LLC in Texas?
No, the amount of capital needed depends on the projected size and type of your business operations.
Can I amend or change my Texas Certificate of Formation/Organization details?
Yes, Amendment forms are available online, following the Texas State requirements.
Can people other than myself legally and simultaneously hold company positions or alter roles in the LLC organization?
Yes, but the change must comply with all members’ initial terms and strategic goals in the LLC operating agreement.
How can I advertise my Texas LLC?
You can advertise your business in many ways, depending on your type and the target audience, this could be social media ads, designing a custom website, SEO, content marketing, etc.
Are there security laws that govern my LLC company in Texas?
Texas Securities law requires disclosures related to company offering sales, advertising investment proposal, securities broker-dealers, crowdfunding, franchise regulation, etc. but check with the State or consult with an attorney for thorough regulatory support.
Can I add additional information besides basic formation data in my Texas LLC’S title?
Yes, but such detailed designation is attractive for regulatory officials as it may affect the LLC debt-return, tax-exempt status, tax liability. Stay careful with Title Tags while forming LLCs.
Can a Texas Non-Profit LLC be created?
Yes, but you have to file Very Specific Certificates through whichever Department of Texas regulation is relevant.

Also Read

How Fast Can I Form an LLC in Texas

The answer to this question largely depends on how efficiently you navigate the process of forming an LLC in Texas. Fortunately, Texas is known for having a relatively straightforward and business-friendly process for establishing an LLC, making it possible to get your business up and running in a relatively short amount of time.

One important step in forming an LLC in Texas is choosing a unique name for your business that complies with state regulations. You’ll also need to designate a registered agent who can accept legal documents on behalf of your LLC. Once you’ve completed these preliminary steps, the next key requirement is filing the necessary paperwork with the Texas Secretary of State, which typically involves submitting Articles of Organization and paying the required filing fee.

In Texas, you also have the option to expedite the LLC formation process by paying an additional fee for expedited processing. While this can speed up the process significantly, it’s important to keep in mind that choosing expedited processing may not be necessary for all businesses. With or without expediting the process, forming an LLC in Texas can typically be done within a relatively short timeframe.

Another factor that can influence how fast you can form an LLC in Texas is your level of preparation and organization. By gathering all the necessary information and documents ahead of time, you can streamline the process and minimize any delays. Additionally, seeking professional assistance from a lawyer or business formation service can help ensure that you follow all the necessary steps correctly and efficiently.

Once your LLC is formed, there are several additional steps you may need to take, such as obtaining any required business licenses or permits and setting up a business bank account. By staying proactive and organized throughout the process, you can ensure that your LLC is up and running quickly and smoothly.

In conclusion, forming an LLC in Texas can be a relatively fast and straightforward process, especially if you are prepared and organized. By following the necessary steps and meeting all state requirements, you can establish your business in Texas and start pursuing your entrepreneurial dreams in no time. So, whether you’re looking to launch a new business or protect an existing one, forming an LLC in Texas is a feasible goal that can be accomplished quickly with the right approach.

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.

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