How to form an LLC in Texas

Among other advantages for small enterprises, a limited liability corporation (LLC) provides liability protection and tax advantages. If an LLC is the perfect company structure for you, take these steps to form one in Texas. 

Note: You can use a business formation service or set up your LLC by yourself.

1. Give Your Texas LLC a memorable name

The name you choose for your limited liability company (LLC) must be able to be differentiated from the names of other business organizations that are already on record with the Texas Secretary of State. You are able to verify the availability of a name by visiting the SOSDirect website of the Texas Secretary of State.

According to state law in Texas, the name of a limited liability company (LLC) must contain one of the following:

• Limited Company
• Limited Liability Company
• Ltd Co
• L.L.C.
• LLC
• Ltd Company
• LC, or L.C.

By submitting an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) to the Texas Secretary of State, you will be able to reserve a name for a period of one hundred and twenty days. 

You have the option of filing the reservation either online via the SOSDirect website of the Texas Secretary of State or by mail. The filing cost is forty dollars.

Using a Doing Business As name, or “DBA”

When doing business in the “real world,” it is not necessary for you to use the formal legal name of your limited liability company that is registered on your Certificate of Formation. An assumed name, often known as a “DBA” (which is an abbreviation for “doing business as”), trade name, or false company name is what you should use instead.

In order to do this, you are required to file a Certificate of Assumed Name (Form 503) with the Texas Secretary of State as well as the county clerk in the county in where the office of your limited liability company is situated. You have the option of registering either online with SOSDirect or through the mail. The charge to submit paperwork is $25.

2. Texas Registered Agents

A registered agent in Texas is required of every limited liability company (LLC) operating in the state. If the limited liability company (LLC) is taken to court, this refers to a person or company that has agreed to accept service of process on its behalf.

The Registered Agent might either be a resident of Texas or a business organization that is permitted to conduct operations in the state. It is required that the Registered Agent have a real, live street address in the state of Texas.

Explanation of the role of the Registered Agent.

A Registered Agent receives tax forms, legal paperwork, lawsuit notices, and government contact on behalf of your firm. Consider the role of your registered agent as that of the point of contact for your company with the state.

Who qualifies to serve as an organization’s Registered Agent?

A Registered Agent in the state of Texas has to be either a person who lives there continuously or a company that is permitted to operate legally inside the state’s borders, like a Registered Agent service. You have the option of selecting anybody who works for the organization, including yourself.

3. Submit an application for the Certificate of Formation

The Certificate of Formation is a document that lays forth fundamental information about your limited liability company and is responsible for formally establishing your LLC. Because this form serves as the legal registration for your company with the state, it is essential that all of the details be accurate.

What information should be included on a Certificate of Formation?

When completing the Certificate of Formation for your Texas LLC, you are required to give the following information:

• LLC’s name
• If the term of the LLC is permanent or restricted.
• Address of the main office of the limited liability company Name and address of the registered agent for the limited liability company
• Location where the Secretary of State should send notifications to the limited liability company (LLC) through mail.
• How the Limited Liability Company (LLC) will be run: by its members or by its managers
• Whether or whether the limited liability company will provide professional services
• Name and address of each person who organized the limited liability company, as well as the name and address of at least one member or management who has direct knowledge of the activities of the limited liability company.

Putting in an Application for Your Certificate of Formation

Put in an application with the Texas Secretary of State to get your Certificate of Formation. To register a limited liability company in the state of Texas, the next step is to submit an application to the state. 

Your limited liability company will become official as soon as it has been authorized. In the majority of states, the document that is equivalent to a Certificate of Formation is called the “Articles of Organization.”

Visit the website of the Texas Secretary of State to submit your paperwork electronically. You will then be prompted to establish an SOSDirect Account by providing a username and password when you get to that page. 

At this point, you will also be required to provide the information for the credit card you will use to pay the filing fee.

In order to establish a limited liability company (LLC) in the state of Texas, you will be required to pay a one-time filing fee in the amount of $300. If you pay with a credit card, you will also be subject to an additional charge of 2.7%.

4. Obtain a State Certificate

After the formation paperwork of the LLC has been submitted and authorized, the state will send you a certificate that proves the LLC’s official existence in response to a written request for a copy together with the appropriate amount of postage.

With this certificate, the limited liability company will be able to get an Employer Identification Number (EIN), as well as business permits and a bank account for businesses.

5. Draw up an Operating Agreement business contract

Even while establishing a complete operating agreement for an LLC is not a legally required stage in the process of incorporating a limited liability company in the state of Texas, it is highly suggested for all new limited liability firms.

The following items should be included in the operating agreement:

• Describe the business structure of the limited liability company.
• Determine the specific duties and commitments that each member of the limited liability company (LLC) has
• Operational structure of the LLC.

Significant legal and logistical challenges might await a limited liability company (LLC) in the absence of an operating agreement that defines the precise responsibilities of its members.

6. Get your EIN tax ID

A federal employer identification number, commonly known as a tax ID number, will be required of many limited liability companies (LLCs). An Employer Identification Number (EIN) is a nine-digit number that identifies your company to the Internal Revenue Service. 

You need an EIN in order to pay federal employer taxes, open a bank account (in most situations), or recruit staff.

On the website of the Internal Revenue Service (IRS), which is accessible without charge, you may check to see whether you need an EIN and submit an application for one online. 

Single-member limited liability companies, which are an exemption to the rule that most firms are required to acquire an EIN, may instead use the owner’s Social Security number.

Business Licenses

Depending on the nature of their operations and where they are located, some limited liability companies (LLCs) doing business in the state of Texas may be needed to get one or more business licenses or permits from the state or from their respective municipal governments.

Read through the Texas Start a Business Guide, which is made available by the Secretary of State, to get information on how to satisfy the criteria for obtaining a state business license. The Texas License Directory allows users to search for specific licenses that they need.

Contact a municipal or county clerk in the city or county where your limited liability company (LLC) is based to get information on the local licensing requirements.

7. Renewals on an Annual Basis

Texas is an exception to the rule that limited liability companies (LLCs) must submit yearly reports with the Secretary of State. However, limited liability companies are required to submit yearly franchise tax filings. The specifics of how the tax is computed might be difficult to understand.

Check out the website of the Comptroller of Public Accounts for further details and information.

Fees and further actions

Fees

To submit a Limited Liability Company Certificate of Formation, the Texas Secretary of State requires a filing cost of $300 in addition to an extra state-mandated convenience fee of 2.7%.

If you want to reserve the name of your limited liability company before you submit the certificate of formation, you will have to pay a fee of forty dollars to register an application for name reservation.

Form 304 is required in the event that your company is a foreign LLC. The “Application for Registration of a Foreign Limited Liability Company” form is meant for limited liability companies (LLCs) that already exist in another state but want to register in Texas so that they may do business there. 

You can go to the form here. The charge to submit the paperwork is $750.

This filing fee will be waived by the Secretary of State for qualified veterans (only those with honorable discharges) who file directly with the Secretary of State by letter, in office, or by fax when they are starting a company that will be owned and operated only by veterans. 

Visit the page titled “Business Information for Veterans” on the website of the Secretary of State for further details.

Consider the following additional fees that may be incurred by an LLC:

• Reservation of an LLC name costs $40 
• Name for “doing business as” costs $25. 
• Certified copies of documents cost $10 each.
• Certificate of Existence

Tax Paid to the State of Texas for a Franchise

Yearly statewide franchise tax returns are required to be filed by all Texas LLCs. LLCs that draw revenues greater than $1.1m annually in income will be subject to a franchise tax beginning in 2021. 

The official website of the Texas Comptroller provides users with access to supplementary data and information pertaining to the computation of the tax.

You’ll be able to locate relevant tax paperwork at this location. In Texas, sustaining your limited liability company does not require you to pay any additional annual fees.

Further actions

When you register a limited liability company (LLC), you establish a legal basis upon which to operate your firm. Companies should make it a priority to maintain their limited liability company in compliance with state regulations and in an active position on the state’s website.

In addition, having a registered limited liability company enables you to perform the following:

• Obtain any permissions or licenses required to run your company, such as those issued by the health department, the zoning department, the department of home occupations, the department of professional licensing, and others. Some states need a seller’s permission to conduct sales
• Register your company with the department of revenue in your state.
• Create a business checking account with a financial institution such as Novo, Kabbage, or Bluevine.
• Create a credit card account for your company.
• Invest in insurance coverage for your company.
• Create a trademark to protect both your company’s name and its logo.
• Do it yourself or use a professional agency to establish a limited liability company?
• To establish a limited liability company (LLC), you are not required by law to consult a lawyer. The majority of states enable the establishment of LLCs via the process of registering the business entity on the website of the secretary of state and IRS.

If you are not acquainted with the process of forming an LLC, your best bet may be to hire a professional LLC provider so that you can be certain that the creation will go smoothly and quickly.

When entrepreneurs start a new firm, they may save startup costs and save valuable time by spending good money on a professional formations agency that specializes in company forms. 

You may have them take care of the things you haven’t had time to think about, and pay anywhere from $50 to $500 to get them done.

• Developing an operating agreement for an LLC that details your company’s who, what, when, where, why, and how, and putting it into writing (required in some states).
• putting together articles of incorporation that identify the management of the LLC, the registration agent, and the date the company was formed.
• Taking up the role of registered agent for your firm.
• Keeping careful records in the event that there are investigations or litigation.
• Payment of filing fees and registration with the appropriate parties.
• Registering the name of your firm and ensuring that the name you choose for your limited liability company is accessible.
• Finishing up and turning in all of the necessary legal and formation documentation.

FAQs