How to form a Texas LLC
How to form a Texas LLC
$300 – $310 state filing fee
$50 – $300 per year for registered agent
$0 – $40 for name reservation
Steps to form a Texas LLC
Forming a limited liability company in Texas requires filing a Certificate of Formation with the Texas Secretary of State and paying a $300 state filing fee. The entire process can be completed online through the SOSDirect portal, and most filings are processed within a few business days. Texas is one of the most popular states for LLC formation thanks to its business-friendly laws and lack of a state personal income tax.
Whether you are launching a new venture or formalizing an existing business, following the correct steps ensures your LLC is legally established and properly structured from day one. Below is a summary of every step involved.
| Step | Action | Cost |
|---|---|---|
| 1 | Choose and verify your LLC name | Free to $40 |
| 2 | Appoint a registered agent | Free to $300 per year |
| 3 | Decide on a management structure | Free |
| 4 | File Certificate of Formation | $300 to $310 |
| 5 | Obtain a federal EIN | Free |
| 6 | Meet ongoing compliance requirements | Varies |
Step 1: Choose a name for your Texas LLC
Your LLC name is both a legal identifier and the foundation of your brand. Texas imposes specific naming rules that every LLC must follow, so you should verify availability before filing any paperwork.
| Naming requirement | Details |
|---|---|
| Required designator | Must include "Limited Liability Company," "Limited Company," or an abbreviation such as "LLC" or "L.L.C." |
| Uniqueness | Must be distinguishable from all other entities on file with the Secretary of State |
| Restricted words | "Bank," "Trust," "Lotto," "Lottery," and education-related words require special approval |
| Name reservation | Optional; $40 filing fee; valid for 120 days with one renewal allowed |
Texas LLC naming rules
Every Texas LLC name must end with a proper designator. Acceptable options include "Limited Liability Company," "Limited Company," "LLC," "L.L.C.," "Ltd. Co.," or "L.C." Without one of these, the Secretary of State will reject your filing.
Your chosen name must also be clearly distinguishable from every other domestic or foreign entity already registered in Texas. This includes corporations, limited partnerships, and other LLCs. Names that imply a purpose different from the one stated in your Certificate of Formation will not be accepted.
Certain words trigger additional review. Using terms like "Bank," "Trust," or words associated with veterans requires prior approval from the relevant state agency. Education-related words such as "College," "University," or "Seminary" need authorization from the Texas Higher Education Coordinating Board.
Checking name availability
You can search for existing business names through the Texas Secretary of State's SOSDirect portal at no cost. This search compares your proposed name against all currently registered entities in the state database.
If you find an available name but are not ready to file your Certificate of Formation, you can reserve it by submitting an Application for Reservation or Renewal of Reservation of an Entity Name. The filing fee is $40, and the reservation lasts 120 days. You can renew it once for an additional 120-day period.
Register a website domain name that matches or closely aligns with your LLC name as early as possible. A consistent domain strengthens your brand credibility and makes it easier for customers to find you online. Domain availability is separate from state name availability, so check both before finalizing your decision.
Step 2: Appoint a registered agent
Texas law requires every LLC to designate a registered agent at the time of formation and maintain one for as long as the company exists. A registered agent receives legal documents, government correspondence, and service of process on behalf of your business.
| Registered agent option | Requirements | Typical cost |
|---|---|---|
| Yourself or an LLC member | Must be a Texas resident with a physical Texas address; available during business hours | Free |
| Professional registered agent service | Must be authorized to do business in Texas with a physical office | $50 to $300 per year |
Agent requirements
If your registered agent is an individual, that person must be a resident of Texas and must consent to serve in the role. The agent must maintain a physical street address in Texas (P.O. boxes do not qualify) and be available to accept documents during regular business hours, Monday through Friday.
If you choose a business entity to serve as your registered agent, that entity must be authorized to conduct business in the state and must have a registered office in Texas.
Why use a professional service
While you can serve as your own registered agent, many business owners prefer hiring a professional service. A commercial registered agent keeps your personal home address off the public record, ensures you never miss a legal deadline, and provides consistent availability even when you travel or relocate.
Professional registered agent services typically charge between $50 and $300 per year. Some formation services include the first year of registered agent service at no extra cost when you use them to file your Certificate of Formation.
Step 3: Decide on a management structure
Before filing your formation documents, you need to determine how your LLC will be managed. Texas offers two management options, and your choice affects daily operations, authority over business decisions, and how responsibilities are distributed among owners.
| Management type | Who runs the business | Best suited for |
|---|---|---|
| Member-managed | All owners (members) share management authority | Small LLCs where all owners are actively involved |
| Manager-managed | One or more designated managers (who may or may not be members) | LLCs with passive investors or multiple owners who prefer delegated leadership |
Member-managed LLCs
In a member-managed LLC, every owner participates in running the business and making day-to-day operational decisions. This is the default structure in Texas and works well for small businesses where all members want a hands-on role.
Each member typically has the authority to enter into contracts, hire employees, and make financial decisions on behalf of the company. The specific division of responsibilities can be outlined in your operating agreement.
Manager-managed LLCs
A manager-managed LLC centralizes decision-making authority in one or more designated managers. These managers can be members of the LLC, outside professionals, or even other business entities.
This structure is common when some owners prefer to remain passive investors without participating in daily operations. It also works well for larger LLCs that benefit from professional management. Members who are not managers still retain certain voting rights on major decisions, such as amending the operating agreement or dissolving the company.
Step 4: File your Certificate of Formation
The Certificate of Formation (Form 205) is the official document that legally creates your Texas LLC. You file it with the Texas Secretary of State along with a $300 filing fee. Credit card payments incur an additional 2.7% convenience fee, bringing the total to approximately $310.
| Filing detail | Information |
|---|---|
| Form | Certificate of Formation (Form 205) |
| Filing fee | $300 (plus 2.7% credit card fee if applicable) |
| Filed with | Texas Secretary of State |
| Online filing | Available through SOSDirect |
| Mail filing address | Secretary of State, P.O. Box 13697, Austin, TX 78711-3697 |
Required information on the Certificate of Formation
You will need to provide several pieces of information to complete your filing. All data submitted becomes part of the public record. Gather the following before you begin:
- LLC name: Your full company name including the required designator (e.g., "LLC")
- Registered agent: The name and physical Texas street address of your designated agent
- Governing authority: Whether your LLC is member-managed or manager-managed, along with the names and addresses of initial managers or members
- Purpose: A statement describing the purpose of the LLC (a general purpose statement is acceptable)
- Company address: The mailing address of the LLC
- Organizer: The name and address of the person filing the Certificate of Formation
- Effective date: The date the LLC should become effective (can be the filing date or a future date up to 90 days out)
- Duration: Whether the LLC will exist perpetually or for a specified period
How to submit your filing
The fastest method is filing online through the SOSDirect portal on the Secretary of State's website. Online filings are generally processed more quickly than paper submissions.
If you prefer to file by mail, send your original Certificate of Formation plus one duplicate copy to the Secretary of State at P.O. Box 13697, Austin, TX 78711-3697. Include payment for the $300 filing fee by check or money order made payable to the Secretary of State.
Once the Secretary of State approves and files your Certificate of Formation, your LLC officially exists as a legal entity in Texas. You can track the status of your filing through the SOSDirect portal.
While Texas does not legally require an operating agreement, drafting one is strongly recommended. This internal document outlines ownership percentages, profit distribution, voting rights, and procedures for adding or removing members. It protects your limited liability status and helps prevent disputes among owners.
Step 5: Obtain a federal EIN
An Employer Identification Number (EIN) is a nine-digit number issued by the IRS that identifies your business for tax purposes. Obtaining an EIN is free and can be done immediately online.
| EIN detail | Information |
|---|---|
| Cost | Free |
| Where to apply | IRS website (irs.gov), by mail, or by fax |
| Online processing time | Immediate |
| Mail processing time | 4 to 5 weeks |
When you need an EIN
Your Texas LLC needs an EIN if it will have employees, operate as a multi-member LLC, or elect to be taxed as a corporation. Even single-member LLCs with no employees benefit from having an EIN because most banks require one to open a business bank account.
An EIN also keeps your personal Social Security number off business documents, reducing the risk of identity theft. You will use your EIN on tax returns, payroll filings, business license applications, and vendor agreements.
How to apply
The fastest way to get an EIN is through the IRS website. The online application is available Monday through Friday, 7 a.m. to 10 p.m. Eastern Time, and you receive your number instantly upon completion.
You can also apply by mailing or faxing Form SS-4 to the IRS. Fax applications are typically processed within four business days, while mail applications take four to five weeks.
Step 6: Meet ongoing compliance requirements
After forming your LLC, you must satisfy several ongoing obligations to keep it in good standing with the state. Failing to meet these requirements can result in penalties or even involuntary termination of your LLC.
| Requirement | Details | Cost |
|---|---|---|
| Texas franchise tax | Annual report and tax filing due May 15 each year | Varies (many small LLCs owe $0) |
| Business licenses and permits | Depends on industry and location | Varies |
| Assumed name certificate (DBA) | Required if operating under a name different from the LLC's legal name | $25 to $50 |
| Maintain registered agent | Must have a registered agent at all times | Free to $300 per year |
Texas franchise tax
Texas does not impose a state personal income tax, but it does levy a franchise tax (also called the margin tax) on most businesses. LLCs must file an annual franchise tax report with the Texas Comptroller of Public Accounts by May 15 each year.
However, many small LLCs owe nothing. Businesses with total annual revenue at or below $2.47 million (as of 2024) are not required to pay the franchise tax, though they must still file a "no tax due" report. For businesses above the threshold, the tax rate is 0.375% for retail and wholesale businesses and 0.75% for all other businesses.
Business licenses and permits
Texas does not have a general state business license, but your LLC may need industry-specific licenses, local permits, or sales tax permits depending on what and where you operate. Common examples include:
- Sales tax permit: Required if you sell taxable goods or services; obtained free from the Texas Comptroller
- Professional licenses: Required for regulated industries like healthcare, real estate, construction, and food service
- Local permits: City or county business permits, zoning approvals, health department permits, and signage permits
Check with your city or county clerk's office and the Texas Department of Licensing and Regulation to determine exactly which licenses apply to your business.
Assumed name certificates
If your LLC conducts business under any name other than its official legal name, you must file an assumed name certificate (commonly called a DBA, or "doing business as") with the county clerk in each county where you maintain a business premises. This filing typically costs between $25 and $50 depending on the county.
Total cost to form a Texas LLC
The minimum cost to start an LLC in Texas is $300, which covers the Certificate of Formation filing fee. Most business owners spend between $300 and $700 total when factoring in optional but recommended services.
| Expense | Required? | Cost |
|---|---|---|
| Certificate of Formation filing fee | Yes | $300 |
| Credit card convenience fee (2.7%) | Only if paying by credit card | ~$8 to $10 |
| Name reservation | No | $40 |
| Professional registered agent service | No (you can serve yourself) | $50 to $300 per year |
| Operating agreement (attorney-drafted) | No | $200 to $500 |
| EIN | Situational | Free |
| LLC formation service | No | $0 to $300+ |
| Assumed name certificate (DBA) | Only if using a different business name | $25 to $50 |
If you handle everything yourself and serve as your own registered agent, the out-of-pocket cost is $300 for the state filing fee alone. Hiring professionals for registered agent service, legal document preparation, or formation assistance increases the total but saves time and reduces the chance of errors.
Benefits of forming an LLC in Texas
Texas is consistently ranked among the top states for business formation. Combining the LLC structure with the state's favorable regulatory environment creates significant advantages for business owners.
| Benefit | Details |
|---|---|
| Limited liability protection | Members' personal assets are generally shielded from business debts and lawsuits |
| No state income tax | Texas has no personal income tax, so LLC profits passed through to members are not taxed at the state level |
| Pass-through taxation | Profits and losses flow through to members' personal tax returns, avoiding double taxation |
| Flexible ownership | Unlimited members allowed; members can be individuals, corporations, trusts, or other entities |
| Management flexibility | Choose member-managed or manager-managed structure |
| Enhanced credibility | Operating as an LLC signals professionalism to customers, vendors, and lenders |
Limited liability protection
The most significant advantage of an LLC is the legal separation between your personal assets and your business obligations. If your LLC faces a lawsuit or incurs debts, creditors generally cannot pursue your personal bank accounts, home, or other personal property. This protection does not exist with sole proprietorships or general partnerships.
To maintain this protection, keep your personal and business finances separate, adequately capitalize the business, and follow all state compliance requirements.
Tax advantages in Texas
Texas does not impose a state personal income tax. Since most LLCs are treated as pass-through entities for federal tax purposes, your share of the LLC's profits appears on your personal tax return but faces no additional state-level income tax.
You also have the option to elect corporate tax treatment (as a C corporation or S corporation) if that structure provides a better tax outcome for your situation. Consult a tax professional to evaluate which election makes the most sense based on your revenue and personal circumstances.
While Texas has no personal income tax, the state's franchise (margin) tax applies to most LLCs. Businesses earning above the no-tax-due threshold must file and pay this tax annually. Make sure to account for this obligation in your financial planning.
Frequently asked questions
How much does it cost to form an LLC in Texas?
The state filing fee for a Texas Certificate of Formation is $300. If you pay by credit card, an additional 2.7% convenience fee applies, bringing the total to roughly $310. Optional expenses like name reservation ($40), professional registered agent service ($50 to $300 per year), and attorney-drafted operating agreements ($200 to $500) can increase your total startup costs.
How long does it take to form a Texas LLC?
Online filings through SOSDirect are typically processed within two to three business days. Mail filings take longer, often one to two weeks or more depending on volume at the Secretary of State's office. You can track the status of your filing through the SOSDirect portal.
Can I be my own registered agent in Texas?
Yes, any individual who resides in Texas can serve as the LLC's registered agent. You must maintain a physical street address in the state (not a P.O. box) and be available to accept legal documents during normal business hours. Keep in mind that your address will become part of the public record.
Does Texas require an operating agreement?
Texas does not legally require LLCs to have a written operating agreement. However, creating one is highly recommended. An operating agreement defines the rights and responsibilities of members, outlines profit-sharing arrangements, and establishes procedures for resolving disputes or dissolving the company. Without one, your LLC defaults to the rules in the Texas Business Organizations Code, which may not align with your intentions.
Does a Texas LLC have annual filing requirements?
Texas does not require a traditional annual report like many other states. Instead, LLCs must file a franchise tax report with the Texas Comptroller of Public Accounts each year by May 15. LLCs with total revenue at or below $2.47 million can file a no-tax-due report and owe nothing, but the filing itself is still mandatory.
Does Texas tax LLC income?
Texas has no state personal income tax, so LLC profits that pass through to individual members are not subject to state income tax. However, the Texas franchise tax (margin tax) applies to LLCs with revenue above the no-tax-due threshold. The rate is 0.375% for retail and wholesale businesses and 0.75% for all other entity types.
Can a foreign LLC register in Texas?
Yes. If your LLC was formed in another state but plans to transact business in Texas, you must register as a foreign LLC by filing an Application for Registration with the Texas Secretary of State. This process requires appointing a Texas registered agent and paying the applicable filing fee.
How many members can a Texas LLC have?
A Texas LLC can have an unlimited number of members. Members can be individuals, other LLCs, corporations, partnerships, or trusts. There is no minimum number of members required; single-member LLCs are permitted and common in Texas.