How to Start an LLC in Texas (2023 Guide)

How to Form an LLC in Texas in 5 Steps

In order to form your LLC in Texas, there are certain steps you’ll need to complete:

• 1. Name Your LLC
• 2. Choose a Texas Registered Agent
• 3. File Your Certificate of Formation
• 4. Create an LLC Operating Agreement
• 5. Obtain an EIN

Step 1: Name Your Texas LLC

Before you get started, you will need to pick a suitable name for yourTexas LLC.

This will need to comply with all applicable naming requirements under Texas law and be both succinct and memorable, as this will make it easily searchable by your potential clients.

1. Important Naming Guidelines for Texas LLCs:

• Your namemust includethe phrase “limited liability company” or one of its abbreviations or words: “LLC, L.L.C., Limited, Ltd., Company or Co.”
• Your namecannot include专业词汇可以迷惑你的公司t agency (FBI, Treasury, State Department, etc.).
• Names must be distinguishable from other business entities in the state, including assumed names (DBAs).
• The LLC’s name cannot be considered grossly offensive to the point that it’s unacceptable as an entity name.

Texas also has a list of restricted words from several state departments, meaning that you will not be able to include them without prior written approval:

• Texas Business & Commerce Code:Your LLC name cannot include the words "Olympic," "Olympiad," or "Citius Altius Fortius," or any combination of them without the written approval of the United States Olympic Committee.
• Texas Finance Code:不允许包含实体名称的单词"bank," "bank and trust," "trust," or "trust company" without approval from the Banking Commissioner.
• Texas Education Code:A number of terms related to education, including “College,” “University,” or “School of Medicine” (among others), are prohibited without a no-objection letter from the Texas Higher Education Coordinating Board.
• Texas Business Organizations Code:Your LLC name cannot include the words “Veteran,” “Foreign,” “Spanish,” “War,” or any other name that implies it was created for the benefit of war veterans unless written approval is issued from a veterans organization.

We recommend checking out theTexas Secretary of State's guidelinesfor a complete list of naming rules in this state.

2. Is the name available in Texas?

To check whether your desired name has already been taken by another business entity in Texas, you can perform aTaxable Entity Searchon the Texas Comptroller of Public Accounts website.

If you’re not going tostart your LLCright away, it might be a good idea to consider reserving your name for up to 120 days.

For more information, you can have a look at ourTexas LLC Name Searchguide.

3. Is the URL available?

You should check online to see if your business name is available as a网络域. Even if you plan to create a business website right away, this is an extremely important step as it will prevent others from acquiring it, potentially saving you both time and money in the long term.

Once you have verified your name is available, you can select a professional service to complete the LLC formation process.

If you need additional information before getting started, you can have a look at our in-depth comparison of the118金宝app instead.

FAQ: Naming a Texas LLC

What is an LLC?

LLC is short for "limited liability company". It is a simple business structure that offers more flexibility than a traditional corporation while still providing legal protection for your personal assets. Read118bet金博宝 for more information.

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How do I name my Texas LLC?

You must follow the Texas limited liability company naming guidelines when choosing a name for your LLC:

• Include "limited liability company" or one of its abbreviations (LLC or L.L.C.).
• Do not use words that could confuse your business with a government agency (FBI, State Department, CIA, etc.).
• Receive the proper licensing when using the words such as lawyer or doctor.

If you are having trouble creating a name for your LLC, use ourLLC Name Generator. We’ll help you find a unique name for your business and an available URL to match.

Do I need to get a DBA or assumed name for my business?

Most LLCs do not need a DBA, known as an assumed name in Texas. The name of the LLC can serve as your company’s brand name, and you can accept checks and other payments under that name as well. However, you may wish to register a DBA to conduct business under another name.

To learn more about DBAs in your state, read ourHow to File a DBA in Texasguide.

Step 2: Choose a Registered Agent in Texas

After you find the right name for your LLC, you will need to nominate aTexas registered agent. This is a necessary step in your Certificate of Formation (i.e., the document used to file and register your LLC with the Secretary of State).

What is a registered agent?A registered agent is an individual or business entity responsible for receiving necessary tax forms, legal documents, notice of lawsuits, and official government correspondence on behalf of your business. You can think of your registered agent as your business's primary point of contact with the state.

Who can be a registered agent?A registered agent must be a resident of Texas or a corporation, such as a registered agent service, authorized to transact business in the state of Texas. You can choose to elect an individual within the company (e.g., yourself, etc.) or use a business attorney.

A registered agent must consent to appointment in written or electronic form.The statement of consent should include the following:

1. The name of your LLC
2. An express statement that the person designated consents to serve as the LLC's registered agent
3. The name of the person designated as the registered agent
4. The signature of the registered agent
5. The date of execution

The consent statement doesn't have to be filed with the Secretary of State.For in-depth information on this requirement and a fillable consent form, view the Acceptance of Consent Form401-A.

FAQ: Nominating a Registered Agent

Can I be my own registered agent?

Yes. You can choose to act as your own registered agent, appoint a member of your LLC, work with a business attorney, or hire a professional registered agent service (recommended).

Read more aboutbeing your own registered agent.

Is a registered agent service worth it?

Using a professional registered agent service is an affordable way to manage government filings for your LLC. For most businesses, the advantages of using a professional service significantly outweigh the annual costs.

Step 3: File the Texas LLC Certificate of Formation

To register your Texas LLC, you must fileForm 205 - Certificate of Formationwith the Texas Secretary of State. You can apply online, by mail, or by fax.

Before filing, make sure you have completed your Certificate of Formation correctly. You will need to have filled in the following sections:

• Your LLC’s entity name and type
• The name and physical street address of your registered agent
• How your LLC is managed (i.e., member-managed or manager-managed)
• The name and address of each initial governing person
• Your LLC’s initial mailing address (i.e., the mailing address for state franchise tax correspondence)
• Any supplemental provisions or information
• The name and address of the organizer
• The date/event after which the Certificate of Formation becomes effective

Keep in mind that you may be eligible to file for free if you're a veteran. You can do this by obtaining a Veteran Verification letter, completingForm 05-904,提交与F的证书ormation. Your franchise tax will additionally be waived for up to five years, which as of right now, is valid until December 31, 2025.

For help with completing the form, visit ourTexas Certificate of Formation.

Note:If you're expanding your existing business to the state of Texas, you'll need to register as aforeign limited liability company(LLC).

FAQ: Filing Texas LLC Documents

What is the processing time to form my LLC in Texas?

It typically takes five to seven days for an LLC to be formed in Texas, though expedited documents can be processed by the end of the next business day for an additional $25.

What is the difference between a domestic Texas LLC and a foreign LLC?

An LLC is called a "domestic LLC" when it conducts business in the state where it was formed. A foreign limited liability company must be created when an existing LLC wishes to expand its business to another state.

How much does it cost to form an LLC in Texas?

It costs $300 to file your Certificate of Formation with the Texas Secretary of State and officially register your LLC with the state.

How do I form a professional LLC in Texas?

To form a professional limited liability company (PLLC) in Texas, each professional member must hold the relevant state license before filing a PLLC-specific Certificate of Formation (Form 206) with the Texas Secretary of State. In some professions, your PLLC may need approval from the state licensing board before it can file with the state.

Step 4: Create a Texas LLC Operating Agreement

An operating agreement, known in Texas as a company agreement, isn't required for Texas LLCs, but having one is a good practice.

What is an operating agreement?是一个188金宝搏官方网站法律文件outlini操作协议ng the ownership and operating procedures of an LLC.

Why are operating agreements important?A comprehensive operating agreement ensures that all LLC members are on the same page and reduces the risk of future conflict.

Read ourTexas LLC operating agreementguide for more information on operating agreements.

FAQ: Creating a Texas LLC Operating Agreement

Do I need to file my operating agreement with the State of Texas?

No. The operating agreement is an internal document that you should keep on file for future reference. However, many other states legally require LLCs to have an operating agreement.

Step 5: Get an EIN for Your Texas LLC

You can get anEmployer Identification Number(EIN) from the IRS for free. It is used to identify business entities and keep track of their tax reporting. It is essentially a Social Security number (SSN) for the company.

Why do I need an EIN?An EIN number is required for the following:

• To open abusiness bank accountfor the company
• For federal and state tax purposes
• 为公司雇佣员工

Where do I get an EIN?An EIN is obtained from the IRS (freeof charge) by the business owner after forming the company. This can be done online or by mail.

FOR INTERNATIONAL APPLICANTS:Youdo not need an SSNto obtain an EIN.Read our guide to getting an EIN for international entrepreneurs.

FAQ: Getting an EIN

What is a Texas EIN?

An EIN (Employer Identification Number) is a federal tax identification number that acts as a Social Security number for your business. This number is given out by the IRS, not the State of Texas.

How do I get an EIN if I don't have a Social Security number?

An SSN is not required to get an EIN. You can simply fill outIRS Form SS-4and leave section 7b blank. Then call the IRS at 267-941-1099 to complete your EIN application. Read our guide forinternational EIN applicants.

Do I need an EIN for my LLC?

All LLCs with employees, or any LLC with more than one member, must have an EIN. This isrequiredby the IRS.

Learn why we recommendalwaysgetting an EIN and how to get one for free in ourDo I Need an EIN for an LLCguide.

Maintain Your Texas LLC

After you’ve successfully formed your LLC, there are a couple of steps you’ll need to periodically take in order to maintain it, including:

• Submitting a Public Information Report
• Filing an Annual Franchise Tax Report
• Sorting out your taxes

We’ve broken down how to complete each of these steps in greater detail below.

Submit a Public Information Report

One of the central aspects of keeping your LLC in good standing in Texas is submitting aPublic Information Report (PIR)to the Comptroller’s office. This report, which is due by May 15 every year, is designed to provide updated and accurate information to the state regarding your business, such as its:

• Principal office and place of business
• Leadership details
• Mailing address
• Registered agent information

Failing to file a PIR for your LLC by the May 15 deadline can result in serious consequences, including penalties and fines and even administrative dissolution in serious cases.

Note:Even though Public Information Reports are often filed by businesses alongside their franchise tax, they are still due even if you don’t need to pay the franchise tax.

File an Annual Franchise Tax Report

In addition to a PIR, your Texas LLC will also be required to pay franchise tax and file anAnnual Franchise Tax Reportwith the Comptroller’s office by May 15 each year if it earns more than $2.47 million in annual revenue.

Franchise tax is levied at a rate of 0.75% for most businesses and 0.375% for wholesalers and retailers. However, it’s worth noting that veteran-owned LLCs that would be liable to pay franchise tax are able to waive this requirement for up to five years.

If your LLC is liable to pay franchise taxes, be sure to file your franchise tax report in a timely manner, as missing the May 15 deadline will result in a $50 penalty in addition to:

• An extra 5% penalty:If you pay the tax between 1 and 30 days late.
• An extra 10% penalty:If you pay the tax more than 30 days late.
• Interest on past due taxes:If you pay the tax more than 60 days late.

For reports due in January 2024 and onwards, any businesses generating annual revenues at or below the “No Tax Due” threshold of $2.47 million are no longer required to file a No Tax Due Report. However, they will still need to submit a Public Information Report.

Sort Out Your Taxes

Regardless of where your LLC is registered, you will be required to pay certain federal taxes. This includes corporation and employer taxes (for LLCs filing as a C corporation), and federal income tax and self-employment taxes (for LLCs taxed as pass-through entities).

In addition, there are a number of different taxes you’ll be required to pay at a local and state level, which can vary depending on the nature of your business.

Below are some of the most common taxes in Texas:

Sales and Use Taxes

Sales and use taxes are a percentage added to the price of tangible goods and most services bought and used within the state. In Texas, this is generally set at a flat rate of 6.25%, though local jurisdictions (such as cities, counties, special purpose districts, and transit authorities) can also impose their own additional sales/use tax rates up to a cap of 2%.

These local rates can overlap with each other and combine with the state’s general sales/use tax up to a maximum of 8.25%. However, certain specific products, such as automotive oil, mixed beverages, and tobacco, are subject to their own separate rates.

While it’s ultimately your customers who will be paying this tax, it’s your business’s responsibility to collect it on all sales of tangible property or taxable services and report it to the state.

Note:To be able to collect this tax, your business will first need to apply for a sales tax permit using theTexas Online Sales Tax Registration Application System.

Property Taxes

In Texas, property tax is managed at the county level as no statewide tax is imposed. Each year, your county’s appraisal district will assess the value of your property (such as land and buildings) and apply the local tax rates in order to determine how much your business owes.

Since different local governments in Texas set their own rates for this tax, your business’s total property tax bill will vary depending on where it’s based. For more information on how property tax will work for your business, you’ll need to get in contact with either your county’s assessor-collector office or employ the help of an accountant.

Note:Use thecounty tax office directoryprovided by the Texas Comptroller of Public Accounts to find the contact information of the relevant officials in your local area.

Unemployment Insurance Tax

According to the Texas Workforce Commission, an LLC’s effective Unemployment Insurance (UI) tax rate is the sum of the following five components (e.g., general tax rate, replenishment tax rate, unemployment obligation assessment rate, deficit tax rate, employment & training investment assessment).

This, multiplied by an LLC’s taxable wages, will determine the amount of UI tax that will need to be paid (up to $9,000 per employee per year, with a minimum tax rate of 0.23% and a maximum tax rate of 6.23%).

Having said that, less experienced employers can experience different UI tax rates:

• Entry-Level Rate:A predetermined tax rate (set at 2.7% or NAICS industry average – whichever is higher) or a computed tax rate (if you’ve acquired compensation experience from a previously liable employer).
• Interim Rate:Based on each employer’s taxable wages paid, timely payment of taxes, and payment of unemployment claims to former employees (if applicable).

The good news is that you do not need to calculate your tax rate independently — even if you do not contact an accountant. Instead, you can:

• Visit theUnemployment Tax Services page: Here you can log in to your account in the UTS system, select the “Account Info” tab, and select the “Tax Rate Summary” link to view your tax rate information for the last several years, or
• Submit aContact Request form: Select “Employer Tax Account Actions/Issues” for Reason of Contact, and then write “Request Employer Tax Rate Statements” when asked to explain your issue.

Note:For more information relating to this tax, you can have a look at the Texas Workforce Commission’sUnemployment Insurance Tax Ratespage. Alternatively, for help with all LLC taxes, see our in-depthTexas LLC Taxesguide.

Related Articles

• LLC Cost Texas
• Texas LLC Taxes
• Texas LLC Operating Agreement
• Texas LLC Registered Agent
• Texas LLC Annual Report
• How to File Certificate of Formation in Texas
• Texas LLC Name Search

Texas Business Resources

• Secretary of State Corporations Section
• Texas Small Business Resources
• Texas LLC Statutes