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How to Form an LLC in Texas
How to form an LLC in Texas ← you are here
This Quick Start Guide is a brief overview of how to form an LLC in Texas.
Texas LLC costs:
State filing fee: $300
Annual franchise tax: $0 (for most LLCs)
(check out Northwest vs LegalZoom)
Hi there, my name is Matt Horwitz and I’m the founder of LLC University®.
We’ve put together a free guide on how to form an LLC in Texas. We hope you find it helpful!
To form a Texas LLC, you can either follow the lessons above (more detailed and step-by-step), or you can follow the Quick Start Guide below on this page (a brief overview).
If this is your first time setting up an LLC in Texas, we recommend that you follow the more detailed lessons above. Please make sure to follow them in order.
A Texas Limited Liability Company (LLC) is a legal business structure that offers personal liability protection in case of a lawsuit. In the event your LLC is sued, your personal assets (like your home, vehicles, and bank accounts) are protected.
You can use your Texas LLC to run a business or you can use your LLC to purchase assets, such as real estate, vehicles, boats, and aircraft.
How to use our Texas LLC instructions:
- follow the Quick Start Guide below on this page (a brief overview)
- or follow the detailed lessons (see links at top of page)
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
(check out Northwest vs LegalZoom)
1. Texas LLC Name
Before filing your Texas LLC Certificate of Formation with the Secretary of State, you’ll want to make sure that your desired LLC name is available for use in the state.
Your Texas LLC name must be unique and distinguishable when compared to existing businesses registered in the state.
There are 3 ways to search an LLC name in Texas:
- Call the State Business Information Line at 512-463-5555
- Send an email to [email protected]
- Check the Texas Comptroller’s Taxable Entity Search page
LLC University® recommendation: Even if you search your LLC name on the Taxable Entity Search page and it seems available, it’s still a good idea to call and confirm. Texas used to be extremely strict about LLC names being available. And while they have changed their laws and loosened their restrictions, the reason most LLC filings are rejected is due to name issues. It’s best to call just to be sure. And if you call early in the morning, there’s barely any hold time.
Designator: Your LLC name must include a designator at the end. Texas law allows for the following:
- LLC or L.L.C. (LLC is the most common)
- LC or L.C.
- Ltd. Co.
- Ltd. Company
- Limited Company
- Ltd. Liability Co.
- Ltd. Liability Company
- Limited Liability Company
Your Texas LLC name cannot include a designator that makes it sounds like a different type of legal entity. For example, you can’t use Inc, Incorporated, Corp, Corporation, LP, LLP, Non-Profit, or Non-Profit Corporation, etc. in your LLC name.
We see this all the time: People rush the LLC naming process, form their LLC, then want to change their name 3 months later. While you can do this by filing an Amendment with the Secretary of State, it’s important to know a couple things. First, that costs $150, and second, you then have to update your LLC name everywhere else: the IRS, the Comptroller, the bank, debit/credit cards, online registrations, etc. It’s just a pain. It’s better to spend more time and think of a solid LLC name from the start. For naming tips, check out how to come up with a good business name.
2. Texas LLC Registered Agent
The Texas Secretary of State requires you to list a Registered Agent in your LLC Certificate of Formation.
A Registered Agent in Texas is a person or company who agrees to receive notices, legal mail, and court documents (called “service of process”) in the event your LLC is sued or involved in a court case.
Your Texas LLC’s Registered Agent must have an actual physical street address located in the state where service of process and other documents can be received.
As per state law, your LLC’s Registered Agent address (called the “Registered Office”) cannot be:
- a PO Box address
- a mailbox rental service (like The UPS Store)
Who can be your LLC’s Texas Registered Agent?
(Note: As we mention in our Texas Registered Agent lesson, who you choose as your LLC’s Registered Agent will have an impact on your privacy and what addresses show up on public records.)
In Texas, you have 3 options for who can be your LLC’s Registered Agent:
- You can be your LLC’s Registered Agent.
- A friend or family member can be your LLC’s Registered Agent.
- You can hire a Registered Agent company. Hiring a Registered Agent company is a good idea if you want to keep your address off public records or if you don’t have an address in Texas.
Consent to serve: Whomever you choose as your LLC’s Registered Agent must sign a Consent to Serve as Registered Agent form. This is called Form 401A.
Registered Agent company: If you want to hire a Registered Agent in Texas, our favorite company is Northwest Registered Agent ($125 per year).
Northwest has great customer service and has been in the business for over 20 years. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account. They’ll also let you use their office address throughout your LLC filing in order to keep your address off of public records.
3. Texas LLC Certificate of Formation
Texas LLC filing fee: $300
($0 for veteran-owned LLC)
Filing methods: You can form an LLC in Texas online or by mail. You can also file by fax or walk-in, but we’ll focus on the first two methods since they’re the most common.
LLC University® recommendation: We like the online filing via SOSDirect as the approval time is faster. It’s also easier than doing paperwork and sending a letter.
Texas LLC online: Can be done via SOSDirect. The system is a bit funny in that you have to enter your credit card information first. Don’t worry though. They don’t charge you, unless you click submit at the end. This is just to prevent fraudulent filings.
Texas LLC by mail: Prepare a Certificate of Formation (Form 205) and Consent to Serve as Registered Agent (Form 401A). Mail 2 copies of your forms, with a check or money order for $300 (made payable to “Secretary of State”), and mail to:
Secretary of State
PO Box 13697
Austin, TX 78711
LLC approval time: 2-3 business days if you file online. 5-7 business days if you file by mail.
Approval documents: You’ll get back a Certificate of Filing and a stamped and approved Certificate of Formation. They’ll be returned by email if you file online. And if you file by mail, they’ll be returned by regular mail (sent to the Registered Agent’s address).
Veterans: Thank you for your service! If your LLC is 100% veteran-owned and all members have been honorably discharged, the Senate Bill 1049 exemption applies. This means your LLC filing is free and your LLC is exempt from franchise tax for 5 years. We have instructions here: Texas veteran LLC
4. Texas LLC Operating Agreement
A Texas LLC Operating Agreement is a written contract among the LLC Members that spells out who owns the LLC and how much of the LLC they own.
Your Texas LLC’s Operating Agreement will also document how your LLC is managed, how profits are split, how taxes are paid, and more.
An Operating Agreement should be in place for both Single-Member LLCs and Multi-Member LLCs located in Texas. Having an Operating Agreement for your Texas LLC helps prove that the company is a separate legal entity from its owners. This helps maintain the personal asset protection provided by your LLC. It’s also beneficial to have this document if you ever end up in court.
Internal Document: An LLC Operating Agreement is an “internal document”, meaning, you don’t have to send a copy to the Secretary of State, the Texas Comptroller, the IRS, or any other state or government agency. You just need to keep a copy of the Operating Agreement with your LLC business records and give a copy to any other LLC Member(s), if applicable.
Download a Texas LLC Operating Agreement: We provide free Texas LLC Operating Agreement templates that you can download on this page: Texas LLC Operating Agreement
5. Federal Tax ID Number (EIN)
An EIN (Employer Identification Number) is obtained from the IRS after your Texas LLC is approved by the Secretary of State.
An EIN is also called an EIN Number, FEIN, Federal Employer Identification Number, or a Federal Tax ID Number. They are all the same thing.
It’s helpful to think of your Texas LLC’s EIN Number as its “social security number”. It helps identify your LLC to the IRS for tax and filing purposes.
Your Texas LLC’s EIN will also be used when you open an LLC bank account, register your LLC for taxes, and process employee payroll (if applicable).
How is a Texas LLC taxed: The IRS doesn’t have a specific tax classification for LLCs and instead, a Texas LLC can be taxed 4 different ways with the IRS; 2 of which occur by default (they occur simply by obtaining your LLC’s EIN), and 2 require a special election be made (a form must be filed after you obtain your LLC’s EIN). We recommend reading how is an LLC taxed before applying for your LLC’s EIN Number.
Wait for LLC approval: Don’t apply for an EIN until your Texas LLC is approved by the Secretary of State.
An EIN is free ($0): The IRS will issue an EIN to your LLC at no cost.
Husband and wife LLC: If you are forming a 2-Member husband and wife LLC in Texas you can elect a special type of taxation called a Qualified Joint Venture LLC. This allows a 2-Member husband and wife LLC to be treated as a Sole Proprietorship instead of a Partnership for tax purposes.
EIN Responsible Party: This will be the IRS’s “contact person” when you apply for your Texas LLC’s EIN. If you have a Single-Member LLC, you will be the Responsible Party. If you have a Multi-Member LLC, any LLC Member can be the Responsible Party. For more information, please see EIN Responsible Party for an LLC.
How to apply for an EIN: There are 3 ways to apply for an EIN for your Texas LLC:
6. Texas LLC Franchise Tax & Public Information Report
All Texas LLCs, regardless of revenue or business activity, must file a Texas Franchise Tax Report and a Public Information Report (PIR) every year.
Unlike most states, where an LLC Annual Report is filed with the Secretary of State, the Texas LLC “annual report” (Franchise Tax Report + PIR) is filed with the Texas Comptroller’s Office.
The franchise tax is a “privilege tax” for doing business in Texas. Part of this privilege includes liability protections provided by state law.
Due date: Texas franchise tax reports are due every year by May 15th. Your LLC’s first franchise tax reports are not due until the year after your LLC is formed. For example, an LLC formed in March 2020 wouldn’t file a franchise tax report until May 15th, 2021.
Welcome Letter: A few weeks after your Texas LLC is approved by the Secretary of State, you’ll receive a Welcome Letter from the Comptroller’s office. You’ll find your LLC’s 11-digit Taxpayer Number. This isn’t your federal Tax ID Number. This is a Texas Taxpayer Number.
Franchise Tax Questionnaire: In your Welcome Letter, you’ll also find an FQ number, which you’ll use to complete the Franchise Tax Questionnaire. This can be done online via WebFile. Once your questionnaire is submitted, the Comptroller’s office will issue you an XT Number. You’ll use your 11-digit Taxpayer Number and your XT Number when filing your Franchise Tax Report & PIR each year.
No tax due: Over 90% of LLCs in Texas fall under the “no tax due threshold” of $1,180,000 in annualized total revenue. In that case, they file a report, but don’t pay any tax. The report they file is called the No Tax Due Report (Form 05-163).
The No Tax Due Report should be filed online via WebFile. When filed online, the No Tax Due Report includes the Public Information Report. WebFile combines them into one interface.
If your LLC has more than $1,180,000 in annualized total revenue, you can file via the EZ Computation method or by using the Long Form. The EZ Computation tax rate is 0.331% of total revenue and doesn’t allow for deductions. The Long Form tax rate is 0.375% of taxable margin for retailers and wholesalers, and 0.75% for all other businesses.
In summary: Texas franchise tax can be quite involved. This is just a brief overview. For further details, please see our Texas LLC franchise tax page.
7. Business Licenses and/or Permits
State business license: Texas doesn’t have a statewide general business license. While you will need to check with your local city/town, most cities in Texas also don’t have a general business license. Texas is following through with their business-friendly approach here.
Sales tax permit: Your Texas LLC will need to register for sales tax if:
- it sells or leases tangible personal property in the state
- it sells a taxable service
WebFile: You can get a sales tax permit for your LLC online via WebFile. There is no charge.
Tips on preventing telemarketing: The sales tax permit asks for a phone number. It’s not a good idea to use your actual cell or home number as you’ll get a ton of annoying marketing calls. Check out Phone.com or Sonetel. You can get a pretty cheap phone number and use it as a “voicemail only” number.
Resale Certificate: Your Texas LLC can use a Resale Certificate (Form 01-339) to buy goods for the purpose of resale without paying sales tax. Form 01-339 can be downloaded from the Resale Certificate FAQ page.
Local license or permit: Depending on where your Texas LLC is located and the industry it is in, you may need a local (city, town, etc.) business license or permit to legally operate. While there are far too many cities and towns to list here, it’s best to call your local municipality for guidance. You can also find a list of licenses from these places:
- Texas.gov (click “work”, then click “more work services”)
- List of licenses on the Department of Licensing & Regulation website
- Texas Commission on Environment Quality has a list of permits and licenses you may need
Need some help? If you’d rather rather not make the calls and do the research, you can use IncFile.
8. Texas LLC Taxes
3 “levels”: It’s helpful to think of taxes on 3 levels: federal, state, and local.
No state income tax: Texas residents don’t pay personal state income tax. However, LLCs in Texas are responsible for filing franchise tax reports and collecting sales tax (if applicable), as mentioned above.
Federal income tax: Most LLCs in Texas (with default tax elections, owned by U.S. persons) are “tax-reporting entities” with the IRS and not “tax-paying” entities. Meaning, because default LLCs are pass-through entities, the LLC owners report and pay taxes on their personal US income tax return (Form 1040).
Foreign-owned Texas LLC:
– If you have a Single-Member Texas LLC that is foreign-owned, you have to file Form 5472 every year.
– If you have a Multi-Member Texas LLC that is foreign-owned, you don’t have to file Form 5472, but you do have to file Form 1065 every year.
Single-Member LLC: If the LLC owner is an individual, the Texas LLC is taxed like a Sole Proprietorship by the IRS. If the LLC owner is a company, the LLC is taxed like a branch/division of the parent company. In LLC/Sole Proprietorship taxation, income is most often reported on a Schedule C, although a different Schedule may be needed depending on how the money is made.
Husband & wife LLC: Because Texas is a community property state, if a husband and wife own an LLC and file their taxes jointly, they can elect to be taxed as a Sole Proprietorship (instead of a Partnership). The IRS calls this a Qualified Joint Venture LLC.
Multi-Member LLC: A Multi-Member Texas LLC is taxed like a Partnership by the IRS. In LLC/Partnership taxation, the LLC files an informational return; Form 1065 Partnership Return. Then each LLC Member gets a K-1 which reflects their share of profits. The K-1 then becomes a part of the LLC Member’s personal 1040 income tax return.
Taxed like a Corporation: If a Texas LLC doesn’t want the default treatment from the IRS, it can elect to pay federal taxes like a Corporation. An LLC can elect to be taxed like a C-Corporation, although this isn’t very common. An LLC can also elect to be taxed like an S-Corporation, which is more popular because of self-employment tax savings. The S-Corp election only makes sense once an LLC has a certain amount of net income. For more information, please see LLC taxed as S-Corp or LLC taxed as C-Corp.
Other taxes: While Texas doesn’t have a personal state income tax, depending on your business industry, your LLC may be responsible for other taxes. Some examples are battery sales tax, crude oil tax, mixed beverages tax, natural gas tax, tobacco tax, and more (see all taxes and fees in Texas). While these don’t apply to the majority of our readers, you’ll want to check with an accountant to make sure your Texas LLC meets all its filing obligations.
Local taxes: You’ll also want to ask an accountant if your Texas LLC is responsible for any local taxes (city, town, etc.). This varies depending on where your LLC is located and where it’s doing business.
9. LLC Bank Account
Once the IRS has issued an EIN Number to your Texas LLC, you can open a business checking account.
It’s best practice to have a business checking account for your Texas LLC in order to maintain your personal liability protection. Using a personal bank account for your LLC is called “commingling of assets” and this can lead to personal liability issues if you end up in court.
Having a separate business bank account for your Texas LLC also makes recordkeeping easier for accounting and tax purposes.
Since banks in Texas all have their own rules and regulations, we recommend calling a few banks to determine the following:
- minimum initial deposit
- minimum balance requirements
- monthly maintenance fees (if any)
Required Texas LLC paperwork: In order to open a business bank account for your Texas LLC, you’ll likely need to have the following documents:
- Certificate of Formation (stamped and approved)
- EIN Confirmation Letter from the IRS
- Photo ID (driver’s license and/or passport)
- Operating Agreement (usually not needed, but good to bring anyway)
Tip: Call the bank ahead of time and double-check what documents are required.
For more details: Please see the following article: business bank account for an LLC
LLC Members: If you have a Multi-Member Texas LLC, all Members that want to be on the bank account should be present when opening the account.
Debit card: Most banks will provide a business debit card on the spot after the bank account is opened. If not, they’ll usually mail the debit card within 1 to 2 weeks.
Credit card: If you want to get a business credit card, we recommend searching at www.creditcards.com
Non-U.S. residents: If you are a non-US resident that has formed an LLC in Texas, you can still open a U.S. business bank account. Please see this lesson: opening an LLC bank account for non-US residents
10. Business Phone Number
Instead of giving out your cell phone number (or home telephone number), it might be a good idea to get a separate business phone number for your Texas LLC.
We recommend getting a phone number from Phone.com. They have the most affordable plans and good customer service.
You can get a local Texas telephone number or you can get a “1-800” number for your business. Phone.com lets you setup call forwarding to any number you like, create pre-recorded messages, and you can get your voicemails sent right to your email.
Getting a separate phone number for your Texas LLC is also a good idea if you’d like to keep your actual phone number off of those annoying “public record” websites.
Another option is Sonetel. Sonetel is cheaper than Phone.com, but setting up an account with Sonetel can be a little tricky. Additionally, Phone.com’s customer support is easier to reach.
Texas State Agencies
(LLC taxation, franchise tax, sales tax, etc.)
800-252-1381 (8:00am – 5:00pm, M-F)
Texas Workforce Commission
(if you’ll hire employees)
512-463-2222 (8:00am – 5:00pm, M-F)