How to form an LLC in Texas
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)
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What is an EIN Number?
This lesson is about getting a Federal Tax ID Number (aka EIN) from the IRS. Please don’t confuse this with your Texas LLC’s “Taxpayer Number”. I know the names are nearly identical, but your LLC’s EIN is a 9-digit number that comes from the IRS. Your Taxpayer Number is an 11-digit number that comes from the Texas Comptroller. You’ll receive your Taxpayer Number on the Welcome Letter from the Comptroller.
An EIN Number stands for Employer Identification Number and it will be issued by the IRS to your Texas LLC.
An EIN is to your Texas LLC what a Social Security Number is to a person. It helps the IRS identify your business for tax and filing purposes.
Having an EIN for your Texas LLC allows you to open a separate bank account under the LLC’s name, apply for certain licenses and permits, and handle employee payroll (if applicable).
Even though it’s called an Employer Identification Number, it doesn’t mean that you have to have employees. The EIN is just a type of Taxpayer Identification Number (TIN) that identifies your Texas LLC with the IRS.
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Your Texas LLC’s EIN may be called different names. They all mean the same thing though.
Similar terms for an EIN include:
- EIN Number
- Employer ID Number
- Employer Identification Number
- Federal Employer ID Number
- Federal Employer Identification Number
- Federal Tax Number
- Federal Tax ID Number
- Federal Tax Identification Number
Benefits of having an EIN for your Texas LLC
Having an EIN for your Texas LLC enables you to do the following:
- Open an LLC business bank account
- File taxes at the federal, state, and local level
- Handle employee payroll (if applicable)
- Obtain business lines of credit or business loans
- Get a business credit card for your LLC
- Apply for business licenses
Wait for your Texas LLC to be approved
Wait for your Texas LLC to be approved by the Secretary of State before applying for your EIN. Otherwise, if your LLC filing is rejected, you’ll have an EIN attached to a non-existent LLC.
However, if this does happen, you can always cancel your EIN and then apply for a new one. And you don’t have to wait for your cancellation to go through before applying for a new EIN.
Applying for an EIN for your LLC is free ($0)
Applying for an EIN for your Texas LLC is completely free.
The IRS doesn’t charge anything for applying for an EIN.
Don’t have an SSN or ITIN?
If you’re a foreigner who formed a Texas LLC, you can still get an EIN without having an SSN or ITIN.
You just can’t get your EIN online. Instead, you need to mail or fax Form SS-4 to the IRS.
We have instructions here: How to apply for EIN without an SSN or ITIN.
(related article: How to apply for an ITIN)
EIN Phone Application
You may have read that you can apply for an EIN by phone. This is no longer the case. The IRS has discontinued this service.
The only businesses that can get an EIN by phone are Exempt Organizations (like non-profits) and Foreign Companies (companies formed outside of the United States).
If you’re a foreigner and you formed an LLC in Texas, we have instructions below on how to apply for your EIN.
EIN for Husband and Wife LLC in Texas
Because Texas is a community property state, a 2-member LLC that is owned by a husband and wife can elect a special form of taxation called a “Qualified Joint Venture LLC“.
A Qualified Joint Venture with the IRS allows your husband and wife Texas LLC to file taxes as a Sole Proprietorship instead of a Partnership. This can save you time and money in accounting and tax costs.
There may be additional benefits to obtaining Qualified Joint Venture status with the IRS and this is a conversation you’ll want to have with an accountant.
Please see our full article here: Qualified Joint Venture (Husband and Wife LLC)
EIN Responsible Party
The EIN Responsible Party is a person that goes on file with the IRS when you apply for an EIN for your Texas LLC.
Think of the Responsible Party as the LLC’s “contact person”. The IRS will send your LLC’s mail and correspondence to this person.
If you have a Single-Member Texas LLC
Then you will be the EIN Responsible Party.
If you have a Multi-Member Texas LLC
One of the LLC Members will be the EIN Responsible Party.
The IRS just wants one person as the EIN Responsible Party. They don’t want all the Texas LLC Members’ information. The IRS gets the other Members’ information when you file your 1065 Partnership return and issue K-1s each year.
Although any LLC Member can be listed, you should list the LLC Member that will take on the responsibility of making sure the LLC’s taxes are handled properly.
If your Texas LLC is owned by another company
The IRS made changes in 2018 that no longer allow an EIN Responsible Party to be a company. The EIN Responsible Party must be an individual person. So it’s best to list one of the individual owners of the parent company.
Note: If you have a Texas LLC that is owned by another company and you try to get an EIN online, you’ll just get an error message (EIN reference number) at the end of the application.
Learn more about EIN Responsible Party
To learn more about who can be the EIN Responsible Party for your Texas LLC, please see EIN Responsible Party for LLC.
How is a Texas LLC taxed?
By default, a Texas LLC is taxed based on the number of Members (owners).
Meaning, an LLC is taxed in the default status set by the IRS and the LLC doesn’t elect to be taxed as a Corporation (either a C-Corporation or an S-Corporation).
(related article: how are LLCs taxed)
The default tax status for a Texas Single-Member LLC is a Disregarded Entity, meaning if the LLC is owned by an individual, the LLC is taxed like a Sole Proprietorship. If the LLC is owned by a company, it is taxed as a branch/division of the parent company.
The default tax status for a Texas Multi-Member LLC is Partnership, meaning the IRS taxes the LLC like a Partnership.
If instead, you want your Texas LLC taxed as a C-Corp, you’ll first apply for an EIN and then later file Form 8832. If you want your LLC taxed as an S-Corp, you’ll first apply for an EIN and then later file Form 2553.
If you choose to have your Texas LLC taxed as a Corporation, make sure you speak with an accountant as there are a lot of details you need to consider. Having an LLC taxed as an S-Corporation is a much more popular choice than having an LLC taxed as a C-Corporation. S-Corporation taxation usually makes sense once an LLC generates about $70,000 in net income per year.
How to apply for an EIN for your Texas LLC
Below you will find 3 different sets of instructions:
1. If you have an SSN or ITIN, use the EIN online application
We recommend applying for an EIN online for your Texas LLC if you have an SSN or ITIN.
This is the easiest filing method and it has the fastest approval time.
We have instructions here:
How to apply for an EIN online
2. If you apply online, but you get an error message
If you have an SSN or ITIN, apply for an EIN online, but you get an error message (called an EIN reference number) at the end, you will need to mail or fax Form SS-4 to the IRS instead.
We have instructions here:
Apply for EIN for LLC with Form SS-4
3. If you don’t have an SSN or ITIN
If you don’t have an SSN or ITIN, you can still get an EIN for your Texas LLC. You just can’t apply for an EIN online.
You will need to mail or fax Form SS-4 to the IRS instead and you must fill the form out in a certain way.
We have instructions here:
How to get an EIN without an SSN or ITIN
EIN Confirmation Letter (EIN Approval)
Once the IRS issues an EIN for your Texas LLC you will receive your official approval, known as an EIN Confirmation Letter (CP 575).
The method you used to apply for an EIN will determine how you receive your EIN Confirmation Letter.
If you applied for an EIN online:
You’ll be able to download a PDF copy of your EIN Confirmation Letter at the end of the online application. There is no waiting time. The IRS will also send you a duplicate copy in the mail in about 4 to 5 weeks.
If you sent Form SS-4 by fax:
The IRS will fax you back your EIN Confirmation Letter within 4 to 7 business days.
If you sent Form SS-4 by mail:
The IRS will mail your EIN Confirmation Letter within 4 to 8 weeks.
Here is what the EIN Confirmation Letter for an LLC looks like:
How to Cancel an EIN?
If there was a mistake with your first EIN application or you need to cancel your EIN Number for any reason, you just need to mail a cancellation letter to the IRS.
We have instructions here: how to cancel an EIN.
You don’t have to wait for your EIN cancellation to be finalized before getting a new EIN for your Texas LLC.
LLC Business Bank Account
After getting your EIN, you can then open a separate business bank account for your Texas LLC.
Banks usually ask for the following documents to open a Texas LLC business bank account:
- EIN Confirmation Letter
- LLC Approval (stamped and approved Certificate of Formation)
- LLC Operating Agreement
- Driver’s License and/or Passport
Aside from the above, banks may also require other paperwork (like proof of address), so we recommend calling a few banks in Texas ahead of time before visiting them in person. It’s also a good idea to ask if they have monthly fees on their “basic” business checking accounts since there are a number of banks that don’t have any monthly fees.
If you’re a non-US resident (foreigner), you will need to show 2 forms of identification, such as your foreign passport and your foreign driver’s license. There are additional things to keep in mind when opening a U.S. bank account for your Texas LLC that we have listed here: Non-US resident opening U.S. bank account for an LLC
Note: You will need to open a bank account in Texas since that is where you formed your LLC.
Next Step: Texas Franchise Tax
Once the IRS has issued an EIN for your Texas LLC, you can then proceed to the next lesson: Texas LLC Franchise Tax.
IRS Contact Information
If you have any questions, you can call the IRS at 1-800-829-4933. Their office hours are 7am – 7pm, Monday through Friday.
We recommend that you call the IRS early to avoid long holding times.
How are LLCs taxed
How to cancel an EIN
How to apply for an ITIN
What is Disregarded Entity LLC
How to open an LLC bank account
How to get a credit card for my LLC
How to find an accountant for your LLC
Should I get an EIN before forming my LLC
When should an LLC be taxed as a C-Corp
When should an LLC be taxed as an S-Corp
What do these EIN Reference Numbers mean
What are IRS Taxpayer Identification Numbers
Form 5472 requirement for foreign-owned LLC
Who should be the EIN Responsible Party for my LLC
What is a husband and wife Qualified Joint Venture LLC
What’s the difference between tax-reporting and tax-paying
IRS: About LLCs
IRS: Taxation of LLCs
IRS: Employer ID Numbers
IRS: Apply for an EIN Online
IRS: Understanding your EIN
IRS: Do you need a new EIN?
IRS: About Single-Member LLCs
IRS: Links for Small Businesses in Texas
Texas Tax Workshops, Meetings and Seminars
Code of Federal Regulations: Section 422.112 (About EINs)
Code of Federal Regulations: Section 25.169 (EIN Application)
Code of Federal Regulations: Section 40.361 (How to File Form SS-4)
Code of Federal Regulations: Section 24.47 (IRS Form SS-4 Instructions)
Code of Federal Regulations: Section 301.7701-3 (Business Entity Types)
Code of Federal Regulations: Section 301.6109-1 (Identification Numbers)