how to start a texas llc

How to Start a Texas LLC

Texas LLC Formation – Basics & Helpful Information

This article is meant to be a general overview of the Texas LLC formation process; including information about how to start a Texas LLC and other basic issues related to Texas LLCs.

Texas LLC Filing Fees

To start or register a Texas LLC, you must file a Certificate of Formation with the Texas Secretary of State. The filing fee charged by the TXSOS to file the LLC’s Certificate of Formation is $300 (+$8.10 if you pay with a credit card). You can expedite the filing for an additional $25.

Texas LLC Filing Time

If you file online, the Texas Secretary of State estimates it will take them 1-3 business days to process the filing. If you file the Certificate of Formation via fax or mail, the turnaround time is increased to 5-7 business days from when the TXSOS receives the paperwork.

Texas LLC Compliance Requirements

Every year the LLC must file Public Information Report (PIR) & Franchise Tax Report. These reports are typically filed together (online) and are due annually no later than May 15th. Texas does not charge a filing fee for these annual reports.

Form an LLC in Texas

You can use this checklist to help guide you through the process of forming a Texas LLC:

Step 1: Decide on a Business Name

Before you can start an LLC in Texas, you’ll need to select a name. You won’t want to purchase business cards or a domain name until you have made sure the name is available. We recommend a free search via the Texas Comptroller database first. You’ll then want to call the Texas Secretary of State’s name availability hotline at 512-463-5555 (have a few alternatives to ask about as you will be on hold for about 5 minutes each time you call). The Texas SOS will check only the Texas database to determine if the name is already taken or perhaps too close to an existing name.

It is also highly recommended that you check the US Patent and Trademark Office to see if someone has a federal trademark of the business name you want (the Texas SOS will not check other state’s databases or the federal trademark database). You can purchase comprehensive name availability search to get a professional determination if the desired name is available.

The legal name of a Texas LLC must contain the words “limited liability company,” “limited company,” or an abbreviation of one of these phrases (i.e. LLC).

View all Texas LLC naming parameters

If you are going to be doing business under a name that is not the same as the LLC’s name, you will need to file an assumed name certificate (also known as a “DBA” which is short for Doing Business As) (1) in the county of your principal place of business (or the county of your registered agent’s address if you do not have a PPB in Texas) and (2) with the Texas Secretary of State.

Learn more about Texas DBAs

Step 2: Register your LLC with the State

Texas Certificate of Formation

The Certificate of Formation is what actually creates an LLC in Texas. As such, a Certificate of Formation will need to be prepared and filed with the Texas Secretary of State (SOS). The Texas SOS has a Certificate of Formation (Form 205) you can use if you want to form an LLC in Texas yourself. You’ll have to pay the filing fee when submitting this form to the Texas SOS.

The Texas Certificate of Formation must include (at a minimum):

  • Name of LLC
  • Name & address of Registered Agent
  • Whether the LLC is to be governed by members or managers
  • Name & address of initial members or managers
  • Purpose of LLC (“all lawful purposes” is typical)
  • Name, address and signature of organizer
  • Effective Date of Filing (normally the date of filing)

Texas Registered Agent Information

A Texas LLC must have a registered agent within the state of Texas. The registered agent for a Texas LLC may be an individual who resides in Texas or a pre-existing business entity registered to conduct business in Texas. The registered agent is designated in the Texas Certificate of Formation (when filed). You can later change the registered agent (or the registered agent’s address) by filing Form 401. Please note, it is a crime to designate a registered agent without their consent. Typically, one of the members will serve as the LLC’s registered agent. If no member resides in Texas (or there is another reason to hire a professional registered agent), there are companies that will serve as the LLC’s registered for a fee (between $40 and $240 a year depending on the registered agent).

What is a Registered Agent?

Step 3: Create and Sign the LLC’s Governing Document

The governing document for an LLC is called the “company agreement” or sometimes the “operating agreement”. The company agreement is to an LLC like a partnership agreement is to a partnership (or bylaws to a corporation). The company agreement governs the internal operation of the LLC and is typically a private document that is kept in the company book and the principal place of business (it is NOT filed with the state). The company agreement can address many issues, some of the more common concepts found within a company agreement are:

  • Limitations on the members liabilities
  • The level of consent needed to take various actions (i.e. simple majority required to add new members)
  • The percentage of the LLC that each member owns
  • How profits and losses are allocated between the members (typically based on ownership percentages)
  • Limitations on transferability
  • What each member is contributing to the LLC and what happens is such contributions are not made.
  • The authority of the members, officers, managers, committees, etc.
  • How meeting are conducted

One of the reasons we recommend using an LLC formation company like TexasLLCPros (a service offered by the Copp Law Firm, a Texas law firm focusing on Texas LLC formations) is that they can provide you with a company agreement in connection with their LLC formation services.

Step 4: Get an EIN

After you form an LLC in Texas, you can get an EIN (don’t make the mistake of getting the EIN before the SOS confirms the LLC filing. It is a nightmare to unwind with the IRS.

There are a few different ways to get an EIN:

  1. Apply Online Yourself: The IRS has an online EIN Application you can use to get an EIN. The turn around time on the EIN using this method is only a few minutes.
  2. Use Form SS-4: You can get an EIN the old fashion way by completing Form SS-4 and mailing or faxing into the IRS. How long does it take to get the EIN this way? According to the IRS: if you mail in Form SS-4, it will take 4-5 weeks to get your EIN. If you fax in Form SS-4 you should have the EIN back in a week if you provide a fax number or 2 weeks if you don’t have a fax number.
  3. Have a Third-Party Obtain: All of the LLC formation companies have the ability to get the EIN for you. The EIN obtainment charge varies by company, but it is generally between $50 and $100. If you get one of the higher priced packages, they will sometimes throw in the EIN for free.
Does my LLC Need an EIN?

Step 5: Obtain Required Licenses and Permits

After you create your new LLC, you’ll need to determine if your business/profession requires any license or permits to conduct business. For example, if you are going to be selling products in Texas, you will likely need a sales tax permit. There are numerous potential permits and licenses your business could require. The Copp Law Firm has consolidated information on Texas business licenses that may be helpful.

Read more about Federal Business Licenses & Permits

Registering a Foreign LLC in Texas

If you have a non-Texas LLC (aka Foreign LLC) and you are doing business in Texas, you may need to register the Foreign LLC in Texas. Each state has a different definition of “doing business”. In Texas, the the kinds of activities that would not constitute “doing business” in Texas are outlined in the Texas Business Organizations Code 9.251:

  1. maintaining or defending an action or suit or an administrative or arbitration proceeding, or effecting the settlement of: (A) such an action, suit, or proceeding; or (B) a claim or dispute to which the entity is a party;
  2. holding a meeting of the entity’s managerial officials, owners, or members or carrying on another activity concerning the entity’s internal affairs;
  3. maintaining a bank account;
  4. maintaining an office or agency for: (A) transferring, exchanging, or registering securities the entity issues; or (B) appointing or maintaining a trustee or depositary related to the entity’s securities;
  5. voting the interest of an entity the foreign entity has acquired;
  6. effecting a sale through an independent contractor;
  7. creating, as borrower or lender, or acquiring indebtedness or a mortgage or other security interest in real or personal property;
  8. securing or collecting a debt due the entity or enforcing a right in property that secures a debt due the entity;
  9. transacting business in interstate commerce;
  10. conducting an isolated transaction that: (A) is completed within a period of 30 days; and (B) is not in the course of a number of repeated, similar transactions;
  11. in a case that does not involve an activity that would constitute the transaction of business in this state if the activity were one of a foreign entity acting in its own right: (A) exercising a power of executor or administrator of the estate of a nonresident decedent under ancillary letters issued by a court of this state; or (B) exercising a power of a trustee under the will of a nonresident decedent, or under a trust created by one or more nonresidents of this state, or by one or more foreign entities;
  12. regarding a debt secured by a mortgage or lien on real or personal property in this state: (A) acquiring the debt in a transaction outside this state or in interstate commerce; (B) collecting or adjusting a principal or interest payment on the debt; (C) enforcing or adjusting a right or property securing the debt; (D) taking an action necessary to preserve and protect the interest of the mortgagee in the security; or (E) engaging in any combination of transactions described by this subdivision;
  13. investing in or acquiring, in a transaction outside of this state, a royalty or other nonoperating mineral interest;
  14. executing a division order, contract of sale, or other instrument incidental to ownership of a nonoperating mineral interest; or
  15. owning, without more, real or personal property in this state.

The filing fee for the Application For Registration of Foreign LLC in Texas is $750.

See more about registering a foreign LLC in Texas
Registering a foreign LLC in Texas FAQs

Helpful Tips & Links

Use TexasLLCPros.com to get expedited service at no additional charge. TexasLLCPros is powered by a Texas business formation law firm whose Texas LLC formation services start at only $250. Unlike the national LLC formation companies, you can actually speak with an attorney…a Texas business formation attorney.

Links

Texas Secretary of State
Texas Secretary of State – Guides and Resources
Texas Comptroller – Sales Tax
Texas Comptroller – Franchise Tax
Texas Comptroller – WebFile
Request Certificate of Good Standing
Texas Business Licenses
Small Business Administration (Texas Info)
Online EIN Application (for the LLC’s Federal Tax ID)
USPTO (Federal) Trademark Search