Texas LLC filing requirements

Benefits of starting an LLC in Texas

Forming an LLC in Texas gives you the best of both worlds: the legal and tax advantages of the LLC structure combined with Texas's impressive business environment. The state is renowned for its business-friendly climate and access to a large, skilled workforce. Plus, Texas has no state personal income tax. If you own a pass-through LLC, your business profits flow directly to your personal income without state-level taxation.

Key benefits:

• Limited liability protection: As the owner of an LLC, you are generally shielded from personal liability for the debts and actions of your business. In most cases, creditors cannot pursue your personal assets like your home or savings to satisfy business obligations. This critical separation between you and your business doesn't exist with sole proprietorships or general partnerships.
• Flexible ownership: Texas LLCs can have unlimited owners, and those owners can be individuals, partnerships, trusts, or corporations. This provides flexibility in structuring ownership.
• Pass-through taxation: LLCs typically don't pay taxes at the business level. Instead, profits and losses pass through to the personal tax returns of the owners. You also have the option to elect corporate tax treatment (C corp or S corp) for your LLC.
• Enhanced credibility: Operating as an LLC signals legitimacy and professionalism, helping establish credibility with customers, vendors, and partners compared to informal business structures.

How to start an LLC in Texas

The following highlights some of the critical steps you will need to complete when forming a limited liability company (LLC) in Texas.

Step 1: Decide on a name for your Texas LLC

Naming your business requires careful consideration. There are many business and compliance requirements to weigh before making the final decision. Texas has very specific regulations when it comes to LLC names:

• Required words. The name of the Texas LLC must end with "Limited Liability Company" or "Limited Company", or with an abbreviation of one of those phrases, such as "Ltd. Co.", "L.C.", "LLC", or "L.L.C".
• Unique. The name of the Texas LLC must be distinguishable in the records of the Texas Secretary of State from the name of any domestic or foreign filing entity (including LLCs or corporations) or reserved or registered name. However, a name already in use may be used if the LLC gets written consent from the existing name holder.
• Prohibited and restricted words. Names submitted with superscript letters or numbers or subscript letters or numbers will not appear in that format in the official company name. (For example, H2 O would appear as H2O.) The name may not contain the word “Lotto” or "Lottery". The name must not imply a purpose other than that stated in the Certificate of Formation. Use of words tied to education (such as but not limited to "College," "School", and "Seminary") cannot be used without approval from the Texas Higher Education Coordinating Board. Use of words such as "Bank" and "Trust", and those implying ties to veterans ("Veterans," "War," etc.), also require approvals prior to use.

Step 2: Determine management structure (member vs. manager)

One of the reasons you may have selected an LLC as your business type is management flexibility. With LLCs, there are two management structure options: member-managed, or manager-managed. (“Member” is the term used to mean an owner of an LLC.) The difference between the two options comes down to the relationship between management and ownership:

• Member-managed. All members (owners) are active in the decision-making processes for day-to-day operations.
• Manager-managed. Designated managers make the day-to-day decisions for the LLC.

Read our article LLC members vs. LLC managers for more information on LLC management structure.

Step 3: Select your Texas registered agent

A registered agent (sometimes referred to as an agent for service of process) is a person or business you appoint to receive and forward important legal and tax information. Texas requires the designation of a registered agent and registered office at the time of an LLC’s formation, and the LLC must maintain a registered agent throughout its existence.

If the registered agent is an individual, then that person must reside in Texas and have consented to serve as the registered agent for the LLC. If using a professional registered agent service, that organization must be registered or authorized to do business in the state. Texas registered agents must maintain a business office at the same address as the entity's registered office. The registered office must be a physical address (i.e., not a PO box nor a telephone answer service).

Note: A Texas LLC cannot appoint itself as its own registered agent.

Step 4: Prepare and file a Certificate of Formation

To officially create your Texas LLC, you must file a Certificate of Formation with the Texas Secretary of State. (If your LLC was formed in another state but you want to do business in Texas, you'll file an Application for Registration of a Foreign Limited Liability Company.)

Creating an operating agreement
You should also create an operating agreement for your LLC. While Texas does not require you to file this document with the state, it's an essential internal document for your business. An operating agreement is a private contract between LLC members that establishes the rules and structure of your business, including ownership percentages, profit distribution, management structure, and decision-making procedures. Read our article on LLC operating agreements for more information.

Step 5: Obtain a federal employer identification number (EIN)

A federal employer identification number, or EIN, is a unique, nine-digit number issued by the IRS that is used to identify a business for tax reporting purposes. It is also referred to as a FEIN or federal tax ID number.

An EIN is used for other important business activities, such as opening a business bank account, obtaining a loan, or paying invoices. Check out our article on the federal EIN for more information.

Step 6: Meet your license, permit, and registration requirements in Texas

Your Texas LLC may be required to complete additional compliance steps in order to legally operate in Texas.

• State tax registration. Many Texas LLCs will need to obtain a sales and use tax permit from the Texas Comptroller of Public Accounts. The Comptroller’s office oversees 100 separate taxes, fees, and assessments, including state franchise taxes. (Texas LLCs must file an annual Public Information Report with the Comptroller's office, and some must also file a Franchise Tax Report.)
• Employees. Employers are required to report new hires and rehires to the Texas Office of the Attorney General.
• Business licenses and permits. Your Texas LLC may need to obtain licenses and permits at the federal, state, and local levels before it can legally operate.
• Assumed name filing. If a Texas LLC plans to transact business under an assumed name, it must file an assumed name certificate with the Texas Secretary of State.

With our business license research service, you receive applications for the business licenses, permits and tax registrations your business needs.