How to Start an LLC in Texas: A Step-by-Step Guide

How to start an LLC in Texas

Starting a business in Texas offers many advantages, from its strong economy to business-friendly regulations. One of the most popular business structures is a Limited Liability Company (LLC). It provides flexibility, legal protection, and simple tax treatment. If you’re ready to launch your venture, here’s a complete, step-by-step guide on how to start an LLC in Texas.

Why Choose an LLC in Texas?

An LLC combines the liability protection of a corporation with the simplicity of a sole proprietorship or partnership. Here’s why many entrepreneurs in Texas prefer LLCs:

Limited personal liability
Flexible tax options
Fewer formalities
Pass-through taxation
Credibility with clients and vendors

Whether you’re starting a tech startup, a real estate agency, or a small e-commerce brand, an LLC is often the best fit.

Step-by-Step Process to Start an LLC in Texas

Here is a detailed breakdown of each step required to form your LLC legally in Texas:

Step	Description
1. Choose a Business Name	Must be unique and include “LLC” or “Limited Liability Company.”
2. Appoint a Registered Agent	Designate an individual or company to receive legal documents on your behalf.
3. File Certificate of Formation	Submit Form 205 to the Texas Secretary of State (online or by mail).
4. Create an Operating Agreement	Not legally required but highly recommended to define roles and rules.
5. Obtain an EIN	Get a free Employer Identification Number from the IRS for tax and hiring.
6. Register for State Taxes	Required if your business collects sales tax or has employees.
7. File for Business Licenses	Check local and industry-specific licensing requirements in your city/county.
8. Maintain Compliance	File annual franchise tax and Public Information Report with the state.

1. Choose a Unique Business Name

The first step is selecting a name that’s distinguishable from existing businesses in Texas. It must contain “Limited Liability Company,” “LLC,” or “L.L.C.” You can search name availability on the Texas Secretary of State’s website and optionally reserve your chosen name for 120 days.

Tip: Avoid names that could confuse your business with a government agency (like “IRS” or “FBI”).

2. Appoint a Registered Agent

A Registered Agent is a person or business entity authorized to receive legal and tax documents on behalf of your LLC. In Texas, the agent must be:

At least 18 years old
A Texas resident or a company authorized to operate in Texas
Available during regular business hours at a Texas physical address (P.O. boxes not accepted)

You can act as your own registered agent, but many business owners prefer hiring a professional service for privacy and reliability.

3. File the Certificate of Formation

To legally create your LLC, you need to file Form 205: Certificate of Formation with the Texas Secretary of State. You can file it:

Online via SOSDirect
By mail with a $300 filing fee
In person at the Secretary of State’s office in Austin

This form includes essential information such as your LLC’s name, registered agent, and purpose.

4. Draft an Operating Agreement

Though not required by Texas law, an Operating Agreement is strongly recommended. It outlines ownership percentages, profit distribution, member roles, voting rights, and exit strategies. This internal document can help prevent disputes and make your LLC appear more professional to banks or investors.

5. Get an EIN from the IRS

An Employer Identification Number (EIN) is required if your LLC has employees or more than one member. Even single-member LLCs should obtain one for tax purposes and to open a business bank account.

Apply for free on the IRS website
Receive your EIN immediately upon completion

6. Register for State Taxes

You must register with the Texas Comptroller of Public Accounts if your LLC:

Sells taxable goods or services
Has employees in Texas
Is subject to franchise tax

The most common requirement is a Sales Tax Permit, which can be obtained online through the Comptroller’s website.

7. Secure Licenses and Permits

Depending on your business type and location, you may need:

City or county permits
Health or safety certifications
Professional or trade licenses

Use the Texas Economic Development Business Permit Office for a directory of permits required by industry.

8. Stay Compliant

Texas LLCs must:

File a Public Information Report (PIR) annually
Pay a Franchise Tax, even if no tax is due (report still required)
Keep your registered agent and business address up to date

Non-compliance can lead to penalties or involuntary dissolution of your LLC.

Costs to Start an LLC in Texas

Item	Estimated Cost
Name Reservation (optional)	$40
Certificate of Formation	$300
Registered Agent Service (optional)	$100–$300 annually
Business Licenses/Permits	Varies by city/industry
EIN	Free
Annual Franchise Tax	Varies

Real-World Tip

Many business owners starting LLCs are also planning major life steps like buying homes. If that’s you, you might also benefit from financial resources such as First-time homebuyer grants USA, which offer down payment and closing cost assistance to qualifying individuals across different states.

Frequently Asked Questions (FAQs)

Q1: How long does it take to form an LLC in Texas?

A: Filing online typically takes 2–3 business days. Filing by mail may take up to 2 weeks.

Q2: Can I be my own registered agent in Texas?

A: Yes, as long as you have a physical address in Texas and are available during business hours.

Q3: Do I need a lawyer to start an LLC in Texas?

A: Not necessarily. While it’s helpful for complex businesses, many entrepreneurs complete the process themselves or use online filing services.

Q4: Is an Operating Agreement mandatory in Texas?

A: No, but it’s highly recommended to define internal business operations, especially for multi-member LLCs.

Q5: What taxes does a Texas LLC pay?

A: Texas LLCs pay franchise tax and may need to collect sales tax. Federal income tax still applies based on how the LLC is taxed.

Conclusion

Starting an LLC in Texas is a straightforward process, but it’s important to follow all the legal steps to ensure your business runs smoothly and remains compliant. From choosing a name and filing the formation documents to obtaining necessary permits and maintaining your records, each step plays a key role in building a solid foundation.

Whether you’re launching a side hustle, opening a retail store, or forming a new professional service, forming an LLC in Texas gives you both protection and flexibility to grow. And as you expand your financial plans, don’t overlook opportunities like First-time homebuyer grants USA to help you balance business success with personal goals.

Kalim A Khan