How to Open An LLC in Texas
Full Step by Step guide
By Bazal Razzaq
Chief Editor
Updated: September 20, 2023, 12:30pm
Editorial Note: We earn a commission if you use the services recommended on this page. Commissions do not affect our opinions or recommendations.
#1 Name The LLC In Texas
Every state has some laws to abide by, and Texas is no different as the state has some set procedures to follow in case you want to start an LLC in the state. Appended are some specifics of the guidelines that need to be followed at all times in case of opening up an LLC:
Use Limited Liability Company
The moment you plan to open up a Limited Liability Company, your business name should always be included in the documents that you share with the authorities. So, in the event of an LLC opening, LLC, Limited Liability Company, or ‘Company or Co.’ should be a part of the documents prepared to be shared with the legal authorities.
Avoid Using Government Names
When you pick a name, there’s a possibility that you may choose a name that would make it look like you are a government organization. This is something that needs to be avoided at all costs, and you need to ensure that any name that coincides with the Federal or State Departments is not in your business name.
Avoid Using Restricted Words
Banks, Attorneys, or Universities are some of the restricted names, and if you use these words in your business name, then you would need to tender more documents that substantiate your LLC’s eligibility for a business of value. Failing to provide these documents would ensure that your LLC is not registered in the State of Texas.
Follow The Naming Rules
The State of Texas has some rules that govern how you can name your business. You would need to refer to the Texas Secretary of State’s guidelines to find out how you can name your business and if it matches the list of requirements for opening up an LLC in Texas.
Check For The Name Availability
There are a multitude of LLCs operating in the State of Texas, and you wouldn’t want yours to coincide with some other LLC or business of the same name. It is, therefore, advised that you check the details by performing a name search on the Texas Comptroller of Public Accounts website.
Get A Domain
Your online presence is important in the current day and age. It’s always advisable to register your business online by searching for a business domain to ensure that you have your professional service available for yourself.
#2 Find The Registered Agent In Texas
Now that you have finalized a name for your LLC, you are required to find a registered agent for your LLC business. This registered agent would be the one responsible for receiving all your tax forms, legal documents, and any other direct or indirect communication from the State of Texas or other places.
An individual or business working/registered in Texas can be your registered agent. You can always choose someone from your team to fill this role. The registered agent must give consent in writing or electronically with the appended details:
- The LLC name
- The Express Statement which confirms that the person is an authorized registered agent for the LLC
- Name and signature of the registered agent, along with the date of commencement
- Register As The Texas LLC
In the State of Texas, you are required to file Form 205 – Certificate of Formation with the Texas Secretary of State. In the form, you are required to mention if this business will be member or manager-managed. You can fill out the form Online or Offline (Offline through Mail or Fax) with a cost of $300 that will be payable to the Secretary of State. Please note that this money is non-refundable. You can send it to:
Secretary of State
P.O. Box 13697
Austin, TX 78711
Fax: (512) 463-5709
The State of Texas offers assistance to veterans. If you are a veteran, just obtain a Veteran Verification Letter, fill in Form 05-904, and submit it with Form 205. The moment you submit these details, your franchise tax will be waived for up to a timeframe of five years. As of this writing, the offer is available till December 31, 2025. In case, you want to do business outside of Texas, then you need to register your LLC as a Foreign LLC.
#3 Generate An LLC Operating Agreement In Texas
While having an LLC Operating Agreement in Texas is not mandatory, having one saves your time and conflicts in the future. It also outlines the way a business is to be done by an LLC.
The Operating Agreement serves as a guide that helps you finalize details easily and effectively and keeps everyone informed about the kind of functionalities that are required in the business.
#4 Apply For An EIN For Your Texas LLC
IRS offers Employer Identification Number (EIN) free of charge in Texas, both online and offline. You need this number to open up a bank account for your business, federal and state tax-related concerns, and even hire employees.
EIN serves as the SSN for your business, and you don’t need an SSN to obtain an EIN. If you want to send the details offline, just share the details to the appended address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
#5 You Need To File Your Texas Annual Report
The State of Texas requires you to file the annual report in two filings, namely: Public Information Report (PIR) and Annual Franchise Tax Report. These reports are supposed to be filed by May 15 with the Texas Comptroller of Public Accounts.
The Texas Franchise Tax Payment depends on the total amount of revenue by your LLC, and so there’s no filing fee for these reports. A business can also file a ‘No Tax Due’ report in the State of Texas. A veteran-owned LLC can file for the Franchise Tax waiver, and the same will be provided to them for a time period of five years. If you don’t file your reports, then it can lead to the dissolution of your Texas LLC.
- File Taxes And Share Employee Details To Stay Law Abiding Business
Sales Tax
In case you are in the business of selling a physical product, you would need to register with the Texas Comptroller of Public Accounts using a seller’s permit. The state sales tax rate is kept at 6.25%, including an additional 2% local tax rate of a maximum.
Employer Tax
Does your LLC have employees in Texas? If so, then you need to register for Unemployment Insurance Tax at the Texas Workforce Commission for your employees. Failing to do so will have serious implications you need to be ready for as the State laws are very focused on this aspect.
Income Tax
Contrary to the other states in the United States of America, Texas doesn’t require state income tax. While the state doesn’t require those details, share them using Form 1065 (for multi-member LLCs) or Form 1040 Schedule C (for single-member LLCs).
It will come in handy in the long run as you will be able to save on any penalties that may imply due to some mistakes or errors that may happen. This also keeps the state informed that you are adding prosperity to the State of Texas.
Hire Employees
Hiring an employee for your business is a sign that you are growing. It’s a great start in the right direction, but you need to keep the state informed by sharing some relevant details. These details include the information that your employees can work in the US.
You are also required to report the employees to the state as ‘new hires.’ As a business, it is your responsibility to provide workers’ compensation insurance to your employees. You need to withhold employee taxes and print compliance posters while displaying them in relevant locations to confirm that you have a workspace.
Frequently Asked Questions
The average wait to form an LLC in Texas is three business days online and five to seven days by mail.
A domestic Texas LLC is a business that runs within Texas and not beyond the state area. On the other hand, a foreign LLC is an LLC that runs beyond the State of Texas.
No, you don’t have to share your operating agreement with the state. It is an internal document that you need to keep for your own records.
It is essential that you obtain an EIN for your LLC. Failing to do so will result in your business getting nullified by the State of Texas, so you should be very careful while taking this step.