Texas ranks second in the nation for new LLC formations, and for good reason. The state has no personal income tax, a business-friendly regulatory environment, and access to one of the largest consumer markets in the country. Whether you’re launching a tech startup in Austin, a real estate investment company in Houston, or a consulting firm in Dallas, forming an LLC in Texas protects your personal assets while keeping your tax situation simple.
This guide walks you through exactly how to start an LLC in Texas, including the filing process, costs, timeline, and ongoing requirements.
Why Form an LLC in Texas?
Before diving into the steps, here’s why an LLC makes sense for most Texas business owners:
- Personal Asset Protection: Your personal bank accounts, home, and vehicles are protected from business lawsuits and debts
- No State Income Tax: Texas has no personal or corporate income tax—one of only seven states with this advantage
- Pass-Through Taxation: LLC profits pass directly to your personal tax return, avoiding double taxation
- Flexibility: Choose between member-managed or manager-managed structures
- Credibility: An LLC appears more professional to customers, vendors, and lenders than a sole proprietorship
- Simplicity: Less paperwork and formality than a corporation
Texas LLC Formation Requirements
To form an LLC in Texas, you need:
- At least one organizer (the person filing the Certificate of Formation)
- A unique business name that includes “LLC” or “Limited Liability Company”
- A registered agent with a physical Texas address
- A completed Certificate of Formation
- The $300 filing fee
There’s no requirement for multiple members—single-member LLCs are fully recognized in Texas.
Step 1: Choose Your Texas LLC Name
Your LLC name must be distinguishable from other business entities registered with the Texas Secretary of State. Texas has specific naming requirements:
Required:
- Must include “Limited Liability Company,” “LLC,” or “L.L.C.”
- Must be distinguishable from existing Texas business names
Prohibited:
- Words that imply government affiliation (FBI, Treasury, State Department)
- Words that require additional licensing without proper credentials (Bank, Insurance, University)
Check Name Availability
Search the Texas Secretary of State’s SOSDirect database to verify your name is available:
- Go to the Texas SOS business search at SOSDirect
- Search for your desired name
- Check for exact matches and similar names
Pro tip: Search for common misspellings and similar-sounding names. If “Lone Star Consulting LLC” exists, “Lonestar Consulting LLC” may be rejected as too similar.
Reserve Your Name (Optional)
If you’re not ready to file immediately, you can reserve your LLC name for 120 days:
- Filing Fee: $40
- How to File: Submit Form 501 to the Secretary of State
- Duration: 120 days, renewable once
Step 2: Appoint a Texas Registered Agent
Every Texas LLC must have a registered agent—a person or company that receives legal documents and official state correspondence on your behalf.
Registered Agent Requirements
Your registered agent must:
- Have a physical street address in Texas (no P.O. boxes)
- Be available during normal business hours
- Accept service of process and official mail
Your Options
Option 1: Be Your Own Registered Agent
- Free, but requires you to be available at a Texas address during business hours
- Your address becomes public record
- Miss a delivery, and you might miss a lawsuit deadline
Option 2: Appoint a Friend or Family Member
- Free, but puts responsibility on someone else
- Their address becomes public record
Option 3: Use a Professional Registered Agent Service
- Typically $50-$300 per year
- Keeps your personal address private
- Ensures reliable document handling
- IncCraft offers registered agent service included with formation packages
Step 3: File Your Certificate of Formation
The Certificate of Formation (Form 205) is the official document that creates your Texas LLC. You can file online or by mail.
Information Required
- LLC Name: Your chosen name with “LLC” designation
- Registered Agent: Name and Texas street address
- Governing Authority: Whether the LLC is member-managed or manager-managed
- Organizer: Name and address of the person filing (doesn’t have to be a member)
- Duration: Perpetual (most common) or a specific end date
- Purpose: General purpose is acceptable—no need to be specific
Filing Methods
| Method | Processing Time | Cost |
|---|---|---|
| Online (SOSDirect) | 2-3 business days | $300 |
| 5-7 business days | $300 | |
| Expedited | 24 hours | $300 + $25 |
How to File Online
- Create a SOSDirect account at sos.state.tx.us
- Select “Formations” then “Limited Liability Company”
- Complete Form 205 with your LLC information
- Pay the $300 filing fee by credit card
- Download your filed Certificate of Formation
Pro tip: Keep your confirmation number. You’ll need it to check status and download documents.
Step 4: Create an Operating Agreement
Texas doesn’t legally require an operating agreement, but you absolutely should have one. This internal document outlines:
- Ownership percentages
- Profit and loss distribution
- Member voting rights
- Management structure
- What happens if a member leaves or dies
- Dissolution procedures
Why It Matters
Without an operating agreement:
- Texas default LLC laws govern your business (which may not reflect your intentions)
- Banks may refuse to open business accounts
- Disputes between members have no clear resolution process
- Your LLC’s liability protection could be challenged in court
Single-Member LLCs Need One Too
Even solo LLC owners should have an operating agreement. It:
- Reinforces the separation between you and your business (crucial for liability protection)
- Provides documentation if your LLC status is ever challenged
- Makes adding partners easier later
Step 5: Get Your EIN (Employer Identification Number)
An EIN is your business’s federal tax ID number. You need one if your LLC:
- Has employees
- Has multiple members
- Files certain federal tax returns
- Opens a business bank account (most banks require it)
How to Get an EIN
The IRS issues EINs for free:
- Go to IRS.gov/EIN
- Complete the online application (takes about 10 minutes)
- Receive your EIN immediately upon completion
Requirements: You need a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to apply online. The responsible party must have a valid taxpayer ID.
Step 6: Open a Business Bank Account
Separating business and personal finances is essential for:
- Maintaining your liability protection
- Simplifying taxes and bookkeeping
- Building business credit
- Looking professional to clients
What You’ll Need
Most banks require:
- Certificate of Formation (filed and stamped)
- EIN confirmation letter
- Operating Agreement
- Government-issued ID
- Initial deposit (varies by bank)
Bank Options in Texas
Texas has strong regional banks that cater to small businesses:
- Frost Bank
- Texas Capital Bank
- Comerica
- Plus national options like Chase, Bank of America, and Wells Fargo
Step 7: Understand Texas Franchise Tax Requirements
Texas has no state income tax, but it does have a franchise tax that applies to most businesses. Here’s what LLCs need to know:
Who Pays Franchise Tax?
All Texas LLCs must file a franchise tax report, but most small businesses owe nothing:
- No Tax Threshold: LLCs with annualized total revenue under $2.47 million (2024) owe no franchise tax
- EZ Computation: LLCs with revenue between $2.47M and $20M may use simplified calculations
- Standard Computation: Larger businesses use the full calculation method
Filing Requirements
| Revenue | Form Required | Due Date |
|---|---|---|
| Under $2.47M | No Tax Due Report (Form 05-163) | May 15 |
| $2.47M – $20M | EZ Computation Report (Form 05-169) | May 15 |
| Over $20M | Long Form (Form 05-158) | May 15 |
Important: Even if you owe no tax, you must file the No Tax Due Report. Failure to file can result in penalties and even forfeiture of your LLC.
Public Information Report
Along with your franchise tax report, you must file a Public Information Report (PIR) that updates your:
- Principal office address
- Registered agent information
- Officer/director/manager information
Step 8: Obtain Business Licenses and Permits
Texas doesn’t have a general state business license, but depending on your industry and location, you may need:
State-Level Licenses
Certain professions require state licensing:
- Contractors (Texas Department of Licensing and Regulation)
- Real estate agents (Texas Real Estate Commission)
- Healthcare providers (Texas Medical Board, Board of Nursing)
- Food service (Texas Department of State Health Services)
- Alcohol sales (Texas Alcoholic Beverage Commission)
Local Licenses
Cities and counties often require:
- General business permits
- Zoning approval
- Health department permits
- Fire department inspections
- Signage permits
Check with your city clerk’s office and county clerk to determine local requirements.
Texas LLC Costs Summary
| Item | Cost | Frequency |
|---|---|---|
| Certificate of Formation | $300 | One-time |
| Registered Agent Service | $0-$300 | Annual |
| EIN | Free | One-time |
| Name Reservation (optional) | $40 | One-time |
| Operating Agreement | $0-$500 | One-time |
| Franchise Tax Report | $0 | Annual |
| Minimum Total | $300 |
No tax due for LLCs under $2.47M in revenue
Timeline: How Long to Form a Texas LLC
| Step | Time Required |
|---|---|
| Choose name and check availability | 1 day |
| Prepare Certificate of Formation | 1 day |
| State processing (standard) | 2-3 business days |
| State processing (expedited) | 24 hours |
| Get EIN | Same day |
| Open bank account | 1-3 days |
| Total (standard) | 5-7 business days |
| Total (expedited) | 2-3 business days |
Common Mistakes to Avoid
- Skipping the Operating Agreement: Even single-member LLCs need this document to protect their liability shield
- Missing Franchise Tax Filings: Even with no tax due, you must file annually or risk forfeiture
- Using a P.O. Box for Registered Agent: Texas requires a physical street address
- Commingling Funds: Mixing personal and business money weakens your liability protection
- Choosing a Name Too Similar to Existing Businesses: The Secretary of State will reject names that could cause confusion
- Forgetting Local Permits: State formation is just the beginning—check city and county requirements
- Not Getting an EIN: Even single-member LLCs benefit from having a separate tax ID
Texas LLC vs. Other States
Entrepreneurs sometimes consider forming in other states. Here’s how Texas compares:
| Factor | Texas | Delaware | Wyoming |
|---|---|---|---|
| Filing Fee | $300 | $90 | $100 |
| Annual Fee | $0 | $300 | $60 |
| State Income Tax | None | None | None |
| Privacy | Moderate | High | High |
| Best For | Operating in TX | Venture-backed | Privacy-focused |
For LLCs under $2.47M revenue
Delaware has no state tax on out-of-state income
Bottom line: If you’re doing business in Texas, form your LLC in Texas. Forming elsewhere means registering as a foreign LLC in Texas anyway—paying fees in both states.
After Formation: Ongoing Requirements
Once your Texas LLC is formed, maintain it properly:
Annual Requirements
- File Franchise Tax Report (even if no tax due) by May 15
- File Public Information Report with franchise tax
- Maintain registered agent
- Keep operating agreement current
As Needed
- Update registered agent if you change services
- Amend Certificate of Formation if business name, address, or structure changes
- File annual reports with any professional licensing boards
Start Your Texas LLC Today
Texas offers one of the best environments in the country for starting a business. No state income tax, strong legal protections, and a massive consumer market make it an ideal place to launch your LLC.
IncCraft handles your Texas LLC formation quickly and correctly. We file your Certificate of Formation, obtain your EIN, and provide registered agent service—so you can focus on building your business.
Ready to form your Texas LLC? Get started with IncCraft today.