Forming an LLC (Limited Liability Company) in Texas is easy and affordable. The following are few procedural steps on how to start an LLC in Texas. LLCs can be formed in two ways, domestic and/or foreign. If you are planning to set up an LLC in states other than Texas, visit How to Start an LLC.
On this page, you’ll learn about the following:
- How to Start a Texas LLC
- After Starting your Texas LLC
- Why an LLC in Texas
- Top Businesses in Texas
- Texas LLC Formation Review
How to Start a Texas LLC
Suppose you’re planning to invest in some profitable business or maybe about to set up your business in Texas. In that case, forming an LLC in Texas is the simplest form of business for you. LLCs are a good option for the owners as it reduces the personal liability for company and business debt.
An LLC or a Limited Liability Company a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. This section gives you a simple – but essential – step-by-step guide on How to Start an LLC in Texas.
Step 1: Decide a Name for Your LLC
If you are to start an LLC in Texas, the first thing you do is decide on a business or company name, and how to name your LLC may be tricky. Thus, you have the option to choose a name that complies with the Texas business naming requirements. It must also be easily searchable for potential clients. Here is the step-by-step guide to follow when naming your Texas LLC.
Why do you need a proper business name?
If you want your LLC to have special identification, your company name is essential. However, many people face lots of issues by avoiding focus on choosing a business name for their LLC business formation filings.
Because of this, here are some of the major benefits of choosing the best LLC corporate names.
- To help establish a company’s presence in the market, a proper business entity type will help you. This also creates a new identity that will resemble your LLC.
- After you’ve properly chosen the name for your LLC, you will have no problems finishing the registration process.
- You can only get the EIN number when you have your name registration certificate with you.
What are the requirements when deciding a name for your LLC?
A name search is vital to make sure your business’ name is unique. Check the availability of your name with Business Entity Search on the Texas Secretary of State’s website. Reserve the name by completing the Name Reservation Request Form for Domestic Entities.
- Don’t include words that could confuse people about your company. Words like ‘treasury, state department.’
- You should also avoid restricted words like ‘bank, attorney, university,’ because they may require a lawyer and more paperwork.
- As for a business website and your URL name, check if your name is still available for domain use with NameCheap.
Reserve a business domain
Even if you don’t have plans to set up a website today, it will help if you buy a domain to avoid others from using your name for their website, so do visit NameCheap for your domain name and Kinsta for web hosting.
If you have decided on your URL name and have reserved it, set up a professional email account with Google GSuite.
Step 2: Assign a Registered Agent in Texas
A registered agent, or business entity, is a person that will act or work on your behalf. This person or business will receive significant tax forms, legal forms, formation documents, any internal document, a notice of lawsuits, and other official government correspondence in Texas. Choosing a Texas-registered agent for service of process for your LLC is required.
Make sure your registered agents are residents of Texas or have a physical street address. It could also be a business with an office address. Here are the recommended agent service provider list and employees for you:
Our Rating & Pricing
#1 TOP PICK
$49 + State Fees
$299 + State Fees
$399 + State Fees
These five LLC formation services are recommended agents’ registered services as they are authorized to conduct business in Texas. Compare them to check the best yet cheapest option for you. Besides, these professional service providers can guarantee you services like filing services to their potential customers because they have been in the business for years.
Step 3: File Certificate of Formation in Texas
A Certificate of Name Reservation is needed to file a Certificate of Formation, as other states call it. You need to make reports of this certificate with the Texas Secretary of State. You may file them online or by mail. The filing cost is $300
This Certificate of Formation is a legal document needed to form your business officially. It will indicate details about your LLC in Texas, like if it is a member-managed or managers-managed. LLCs with employees need to check the Texas government portal for guidelines to hire employees.
Before you start filings, you must already have your LLC name and registered agents or employees. You will attach a copy of your Name Reservation Certificate along with a list of the services that your Texas LLC will offer. The filings come with a state filings cost of $50.
How to File Online
Go to the Secretary of State Online Service. Select “non-subscriber.” Fill out the online form. The website will alert you if your county does not support online filings after selecting your principal county.
How to File by Mail
If you prefer filing real-life forms for your Texas LLC registration, then you can download the Texas Limited Company Certificate of Formation. Read the form thoroughly and fill it out. It will have to fill, among others, your name, city, state, zip code, and signature.
Step 4: Create Your Texas LLC Operating Agreement
A limited liability operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
Starting an LLC in Texas does not require you to have a liability company operating agreement, but it is ideal to have one that contains all your details of business operation.
Step 5: Filing a Texas LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify types of business for tax purposes. It is like a Social Security number dedicated to a business.
It is also called a Federal Employer Identification Number (FEIN) or a Federal Tax Identification Number (FTIN). You will need this number for tax filing and to determine tax classification options.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
After Starting your Texas LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business account
- File Texas business permits & licenses
- Get liability for business insurance with coverage for employees
- File a Texas LLC annual report or biennial report
- Already existing LLCs that wish to operate in Texas must register as a foreign Texas LLC.
This page has provided you with broad steps to LLC formation and filing processes. You now have to remember the upcoming filing deadline and filing fee, annual costs, or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Why an LLC in Texas
There can be several competitive reasons, both financially and environment-wise, so people start an LLC in Texas. One of the most common reasons is wide business funding options and tax liabilities reduction in the state. Some of the incentives from which most of the businesses are benefitted are discussed below in detail.
Support from the Secretary of State
A special act started in the Texas state under which the state will support all the limited liability companies that will form here. The state will protect all the rights of an LLC, and the requirements of the LLC are also well taken care of.
Texas Enterprise Fund
A proper cash flow is the requirement of every LLC as they start up at a small scale, and not every entrepreneur has their hands full of cash. That is why a Texas LLC will be the best choice for them to overcome the shortcomings of the LLC; the state government will help a person take a cash grant through TEF. It is basically a financial incentive scheme under which a grant is given to the selected businesses ready to produce jobs in the sector.
Since the time of its establishment, w.e.f. 2004, TEF has distributed a grant of around $600 million to many industries around the state.
Tax Climate is favorable for businesses
The biggest reason Texas is in demand to start an LLC is no personal income tax. The government launching this no income tax scheme is basically the lack of business in Texas. After that, the footfall of businesses in Texas started to increase. If we study the non-existing personal income tax, then it can be defined as:-
- Any entrepreneur who makes up money through their start-up LLC in Texas is not required to pay any money.
- Businesses can hire the best talent for their industry without profit loss tensions as the amount they earn will not be taxable, due to which they will try to give up the best for getting the best employees.
Moreover, depending on the type of business, the income tax rate that is already lower than other states will shrink more. The only situation in which an LLC will be eligible for lower-income tax is eligibility. There is a threshold business value, and if the company doesn’t exceed that value, they will enjoy zero business tax.
Top Businesses in Texas
If you are a new-age entrepreneur and want to form an LLC in Texas, you need to know beforehand about the Texas economy. You should know which are the top businesses of the state and their contribution to the GDP?
The oil and petroleum mining of the state is the most significant contributor to the Texas GDP. It is noticed that these businesses do around $262.2 billion worth of business. 1/3rd of the petrol that is consumed in the country is processed and supplied by Texas. The average annual oil production in the state is around 4.6 billion barrels out of the 187,139 wells in the state.
The oil produced in Texas is also known to export to significant parts of the world from which the state and the center are gaining huge profits.
There is a well-developed tourism business present in the state, which is growing significantly. The highest numbers of visitors that were catered by the state in the previous year were 220 million. Moreover, Texas has also become a tourism place for business meetings and discussions.
The total contribution that is made by the tourism businesses to the state is around $164 billion, out of which half is directly spent by the tourists visiting.
Texas is known to be the home of the largest number of cattle found around in the state, with about 16 million. This figure makes them a country leader in the production of sheep and goat products. It is also the top manufacturer of cotton crops in the country, grown by most rural dwellers. According to statistics, every seventh person in the state earns money through the agriculture sector, contributing around $22 billion.
Some of the small business ideas that are well implemented in Texas state are:-
- Legal consultancy firm
- Theatrical teacher
- Gift shops
Texas LLC Formation Review
Time needed: 30 minutes.
Just to recap, here are the easy steps again when forming an LLC in Texas. Click on the steps in this list to read the full detail.
- Name your Texas LLC
The first thing you must do is to choose a company name, which should include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).
- Choose a registered agent
In Texas, it is mandatory to select a registered agent for your LLC. You can check out our list of our 5 Best LLC Services in the United States.
- File a formation certificate
Filing a formation certificate is necessary when forming an LLC. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- Create operating agreement
An operating agreement is not a strict requirement but something encouraged when you start an LLC.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
A “domestic LLC” is one that conducts business in a state where it was formed. Meanwhile, a “foreign LLC” is an existing LLC that extended business to another state.
For Domestic LLCs, it is vital to have a Certificate of Name Reservation and Certificate of Formation. For the foreign LLCs in Texas, you must have a Certificate of Good Standing.
The cost to form an LLC varies per state.
Seldom do L.L.C.s use D.B.A. or a ‘Doing Business As’ name nor a fictitious business name. However, if you want to have one, you make read more about DBAs here.
This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
>Your name should have “L.L.C. or LLC” or the phrase “limited liability the business.”
>Do not include words that could create confusion between your LLC and any government business.
>Words like ‘bank, attorney, university’ are restricted as well.
>Lastly, your name should distinguish from other Texas limited liability corporations, limited partnerships, or registered limited liability partnerships.
Typically, you can file your LLC name online or by mail. Check with the state where you will set up your LLC name. Take note that the fees for business names may also vary per state.
As for a website and your URL name, check if your name is still available for URL use with NameCheap to see if your name is available as a web domain. Even if you don’t have plans to set up a website today, it will help if you buy a URL. Buying it can help to prevent others from getting your name; check out WPEngine, Kinsta, and GoDaddy for hosting and building your website.
No. Never mail these documents or payments to the Secretary of State directly.
The reason you might need an E.I.N. is that it would help for three reasons:
>Opening a business bank account
>Filing and managing federal and state taxes
>Hiring employees or agents
You are not required a Social Security number when getting an EIN You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
International EIN applicants do not need an SSN to get an EIN.