How to Start an LLC in Texas? | 11 Steps To Follow
Texas is one of the best states to start an LLC. No state income tax, a massive consumer market, and a Secretary of State office that doesn't make the process harder than it needs to be — it's a combination that's hard to beat for first-time founders.
Our team has spent time working directly with Texas formation services, tested registered agents operating in the state, and consulted with business attorneys familiar with Texas-specific requirements to put this guide together.
Here's exactly what you need to do to get your Texas LLC up and running.
Starting a different business structure? Check our guide on how to start a business in Texas.
Quick Summary:
- To start an LLC in Texas, choose your LLC type, pick a business name, appoint a registered agent, and file your Articles of Organization with the Texas Secretary of State.
- Texas is one of the most business-friendly states in the country — especially for small LLCs looking for a straightforward setup process.
- Small businesses make up 99.8% of all business entities in Texas — that's 3.2 million companies, according to the U.S. Small Business Administration.
- In our experience, forming an LLC in Texas is one of the smarter moves a new entrepreneur can make, given the state's favorable policies and relatively simple filing process.
How To Start an LLC in Texas?
To start an LLC in Texas, you'll need to file the right formation documents with the state and follow the specific rules set by the Texas Secretary of State. Here's how to do it, step by step.
1. Choose the Type of Your Texas LLC (Mandatory)
In the dynamic Texas business environment, small businesses account for an astounding 99.8% of all enterprises, totaling 3.2 million, according to U.S. Small Business Administration data [1].
This highlights the critical role these entities play in the Texan economy and underscores the strategic necessity of choosing the appropriate LLC structure to thrive in this vibrant marketplace.
Therefore, when choosing the type of Texas LLC, consider the two primary structures: Single-Member LLC and Multi-Member LLC.
Single-Member LLC
It is ideal for solo entrepreneurs; it offers simplicity in management and tax filing. The major advantage is the ease of set-up and operation, as there's no need for complex agreements or decisions by multiple members.
However, this simplicity can be a disadvantage, as it may lack robustness in operational structure and decision-making, potentially impacting business growth and investment opportunities.
Multi-Member LLC
It is suitable for businesses with multiple owners. It provides a clear structure for decision-making and profit-sharing, fostering collaboration and potentially attracting more investors.
The complexity of management, however, is a drawback. Multi-member LLCs require detailed operating agreements and more intricate tax filings, which can be challenging for those inexperienced in business administration.
Both structures offer limited liability protection, but the choice largely depends on the size and nature of your business.
2. Choose a Name for Your Texas LLC (Mandatory)
Your LLC name is the first thing clients, vendors, and banks will see — so it's worth getting right. The name needs to reflect what your business does and comply with Texas naming rules. I've seen first-time founders skip this step too quickly and run into problems later.
The biggest pitfall: choosing a name that's already taken. Texas requires your LLC name to be unique, so you'll need to verify availability before filing. A quick search on the Texas Secretary of State's website will tell you whether the name's already in use.
To look up a Texas LLC, check the Texas Secretary of State's website or use online business name databases to verify availability [2].
Make sure your chosen name also meets the Texas LLC naming requirements — including the required "LLC" or "Limited Liability Company" designation.
The state of Texas has very strict rules as to what terms you can or can not use in Texas business names. The state requires that all business names include the Roman alphabet and Arabic numerals, if needed.
For some terms, especially those involving banking, education, engineering, and sports, you will need additional permissions issued by appropriate State Boards.
To obtain a comprehensive list of terms you can or can not use in your Texas LLC name, get help from the Texas Comptroller of Public Accounts website [3].
Read our article if you need to change your LLC name in Texas.
3. Select a Registered Agent (Mandatory)
The Texas Secretary of State requires business owners to appoint a registered agent in Texas.
You'll get all the names and addresses of Texas agents on the Texas Secretary of State's website [4].
The registered agent will:
- Be a point of contact between your LLC and the Texas State government
- Receive important legal and tax documents on behalf of your business
- File an LLC annual report in Texas and annual franchise tax
Their service keeps you informed and helps you stay on top of the state's compliance requirements — which matters more than most new founders realize.
4. File Texas Articles of Organization (Mandatory)
To officially register your LLC in Texas, you'll need to file Articles of Organization with the Secretary of State.
This document formally registers your business and provides essential information, such as:
- The LLC's name
- Registered Agent
- Management structure and members
- Purpose of the LLC
You can file online or by mail. Either way, you'll owe a non-refundable filing fee of $300. Once filed and approved, your LLC is officially recognized by the state.
Steps to Take After Forming an LLC in Texas
Filing your Articles of Organization is the finish line for formation — but it's really just the starting point for running your business. Texas small businesses employ 5 million people, accounting for 44.3% of the state's workforce, according to the U.S. Census Bureau [5]. Getting the post-formation steps right sets you up to be part of that.
5. Create a Texas LLC Operating Agreement (Optional, but Recommended)
A Texas LLC operating agreement spells out the rights and obligations of each member and defines how the business is managed day to day.
Operating Agreements can regulate many aspects of your business, including:
- How profits are distributed
- What happens to excess cash when it's not needed for operations or expansion
- The duties and responsibilities of the managers
- How decisions are made in the LLC, such as voting rights
- What happens to members' interests if they die or want to leave?
Texas doesn't legally require an operating agreement, but I'd strongly recommend having one anyway — especially if there's more than one member. Without it, disputes get messy fast.
Related Articles:
- How to Get a Series LLC in Texas
- Removing a Member From a Texas LLC
- Best Texas LLC Filing Services
- How Long Does It Take to Form an LLC in Texas
6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)
An EIN is your LLC's federal tax ID — and you'll need one to open a business bank account, hire employees, or file certain tax returns.
The good news: it's free, and the IRS application takes less than 10 minutes online. In most cases, you'll get your EIN the same day. In our experience, this is one of the easiest steps in the whole process, so don't put it off.
You can also apply online at the IRS website or hire someone else to do it on your behalf [6].
The benefits of obtaining an EIN are that it allows you to open a business bank account, apply for loans, and form other legal entities.
7. Open an LLC Bank Account (Optional, but Recommended)
Once your Texas LLC is legally established, opening a dedicated business bank account is a smart move — even though it's not required.
Keeping your personal and business finances separate protects your liability shield. If you're commingling funds, a court could pierce the corporate veil and hold you personally responsible for business debts. That defeats the whole purpose of forming an LLC.
To open an LLC bank account in Texas, you'll typically need your LLC's EIN, a copy of the Texas LLC Articles of Organization, and possibly a resolution identifying authorized signers if there are multiple members in the LLC.
Call the bank ahead of time to confirm exactly what they need — the list varies by institution.
A dedicated business account also makes tax season a lot less painful. Clear records, clean separation, and a paper trail your accountant will actually appreciate.
8. File Your Texas LLC Annual Report
Texas doesn't require LLCs to file an annual report the way most other states do.
Instead, LLCs in Texas are obligated to file an annual franchise tax report.
This report serves a similar function — it gives the state updated information about your company's revenue and determines what franchise tax you owe. Most LLCs operating in Texas are required to file it.
The due date is May 15th each year. Missing it can trigger penalties and, if left unresolved, could eventually cost you the right to do business in the state.
For the most current forms and thresholds, check the Texas Comptroller's website directly. Tax rules shift, and you don't want to rely on outdated guidance.
9. Obtain Business Licenses and Permits
Forming your LLC is separate from getting licensed to operate. Depending on what your business does, you may need federal, state, or local licenses — and the Texas Secretary of State's office doesn't handle any of them.
Licensing is managed by whichever state agency oversees your industry. For example, if you're opening your LLC in Dallas County, you'll need to apply directly with the county clerk's office for an occupational license.
Contact the relevant agency to find out what's required, what it costs, and how long it takes. Don't assume you're covered just because your LLC is registered.
10. Texas Public Information Report (Mandatory)
Along with your annual franchise tax report, Texas LLCs must file a Public Information Report (PIR). I've seen this catch a lot of founders off guard — they handle the franchise tax filing and forget the PIR entirely.
The PIR gives the Texas Comptroller updated details about your LLC, including the names and addresses of officers, directors, and your registered agent. It's a transparency requirement, and Texas takes it seriously.
The PIR is due on May 15th, filed alongside your franchise tax report. Here's the part that surprises most people: even if your LLC qualifies for a franchise tax exemption, you still have to file the PIR.
Skipping it can lead to penalties and put your LLC's standing with the state at risk. Check the Texas Comptroller's website for the current forms before you file.
11. Choosing Your Tax Structure
Your tax classification is one of the most consequential decisions you'll make when setting up your Texas LLC. The good news is you have options — and you don't have to lock in the wrong one forever.
Default Tax Classification:
- Sole Proprietorship/Partnership (for single-member or multi-member LLCs, respectively): By default, Texas LLCs are pass-through entities. Income flows directly to members, who pay self-employment tax on it, plus franchise tax on the LLC's revenue. This avoids the double taxation that corporations face.
Elective Tax Classification:
- C-Corporation: Electing C-Corp status means your LLC pays corporate taxes — and then shareholders pay taxes again on dividends. That double taxation is a real downside for most small LLCs. This option usually only makes sense at a certain scale or with specific investor requirements.
- S-Corporation: S-Corp election gives you liability protection and pass-through taxation, but with one key difference: shareholders pay self-employment tax only on their salary, not on the full profit distribution. For LLCs generating solid profit, this can mean real tax savings. Worth talking through with a CPA.
Texas LLCs enjoy significant tax flexibility and benefits, like avoiding double taxation prevalent in C-Corporations. The income is taxed once at the member's income tax rate.
Additionally, Texas does not impose a state income tax on individuals, further simplifying tax obligations for LLC owners.
I would recommend the default pass-through classification for most small to medium-sized LLCs. This structure simplifies tax filing and minimizes the tax burden by avoiding double taxation. It is particularly beneficial in Texas, given the state's favorable tax policies for LLCs.
The tax structure of an LLC can be changed by filing Form 8832 with the IRS. The election to change the classification cannot take effect more than 75 days before the election is filed and not later than 12 months after filing.
Also, for certain taxes in Texas, quarterly reports are due in April, July, October, and January
Benefits and Drawbacks of an LLC in Texas
Benefits:
- Limited Liability Protection: Your personal assets — your house, your savings, your car — are protected from business debts and legal judgments. That's the core reason most founders choose an LLC over a sole proprietorship or partnership.
- Tax Flexibility: Texas LLCs default to pass-through taxation, so profits and losses flow directly to your personal return. No double taxation. And if a corporate tax structure works better for your situation, you can elect that too.
- Ease of Formation and Maintenance: Compared to a corporation, forming and running a Texas LLC is straightforward. There are no mandatory board meetings, fewer formalities, and lighter ongoing compliance requirements — which is a real advantage for solo founders and small teams.
- Credibility and Name Protection: An LLC signals to clients and vendors that you're running a legitimate business. It also locks in your business name at the state level — no other Texas LLC can register the same name once yours is on file.
Drawbacks:
- Franchise Tax Obligations: Although Texas does not levy a personal income tax, LLCs are subject to a franchise tax, also known as the “Margin Tax.” This applies to businesses with gross receipts above a certain threshold and requires careful financial planning.
- Limited Growth Potential: For businesses planning to go public or seeking significant outside investment, an LLC might not be the ideal structure. Investors and venture capitalists often prefer corporations for their familiar structure and the ability to issue stock.
- Complexity in Multi-Member LLCs: When an LLC has multiple members, issues like profit sharing, management, and the transfer of membership interests can become complex. Proper legal agreements are essential to avoid disputes.
- Self-Employment Taxes: Members of an LLC are considered self-employed and must pay self-employment taxes on their share of the profits. This can be higher than the taxes on wages from employment.
"Texas does not levy a business income tax, but it does apply a franchise tax to specific enterprises. Companies earning less than $2.47 million are exempt from this tax. Those generating up to $20 million in revenue are subject to a 0.331% tax rate. Meanwhile, larger companies are taxed at rates of either 0.375% or 0.75%, based on their business category."
- Jon Morgan, Co-Editor & Co-Founder of Venture Smarter
DIY vs. Professional LLC Formation
There are two ways to form your Texas LLC: do it yourself or hire a formation service. Both can work. The right call depends on your budget, how comfortable you are with paperwork, and how much your time is worth.
Here's how they stack up:
DIY LLC Formation
Pros:
- Cost-Effective: You only pay the $300 Texas state filing fee — no service fees on top of that.
- Control and Learning: You'll understand your LLC's legal structure inside and out, which pays off when questions come up later.
Cons:
- Time-Consuming: Learning the process and completing everything correctly takes longer than most people expect.
- Risk of Errors: Without professional guidance, it's easy to make mistakes on forms or miss Texas-specific requirements — and rejections mean delays and re-filing costs.
- No Legal Advice: If your LLC has multiple members, complex ownership, or specific liability concerns, you're on your own figuring that out.
Professional LLC Formation Services
Pros:
- Expert Guidance: A good formation service knows Texas requirements cold and will catch problems before they become rejections.
- Time-Saving: They handle the paperwork so you can focus on actually building your business.
- Error Reduction: Fewer mistakes, fewer delays, and a smoother process overall.
Cons:
- Additional Cost: You'll pay service fees on top of the $300 state filing fee.
- Less Hands-On Control: You're handing off the process, which means less direct involvement — and less familiarity with the documents you're signing.
Professional LLC Formation Services
Pros:
- Expertise and Efficiency: Professional services bring expertise in state-specific regulations, ensuring that all paperwork is correctly filed. This can save time and prevent delays.
- Legal Compliance and Customization: Many services offer additional legal compliance support and can customize the LLC to your specific needs.
- Peace of Mind: Using a professional service provides peace of mind, knowing that experts are handling the process.
Cons:
- Cost: Professional services come with a fee, in addition to the state filing fees. This can be a significant factor for budget-conscious entrepreneurs.
- Less Hands-On Involvement: You may have less involvement and understanding of the intricate legal details of your LLC formation.
Choosing between DIY and professional LLC formation in Texas depends on individual preferences, business complexity, time availability, and budget.
If cost-saving is a priority and you have the time and confidence to navigate the process, DIY could be a good choice. However, for those seeking expertise, efficiency, and peace of mind, especially in more complex cases, professional services are a valuable investment.
Ultimately, the decision should align with your specific business needs and personal comfort with handling legal procedures.
FAQs
What Happens to LLC When an Owner Dies in Texas?
When an LLC owner dies in Texas, the provisions in the operating agreement will dictate the actions the members should take. Generally, the deceased's share will be transferred to their estate or designated beneficiary.
Can a Single-Member LLC Be a Parent Company in Texas?
In Texas, a single-member LLC can be a parent company regardless of whether single-member or multi-member. Parent companies are usually not doing business in the state they're set up (i.e., their home state), but often child companies do business. Hence, they need to be registered locally.
References:
- https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-TX.pdf
- https://www.sos.state.tx.us/search.shtml
- https://comptroller.texas.gov/
- https://www.sos.state.tx.us/corp/registeredagents.shtml
- https://www.census.gov/programs-surveys/susb.html
- https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
