Starting a business is an exciting venture, but navigating the legal requirements can be a bit overwhelming—especially when it comes to choosing the right business structure. In Texas, one of the most popular and beneficial structures for entrepreneurs is the Limited Liability Company (LLC).
Whether you’re launching a small business or planning to scale in the future, an LLC offers a unique blend of personal liability protection, tax flexibility, and ease of formation that makes it an ideal choice for many new business owners.
Forming an LLC in Texas is relatively simple compared to other states, and it’s a great option if you want to protect your personal assets while enjoying the tax benefits and operational flexibility of a small business.
The process is straightforward, with just a few essential steps required to officially establish your LLC and get it up and running. Additionally, Texas offers a pro-business environment, including no state income tax and a fast approval process for LLC formation.
This guide is designed to walk you through the step-by-step process of starting an LLC in Texas in 2025. Whether you’re familiar with business formation or just getting started, we’ll cover all the essentials—from selecting your LLC name and filing the necessary paperwork to ensuring compliance with state regulations.
By the end of this guide, you’ll be equipped with all the knowledge you need to confidently set up your LLC, avoid common pitfalls, and ensure a smooth launch for your new business in the Lone Star State.
If you’re ready to make your business idea a reality, let’s dive into the process of starting an LLC in Texas. It’s easier than you might think!
Steps to Forming an LLC in Texas
1. Search Your LLC Name
One of the first and most exciting steps in starting your LLC is choosing a name. Your LLC’s name is the identity of your business, so it’s important to select something that reflects your brand and is easy to remember.
Before you settle on a name, you must ensure that it is unique and available for registration in Texas. Here’s how you can do that:
- Check the Texas Secretary of State’s database: This database will help you confirm that the name you want isn’t already in use by another business in Texas.
- Naming Rules in Texas: Your LLC name must follow some important rules:
- It must contain the words “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.”
- The name cannot be misleading to the public. For example, you cannot use terms like “bank” or “insurance” unless your business is licensed in those industries.
- Your name cannot conflict with any registered trademarks.
Once you have a name that meets all the legal requirements and is available, you can move forward.
2. Choose a Registered Agent
In Texas, every LLC must have a Registered Agent. A Registered Agent is a person or business that is designated to receive legal documents on behalf of your LLC, such as lawsuits, subpoenas, and other official notices.
Here are the requirements for a Registered Agent in Texas:
- Physical Address: Your Registered Agent must have a physical address in Texas (P.O. Boxes are not allowed).
- Availability: The Registered Agent must be available during regular business hours to accept legal notices.
You have three options for selecting a Registered Agent:
- Choose Yourself or a Friend: You can serve as your own Registered Agent, or appoint a friend or family member who lives in Texas and is available during business hours.
- Hire a Professional Registered Agent Service: Many businesses opt to hire a professional Registered Agent service. This option is especially useful if you don’t want to list your home address or be responsible for receiving legal documents.
We recommend Northwest Registered Agent: They are a well-known service that specializes in providing Registered Agent services. They offer reliable service and guarantee compliance with Texas laws.
3. File a Certificate of Formation
The next step in starting your LLC in Texas is filing a Certificate of Formation. This document officially creates your LLC and is filed with the Texas Secretary of State.
The Certificate of Formation includes important details about your LLC, such as:
- LLC Name: The name you’ve chosen for your LLC.
- Registered Agent: The name and address of your LLC’s Registered Agent.
- Duration: This is usually “perpetual,” meaning the LLC will continue to exist until it is dissolved.
- Management Structure: You will need to indicate whether your LLC will be managed by members (owners) or by a manager.
- Business Purpose: A general statement that outlines the business’s purpose. Most businesses use a broad statement like “to engage in any lawful activity for which a limited liability company may be formed in Texas.”
To file your Certificate of Formation, you can submit the form online through the Texas Secretary of State website. The filing fee is $300. Once filed, the state will process your application, and you will receive a confirmation of your LLC formation.
4. Create an Operating Agreement
While Texas does not require LLCs to have an Operating Agreement, it is highly recommended that you create one. An Operating Agreement is a legal document that outlines the ownership structure and operating procedures for your LLC.
Some of the key things an Operating Agreement should cover include:
- Ownership: Who owns the LLC and what percentage of ownership each member has.
- Management: How decisions will be made within the LLC, and who will manage day-to-day operations.
- Profit and Loss Distribution: How profits and losses will be allocated among members.
- Responsibilities of Members: The roles and responsibilities of each member or manager.
- How to Add or Remove Members: Procedures for admitting new members or removing existing ones.
Having an Operating Agreement can help prevent disputes and provide a clear roadmap for running your business. It also demonstrates to investors and banks that your LLC is a legitimate, professionally managed company.
5. Get an EIN for Your LLC
An Employer Identification Number (EIN) is a unique number issued by the IRS that identifies your LLC for tax purposes. It’s essentially the social security number for your business. You will need an EIN if:
- You plan to hire employees.
- You want to open a business bank account.
- You want to file taxes for your LLC.
You can obtain an EIN for free directly from the IRS. The application is simple and can be done online, which means you’ll have your EIN within minutes. Keep in mind that if you have more than one member in your LLC, you are required to get an EIN, even if you don’t have employees.
What to Do After Your LLC is Approved
Once your LLC is officially approved, you can start operating your business, but there are a few additional tasks you need to complete to keep your LLC in good standing with the state of Texas.
How Much Do the Franchise Tax Return and Public Information Report Cost?
As an LLC in Texas, you are required to file an annual Franchise Tax Return (FTR) and a Public Information Report (PIR) by May 15th each year. The cost of these filings depends on your business’s revenue.
- If your business makes less than $1.18 million annually, you will be eligible for the No Tax Due Report.
- If your business makes over $1.18 million, you will be required to pay the Franchise Tax.
The filing fee for both the Franchise Tax Return and the Public Information Report is $0 if you file the No Tax Due Report. However, businesses that owe Franchise Tax will need to pay based on their taxable revenue.
When Are the Franchise Tax and PIR Due?
Both the Franchise Tax Return and Public Information Report are due annually by May 15th. Make sure to file on time to avoid penalties or the possibility of your LLC being administratively dissolved.
When Are My First Franchise Tax and PIR Due?
Your first Franchise Tax and Public Information Report are due the year after you form your LLC. For example, if you form your LLC in 2025, your first filing will be due in 2026 by May 15th.
How Do I File My LLC Franchise Tax and Public Information Report?
You can file your Franchise Tax Return and Public Information Report online through the Texas Comptroller’s website. Be sure to provide accurate information about your business’s financials to avoid any issues. The filing process is straightforward, and there are step-by-step guides available on the Comptroller’s website.
How Will My LLC Be Taxed?
The way your LLC is taxed depends on your choice of taxation. By default, LLCs are pass-through entities, which means the business’s income is passed through to the owners’ personal tax returns. This avoids the “double taxation” that corporations often face.
However, you can choose how you want your LLC to be taxed:
- Default Taxation: As a pass-through entity, you report the LLC’s income on your personal income tax return (Schedule C).
- S Corporation Election: You can elect for your LLC to be taxed as an S Corporation, which can help you save on self-employment taxes.
- C Corporation Election: You can elect to have your LLC taxed as a C Corporation, but this means your LLC will be subject to corporate income taxes.
How Much Does It Cost to Start an LLC in Texas?
Below is a breakdown of the typical costs associated with forming and maintaining an LLC in Texas:
| Item | Cost |
|---|---|
| Certificate of Formation | $300 |
| Registered Agent (if hired) | $50–$300 per year |
| Name Reservation (optional) | $40 |
| Assumed Name (DBA) Certificate (if applicable) | $25 |
| EIN (Employer Identification Number) | Free |
| Annual Franchise Tax and PIR | Varies based on income |
While there are some optional costs like name reservations and Registered Agent services, the core costs to start an LLC in Texas are fairly affordable compared to other states.
Final Thoughts
Starting an LLC in Texas is a relatively simple and affordable process, making it an attractive choice for entrepreneurs. With the state’s business-friendly environment, no state income tax, and a straightforward filing process, Texas offers an ideal setting for your business to grow and thrive.
The key steps in forming your LLC include choosing a unique and compliant business name, selecting a Registered Agent, filing the Certificate of Formation, drafting an Operating Agreement (though not legally required), and obtaining an Employer Identification Number (EIN). These steps are designed to ensure that your business is properly structured and compliant with Texas laws.
Once your LLC is approved, staying on top of your annual filing requirements is essential. In Texas, you must file an annual Franchise Tax Report and a Public Information Report by May 15th. This is necessary to maintain your LLC’s good standing with the state. Fortunately, the filing process is simple, and Texas offers plenty of resources to guide you through the process.
By choosing an LLC, you are opting for personal liability protection, flexible tax options, and a manageable reporting structure. Whether you’re running a small business or planning to expand, Texas’ legal framework and low business costs make it an attractive choice for entrepreneurs.
In conclusion, forming an LLC in Texas is an excellent decision for business owners who want flexibility, protection, and a clear pathway to success. By following the steps outlined in this guide, you can confidently start your LLC in Texas and focus on growing your business without unnecessary obstacles or complications.
FAQs
Can I form an LLC in Texas if I’m not a resident?
Yes, you can form an LLC in Texas regardless of where you live. However, your Registered Agent must have a physical address in Texas.
Do I need an Operating Agreement?
Though not required by Texas law, it’s highly recommended. It provides structure to your LLC and helps prevent future disputes among members.
Do I need to file annual reports for my LLC?
Yes, Texas requires all LLCs to file an annual Franchise Tax Report and Public Information Report. These are due by May 15th each year.