How to Start Your Own LLC in Texas

An LLC shields your personal assets from business debts or lawsuits and allows profits and losses to pass through to members' personal tax returns, avoiding corporate double taxation.

Here's a detailed guide to forming an LLC in Texas, step by step.

1. Name Your Texas LLC

Choosing a business name is one of the most important steps when forming an LLC. Your name represents your brand and first impression, so it should be memorable, unique, and reflective of your business. Start by clarifying your business concept, brainstorming with friends or mentors, and searching online for availability. Online business name generators can be useful for inspiration, but human creativity is essential to capture your brand's essence.

After generating potential names, you must ensure compliance with Texas naming regulations. Your LLC name must include "Limited Liability Company," "LLC," or "L.L.C." It cannot include words that could mislead others into thinking your business is a government agency, suggest unlawful activity, or reference restricted terms like veteran, legion, foreign, Spanish, disabled, war, world war, lotto, or lottery.

Check both the Texas Comptroller's business database and the U.S. Patent and Trademark Office to ensure your desired name is available locally and nationally. While Texas does not require you to reserve a name, doing so locks it for 120 days for a fee of $40. Name reservation can be completed online through the Texas Secretary of State's website or via mail.

Doing Business As (DBA)

If you plan to operate under a different name than your LLC, you'll need a DBA, called an "assumed name" in Texas. This allows you to brand multiple product lines or business ventures under the same LLC. DBAs cannot be filed online and require mailing a form to the Secretary of State, with a typical registration fee between $15–$25 depending on your business type. Assumed names are valid for ten years.

2. Select a Registered Agent

Texas law requires all LLCs to appoint a registered agent. This is an individual or service designated to receive legal and official business correspondence. The registered agent must be at least 18 years old, have a physical Texas address, and be available during standard business hours.

While you can serve as your own agent, many entrepreneurs hire professional services for convenience, compliance, and privacy. This ensures you never miss critical legal notices and allows you to operate your business without being tied to a specific office location.

3. Determine Your Management Structure

An LLC in Texas can be either member-managed or manager-managed. In a member-managed LLC, all members actively handle day-to-day operations and decision-making. Manager-managed LLCs designate specific managers to oversee operations, while some members remain passive investors.

Member-managed structures are ideal for smaller LLCs where all owners are involved. Manager-managed LLCs work better for larger groups or when some members prefer to remain hands-off. By default, if your Texas LLC does not specify a management structure, it is considered member-managed.

4. File a Certificate of Formation

The Certificate of Formation (sometimes called Articles of Organization) is the official document that legally creates your LLC. Filing can be done online through the Texas Secretary of State's SOSDirect system or via mail.

You'll need to provide:

• The LLC name
• Registered agent and office information
• Governance structure (members or managers)
• Business purpose
• Principal address and organizer information
• Effective date

The filing fee is $300, and online submissions are typically processed within 5–7 business days. Mail filings take longer unless you pay for expedited processing. Once approved, you'll receive a Certificate of Formation confirming your LLC's legal creation.

5. Draft an Operating Agreement

Although Texas does not legally require an operating agreement, it is strongly recommended. This internal document defines ownership, roles, and procedures, helping prevent conflicts and protecting your limited liability.

A comprehensive operating agreement typically includes:

• Member details and ownership percentages
• Management responsibilities and voting rights
• Procedures for profit distribution
• Rules for adding or removing members
• Dispute resolution and record-keeping

While templates are available online, consulting an attorney ensures that your agreement is enforceable and customized to your LLC's needs.

6. Obtain an Employer Identification Number (EIN)

An EIN is a federal tax ID required for multi-member LLCs, hiring employees, or opening business bank accounts. You can apply for an EIN online via the IRS website. The IRS requires a responsible party's legal name and Taxpayer Identification Number (usually your SSN) to complete the application.

7. Obtain Business Licenses and Permits

Licensing requirements vary depending on your industry and location. Texas does not have a general business license, but you may need state or local permits for certain activities, such as selling alcohol, food service, childcare, or professional services.

If your business sells taxable goods or services, you will also need a sales tax permit from the Texas Comptroller's office. Always check city and county regulations for zoning, building, or signage permits. Operating without proper licenses can result in fines, penalties, or forced closure. Consulting a business attorney or a service like MyCorporation can simplify this process.

8. Determine Your Tax Status

By default, LLCs are pass-through entities, meaning profits and losses flow directly to members' personal tax returns. Single-member LLCs are taxed like sole proprietorships, while multi-member LLCs are treated as partnerships. Members pay self-employment taxes on their share of profits.

LLCs can elect corporate taxation by filing IRS forms:

• C-Corporation: The LLC pays corporate tax on profits, and dividends distributed to members are taxed again individually. This can help retain profits within the business.
• S-Corporation: Profits and losses pass through to members, but members must receive a reasonable salary subject to payroll taxes. Remaining profits are distributed without self-employment taxes, offering potential tax savings.

9. Open Your Business Bank Account

Separating personal and business finances is critical for legal protection and accurate accounting. To open a business bank account, you will need your EIN and Certificate of Formation. Many banks also require a copy of your operating agreement.

Additional Financial Steps

• Business Credit Card: Helps build business credit and manage expenses.
• Business Insurance: Consider general liability, professional liability, workers' compensation, property insurance, or a Business Owner's Policy (BOP) for comprehensive coverage.

10. Maintain LLC Records and Annual Reporting

Keep all LLC documents, contracts, and financial records organized. In Texas, LLCs must file an annual franchise tax report and a Public Information Report by May 15 each year. Even if no tax is owed, failing to file can result in penalties, interest, and loss of good standing.

Texas LLC FAQs