How to Start an LLC in Texas

Starting an LLC in Texas is one of the safest and most profitable ways to dip your toes into entrepreneurship. The Lone Star State makes for a fruitful ground for LLC launching, but being in the largest US state also puts you face to face with fierce competition. And since beginning an LLC business is just as important as maintaining it, you will need proper guidance to ensure that you are on top of your LLC product distribution, customer location, and more. 

Our detailed guide will walk you through the steps of how to start an LLC in Texas in 2022.

StateTexasOklahomaLouisianaNew MexicoUS Average
Population29,527,9413,959,3534,624,0472,117,5226,619,825
LLC Filing Fee$300$100$100$50$130.38
LLC Annual/Biennial Fee$0 for most LLCs (however a No Tax Due Report and Public Information Report must be filed every year)$25 (every year)$35 (every year)$0 (no fee and no information report)$89.34 (every year)
Corporate Tax Rate0%*4.00%3.5-7.5%4.8-5.9%5.60%
Nominal GDP per capita$67,235$51,861$55,213$51,481$64, 773.08
Texas has a gross-receipts tax that is set at 6.7%.7.5% if you earn more than $150,000per year5.9% if you earn more than $500,000per year

Before You Set Up an LLC in Texas

In general, an LLC company protects its founders in terms of liability and, among other benefits, enables certain tax advantages and alleviations. 

The first requirement of starting an LLC in Texas is to register the company at hand with the Texas Secretary of State (SOS)

This is necessary to complete since it allows the company to enter into public records, all the while providing the state of Texas with all relevant information needed. 

Following this step, you will also need to: 

  • Choose an idea for your LLC 
  • Name your LLC 
  • Conduct a business plan 
  • Obtain an Employer Identification Number (EIN) 
  • Appoint a registered agent 
  • File a Certificate of Formation 
  • Create an Operating Agreement 
  • Understand Texas tax requirement
  • Find solid Texas-based insurance companies

How Much Does It Cost to Start an LLC in Texas

To make forming an LLC in Texas profitable, you first need to invest in it. As with every other venture, starting an LLC will require initial costs that you will have to cover, which are as follows:

  • A $300 filing fee, paid to the Texas Secretary of State
  • Additional state-mandated 2.7% convenience fee for LLC certificate of formation 
  • $40 to file a name reservation application, paid before filing a certificate of formation
  • Your personal investments 

When launching an LLC, there are also filing fees for veteran-owned businesses, applicable to honorable discharges only.

For those wondering how to start an LLC in Texas for free, we hate to burst your bubble, but LLC launches typically come with certain mandatory payments, so doing it entirely free is not an option.

So, how much will it cost to start an LLC in Texas? 
Depending on how much you’re prepared to invest out of your own pocket, the payment range is likely to come between $600 to $1000+

Other costs to consider here include filing fees—$300 from SOS—and a reservation fee of $40. 

You will also have to cover a 2.7% convenience fee for your LLC certificate of formation.  

Launching an LLC yourself is the most profitable option to consider, but it is also the lengthiest and most complex. At the same time, you can also hire a lawyer to manage this process, though the costs for their service may double. 

Steps to Start an LLC in Texas

Steps to Start an LLC

Launching an LLC in Texas requires multiple steps to complete properly. 

You will need to complete all forms from the Texas Secretary of State. 

Next, you will have to register your business entity in the Texas SOS as well as the IRS. 

Once you have done this, creating an LLC in Texas will require completing the next five key steps:

  • Pick a name for your LLC 
  • Find a registered agent 
  • File a certificate of formation 
  • Forming an operating agreement 
  • Apply for an EIN 

Pick a Name for Your LLC

You can’t form a business identity without a name—so, the first step is to adequately name your LLC. 

Here, you want to ensure that your name is unique to your business, so it can grow into your desired brand later on.

To choose a name that is one-of-a-kind and stands out among competitors, you can concoct it yourself or use our free name generator for ideas. 

Ideally, you want to stick to a name that is easy to remember, relevant to your business, and marketable. You can try our business name generator to create interesting name ideas for your LLC. 

Once you have shortlisted a few names you like, consult the US Patent and Trademark Office next. They will let you know if any of the names you selected have been already trademarked. 

If you need additional assistance, feel free to look into the requirements in choosing a business name, laid down in the Texas Secretary of State name filing needs and their FAQs.

Once you’ve chosen a suitable LLC name, your next step is to register it via the SOS direct site

Find a Registered Agent in Texas

For safety and legal purposes, when starting your LLC in Texas, you need to hire a registered agent

The registered agent in Texas can either be an individual or a corporation that specifically receives court documents in the name of your LLC, and can be of tremendous help if your LLC ever faces a lawsuit. 

Such lawsuits can come from debt collectors that specifically target LLCs, but a registered agent helps protect your personal assets, investments, and liabilities attained by your business. 

Do You Need a Registered Agent in Texas?

Yes. Having a registered agent in Texas is a legal requirement for both LLCs and corporations which are registered with the Secretary of State. 

The agent also serves as a primary entity for contact in case of any notices or process services. 

Unfortunately, you cannot be your own registered agent and can find additional information about them in the Texas SOS agent FAQs

ZenBusiness – $49 + state fees to register your LLC (read review)
Incfile – $0 + $50 state fees to register your LLC (read review)

Certificate of Formation

Think of the certificate of formation as the paper framework of your LLC.

In essence, they hold the basic data you need to register your company within the state of Texas. 

Before you can launch an LLC in Texas, you’ll have to file Form 205 – Certificate of Formation with the Texas Secretary of State. 

Certificate of Formation

The filing process can be either done online or via the SOSDirect of Texas, with a mailing fee of $300. 

The main reason you have to complete the certificate of formation is so you provide a legally filed document to the state of Texas, including the following mandatory information: 

  • The company name 
  • The name and address of your registered agent
  • LLC members’ names and addresses 
  • The LLC cause 
  • The operating agreement 

Other Required Documents 

Besides the certificate of formation, you also have to make the following document filings to launch an LLC in Texas:

Operating Agreement

The LLC operating agreement is the blueprint of your business. As such, it ought to include outlined details on how it operates. 

The complete operating agreement should include: 

  • The ways your company functions 
  • The ways your LLC is managed 
  • Sources on how you manage and share your profits between stakeholders 

And since you’ll be launching an LLC in Texas, you are in luck, since the state does not require submission of an operating agreement as part of the registration process. Nonetheless, it is advisable to do so, because, without one, the Texas default operating rules will lead to more difficulties in keeping your LLC afloat. 

To write your own operating agreement, choose any of the available templates.
Get an EIN

Think of the employer identification number as your social security number since both work similarly. And likewise, an EIN is imperative for completing your LLC registration. 

Keep both your Taxpayer Identification Number and Social Security Number on hand when you contact the IRS via their interview application protocol. You can register at the IRS through mail, fax, or phone

The Forms You Need to Register an LLC in Texas

To register an LLC in Texas you need the following forms:

Did You Know? 
Fact 1: LLCs in Texas allow ownership flexibility. 
Fact 2: LLCs in Texas allow limited liability protection.
Fact 3: LLCs in Texas allow tax options.
Fact 4: LLCs and their owners can choose how they split the tax burden.
Fact 5: LLCs first appeared as a concept in Texas in the early 1990s. 

LLC Taxes in Texas

How much do LLCs have to pay in taxes in Texas? 

By Texas state taxes, LLCs whose revenue surpasses $1.18 million need to pay a franchise tax of 0.375%. LLCs with less than $1.18 million don’t pay this tax.
State taxes are collected by individual state governments for specific state bills, whereas federal income taxes are collected by the federal government for general bills. 

How much state taxes do LLCs in Texas have to pay?

Every May, LLCs in Texas pay the state franchise tax to the Texas Comptroller of Public Accounts, only if their revenue exceeds $1.1M.

How much federal taxes do LLCs in Texas have to pay? 

LLCs usually do not pay federal taxes. These federal taxes are only paid by their members. 

Corporate Tax Rate Texas

Taxes in Texas 

Texas has no individual income tax. Taxes are generated from sales, property, and corporate income taxes.

  • State with the best tax options for LLC: Wyoming
  • State with the worst tax options for LLC: New Jersey 
  • Here are a detailed breakdown of the top 10 best and worst states to set up LLCs in terms of taxes

Is Texas a good place to start an LLC? 

Because of the simplicity of the filing, as well as the flexibility and short waiting period, Texas is a viable state to start an LLC. 

We recommend you try one of our recommended LLC services to start an LLC in Texas. 

How Long to Form an LLC In Texas

Forming an LLC in Texas lasts anywhere from 5-7 days to a month, depending on how long you need to register a name. 

How Much Does it Cost to Run an LLC in Texas?

It takes about $300 to run an LLC, for the filing fee. There’s the state-mandated 2.7% fee, too, when filing a certificate of formation. If the LLC is foreign, the cost might reach up to $750. 

What to do after Formation? 

Registering your LLC is only the first step towards success, with the next being much more difficult—to maintain it. 

A superbly operated LLC will be covered in aspects of marketing, branding, and reporting. 

Alongside the launch, you will also need to consider the following steps:

  • Create a logo—the logo is what your LLC will be recognized by in the future.
    It needs to be unique and memorable. It should transparently showcase the services or products you offer. Choose the imagery and colors carefully, add a slogan, and select a suitable font to get your message across.
  • Build a website/eCommerce store—once your customers learn of your LLC, they’ll search the website. This means you need an online presence. Develop a sitemap with a page structure where all information is organized neatly and clearly. Don’t forget to include contact info as well, so customers can reach out. 
  • Bank account—an LLC like most companies should have a bank account for stormy days. It should be present if the revenue does not exceed the expected. It also helps separate personal assets from that of the company. 
  • Business insurance—If you want to protect your LLC even more than it is, you can find useful info in the Texas Department of Insurance, concerning general and professional liability, and worker comprehension. 
  • Annual reports—you don’t have to file annual reports with the Texas SOS if you run an LLC. Nevertheless, the LLC founder needs to file an annual franchise report. 

Along with these, you will also have to:

  • Apply for a business credit card
  • Obtain copyright on the logo
  • Obtain permits or licenses 

It is vital to meet all criteria to ensure the longevity and smooth running of your LLC. 

Resources to Start a Successful LLC in Texas

If you want to successfully start an LLC in Texas, you’ll need to know these sites like the back of your hand: 

Start Marketing Your LLC in Texas

To maintain your LLC you need to properly market it, by developing a designated marketing plan.

  • Create the logo next and promote your slogan. 
  • Launch a professional website—it will serve as your online marketing tool. 
  • Get your contact info out there—use social media, billboards, flyers, and any other means of B2C or B2B marketing.

How to Dissolve an LLC in Texas

The first thing you need in order to dissolve your LLC is to file a termination certificate from the Texas SOS. You can terminate through the SOSdirect or via mail. There’s also an additional associate fee you pay during the process. 

To dissolve an LLC, you’ll need to provide proof that you met all your designated tax responsibilities. Before you can officially terminate, you will receive a certificate of account status.

Conclusion

Texas is a sublime state of choice for starting an LLC business. 

Its welcoming economic climate, limited taxes, and asset protection perks are some of the key reasons to scale your LLC there. 

Texas is also one of the most flexible states in the US for new businesses since it pays special attention to all parties involved. And with a straightforward launching process, we hope you found our review of the costs, benefits, and governmental institutions of launching an LLC in Texas useful.  

Frequently Asked Questions (FAQ)

LLCs need to pay the annual franchise tax and the flat-rate sales tax. You might be able to omit the annual franchise tax if your LLC’s revenue is below the threshold. LLCs might also be required to pay local sales taxes.

Contact the Texas Secretary of State first. Then, choose a name for the LLC, get a registered agent, file a certification of formation, wait for the state to send you the certificate, file an operating agreement, set your EIN, and prepare the LLC franchise tax amount of 0.375%, only applicable to LLCs with annual revenue ranging between $1.8 million and $10 million.

You can have your Texas LLC set in 5-7 business days. The process might take longer if you don’t provide all details required to file a certification.

A Texas LLC expires after one year, and it can get renewed for an additional one-year term. All Texas-based LLCs submit annual reports every year, by May 15.

All corporations that regularly conduct businesses under a name other than their legal name in Texas must file a DBA, or ‘doing business as’ or a ‘trade name.’

There are no annual fees for LLCs but there’s an annual franchise tax that you can avoid if your revenue falls below the threshold.

Matija Kolaric

Amazing content is the core of what we do. With more than 5 years of experience in branding, name development, and business, Matija helps create and manage content production.

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