How To Form an LLC In Texas (TX)?

Want to learn how to form an LLC in Texas? There are plenty of reasons to! It comes with certain tax benefits, makes it easier to manage your business, and gives you perks of liability protection.

Texas is one of the states in the US that have adopted the Uniform Limited Liability Company Act. This Act includes many regulations and laws, making forming an LLC in Texas quite confusing. That is why we have drafted this guide to walk you through the steps of forming an LLC in Texas.

Let’s dive in!

Choose a Name for Your Texas LLC

The first step in forming your LLC in Texas is choosing a business name. As a general rule, you need to pick a name that your potential customers can easily remember, search, and pronounce.

Be sure that the chosen business name relates to your Texas business activities and complies with the Texas LLC naming requirements and guidelines, which include the following:

• Your chosen Texas business name must be unique and distinguishable from other LLCs.
• Your Texas business name should have the words: “limited liability company” or the acronyms “LLC” or “L.L.C” at the end.
• Restricted phrases, such as Attorney, Bank, University, etc., may need extra paperwork and a licensed professional, like a lawyer or doctor, to be part of your Texas LLC.
• The Texas business name must not confuse your LLC with government agencies (State Department, Treasury, FBI, etc.

You can learn more about Texas’s entire list of naming rules by reading the Texas Secretary of State’s naming guidelines.

It is vital to ensure that your chosen LLC name is available in Texas and not taken by another business entity by doing a Texas business name search.

The name should also be available as a web domain to help you build an online presence for your Texas business. If you don’t have plans to use the URL immediately, we recommend purchasing and trademarking it to prevent other business owners from acquiring it.

Hire a Registered Agent

The State of Texas requires all businesses to appoint a registered agent for the LLC formation process.

A registered agent is a person or business entity responsible for accepting all legal documents (such as service of process), tax documentation, and official government documents on behalf of your LLC.

To be a registered agent in Texas, you must be over the age of 18 years and have a permanent street address in Texas. You should also be available during regular business hours.

While you can appoint yourself or any other member of your LLC as a registered agent, we recommend hiring one of the following commercial registered agent service providers:

Texas Registered Agent

If you are looking for an affordable registered agent for your Texas LLC that will give you access to helpful business compliance features, consider Texas Registered Agent.

They will offer you all the essential registered agent services, including the following:

• Access to an online account
• Scanned and uploaded documents
• Free phone services for 60 days
• Tax reminders
• Access to a physical address
• Mail forwarding

Texas Registered Agent is a highly affordable choice and has no other hidden or additional costs. The price is constant yearly, with no cancellation fees or forwarding costs. Their annual fee is only $35, making them an ideal choice for business owners on a budget.

ZenBusiness

Ranked #1 on Investopedia, Fobes, and MarketWatch, ZenBusiness has an excellent reputation in the registered agent world. Although its registered agent services are slightly pricier ($199 per year), they will offer outstanding compliance resources and tools in return.

ZenBusiness even allows you to add more compliance tools by upgrading your package to include two free filing amendments per year, submitted documents on your behalf, and annual support alerts.

Another reason to hire ZenBusiness as your Texas LLC’s registered agent service provider is their charitable $5K Grant Program to help you start and grow your business.

Northwest

Northwest is another reliable and well-known registered agent service provider in Texas. They have helped over three million businesses remain compliant.

What separates Northwest registered agents is its outstanding customer support. Their experienced experts are always available to assist you with all compliance and registered agent issues.

Moreover, you get a free compliance calendar to keep track of all your crucial dates during your first year with Northwest.

Northwest’s annual fee is $125. However, you can leverage their multi-year discount if you use Northwest’s registered agent services in 5 or more states.

File an Article of Organization

Once you have picked a name for your Texas LLC and appointed a registered agent, the next step is to register your business with the Texas Secretary of State.

The simplest way to register your Texas LLC is by filing an Article of Organization online via the Texas Online Business Formation System. You will be required to create an account with your LLC name, fill out the form and pay the filing fee of $300.

You can opt for mail filing if you do not want to use the online filing method. If you apply via mail, you must download and accurately fill out two copies of the Texas Article of Organization form. Then send the filled copies together with a money order or check for the $300 state filing fee to the following address:

Business and Commercial Section, Secretary of State
P.O. Box 13697
Austin, TX 78711-3697

Regardless of whether you use the online filing or mail, you will be required to include the following details in your Article of Organization:

• The purpose of your Texas LLC
• The name and physical address of your business
• The names, email addresses, and phone numbers of all members of your LLC
• The effective date of your Texas LLC
• The name and physical street address of the appointed registered agent

Male sure you have everything ready before getting started.

Create an Operating Agreement

While LLCs in Texas are not legally required to create an Operating Agreement, it can be helpful to do so. With so much flexibility in their structure and management, Texas LLCs can work out their chosen procedures and logistics for their business entities using a written and signed Operating Agreement.

An Operating Agreement is between you and your fellow business partners. It defines the responsibilities, roles, and duties of each member of your LLC. It is also vital in solving disputes between LLC members.

A well-written Operating Agreement for your Texas LLC should include the following details:

• The management structure and style of your Texas LLC
• The loss and profit distribution
• Duties, responsibilities, and rights of every member
• The ownership percentage of every LLC member
• The procedures of LLC members leaving or selling their shares

Obtain Necessary Licenses and Permits

The Article of Organization is not the only legal document you need while forming an LLC in Texas. You must also comply with state and local government laws by acquiring the relevant licenses and permits.

The fees and requirements of your Texas LLC’s licenses and permits vary depending on the location and type of your business.

While you may not require a general business license to run a business in Texas, you may require specific ones. For example, if your Texas business sells liquor, you need the relevant operating license and permit from the Texas Alcoholic Beverage Commission.

The complete details of the licenses and permits you need for your Texas can be found at the Texas Department of Business Licensing and Regulations.

Get an EIN

A Federal and State Tax ID, also referred to as an Employer Identification Number (EIN), is a type of tax ID your LLC needs to:

• Hire employees
• Secure business licenses and permits
• Open a business business bank
• Meet your tax filing obligations required by the IRS and Texas Secretary of State

You will not need to acquire an EIN if you own a single-member LLC in Texas unless you have plans to hire employees or file income taxes as a corporation. The Texas Secretary of State views single-member LLCs as ‘pass-through” business entities.

You can apply for and acquire your EIN online via the Internal Revenue Service. The application process is straightforward and free.

Open Business Bank Accounts

While you can use your personal bank account, the best practice is to open a separate business bank account for your LLC. Having a separate account separates your Texas LLC’s finances from your personal finances.

Most business owners begin with a checking account. However, we recommend opening a business savings account and getting a business credit card.

The good news is that it is straightforward to open a business bank and credit account in Texas. You only need to visit your nearest bank with your LLC’s EIN, Operating Agreement, and Article of Organization.

There are plenty of financial institutions to choose from, too, including the following:

• American National Bank of Texas
• Fidelity Bank of Texas
• Citizens National Bank of Texas

Purchase Texas Business Insurance

An LLC is meant to protect the owner’s personal assets, but this protection is not comprehensive. Therefore, it is vital to purchase insurance policies that protect your LLC against damages and lawsuits.

The most common business insurance policies purchased by LLC owners in Texas are general liability insurance cover, professional liability insurance policy, and worker’s compensation insurance cover.

You may also need additional business insurance policies, such as unemployment insurance policy, disability insurance cover, etc. We recommend checking with the Texas Department of Insurance to learn more about the insurance requirements of your LLC.

Get a competitive quote for your Texas insurance needs by consulting a comparison site like Insureon.

Accelerate Things with an LLC Formation Package

If the process of forming your Texas appears daunting and time-consuming, and you would like assistance from an experienced expert, do not hesitate to purchase an LLC formation package.

Most companies in Texas, especially those that provide registered agent services, provide comprehensive LLC formation services that will streamline and speed up the process.

Some companies, such as ZenBusiness, even offer to form your LLC free of charge. Their Starter package is entirely free, excluding the state filing charges. They also provide a Pro package that costs $199 per year and a Premium package that will set you back $299 yearly. If you choose the Premium package, your Texas LLC will be formed in 1-2 business days.

Another excellent LLC formation company is LegalZoom. With their Basic package, LegalZoom promises to handle all the essential LLC formation services. If you have some budget, you can purchase their Pro LLC formation package at $249 a year or the Premium LLC formation package at $299.

FAQs About Forming an LLC in Texas

How Long Will It Take to Form My Texas LLC?

If you file the Article of Organization online, you can get your Texas LLC formed in 10-15 working days. Or two to three months if you file your Article of Organization by mail. If you want your Texas LLC formed faster, you can pay for expedited processing.

How Much Does It Cost to Set Up an LLC in Texas?

The cost of setting up a domestic LLC in Texas is $30n. If you are forming a foreign LLC, you can expect to pay a $750 filing fee. You can also spend between $85 to $535 to hire a registered agent in Texas.

Can I Act as my Own Registered Agent in Texas?

Yes. You can pick yourself as your own registered agent in Texas, provided you follow all the state LLC formation regulations, which include the following:

• You must be a permanent Texas resident with a street address (a P.O. box address is unacceptable).
• You must have a minimum of 18 years.
• You must be available to accept compliance documents during all working hours in Texas.

Can I Form a Single-Member LLC in Texas?

Yes. You can form a single-member LLC in Texas. However, you must follow all the relevant Texas LLC formation regulations and steps we highlighted in this article.

Conclusion

We hope you found this article on forming an LLC in Texas helpful and that you are now one step closer to launching your Texas business.

Generally, forming a Limited Liability Company in Texas is a relatively straightforward and affordable process. However, the process can be daunting and time-consuming for some business owners. If that is the case, we recommend hiring an LLC formation company.

Also see:

• Texas (TX) Secretary of State (SOS) LLC & Business Search
• Texas (TX) Registered Agent Services
• How To Find Texas Bookkeepers