1. Choose a business name for the LLC and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
- Texas law requires that an LLC name contain the words "limited liability company," "limited company," or an abbreviation of one of these phrases. Additionally, your business name must not be the same as, or deceptively similar to, any other names on file with the Secretary of State.
- The Texas Secretary of State can provide a preliminary determination of business name availability. Call (512) 463-5555, dial 7-1-1 for relay services, or e-mail your name inquiry to firstname.lastname@example.org.
- Although you are not required to do so, consider registering your business name as a federal and/or state trademark.
2. Prepare and file a certificate of formation with the Secretary of State.
- The filing fee is $300. The Secretary of State's website has a simple, fill-in-the-blank form for the certificate of formation. Instructions are provided as well.
- If the LLC will be managed by one or more managers, rather than all the members together, then you should put a clause saying that in the certificate of formation (see Article 3 of the form certificate). For general information on the certificate of formation (usually called "articles of organization"), see the Articles of Organization page.
3. Negotiate and execute an operating agreement.
- Texas does not require an operating agreement in order to form an LLC, but executing one is highly advisable. There is no set criteria for the content of an operating agreement, but it typically includes topics such as how meetings are conducted, how the company will be managed, what capital contributions are required from each member, and how profits and losses will be allocated. The operating agreement does not need to be filed with the state. Please see the Operating Agreement page for details.
4. Obtain any required local licenses.
- See the general section on forming a LLC for details.
5. Determine what tax and other regulatory obligations the LLC has, and take care of any necessary registrations.
- Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. There is no filing fee.
- If you have an employee or employees in Texas, you are subject to Texas employment taxes. You can register online using the Texas Employer Portal. For more information on being an employer in Texas, request a copy of the Employer Handbook.
- Whenever you hire an employee in Texas, you must inform both the IRS and the State of Texas. You can find details of all the necessary steps including verifying work eligibility and withholding allowances on the Hiring Employees section of the IRS website. You can find state-level information about reporting new hires at the Texas Employer Portal.
- Texas employers can choose whether or not to provide workers' compensation coverage to their employees. The Texas Department of Insurance, Division of Workers' Compensation administers the program.
- As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.
- LLCs are subject to Texas's franchise tax. LLCs pay the greater of .25 percent of capital or 4.5 percent of earned surplus. LLCs that owe less than $100 do not pay any tax. In addition, LLCs do not owe any tax if the gross receipts from their entire business for both taxable capital and taxable earned surplus are each less than $150,000 during the period upon which the tax is based. These LLCs must file an abbreviated information report. Please see the Texas Franchise Tax on Corporations page for details.
6. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. You will probably need a Tax ID number (EIN), a copy of the certificate of formation, and a resolution identifying authorized signers if those names are not listed in the certificate. Here is one example of the documentation that banks ask for.