Forming an LLC in Texas

Here is an outline of the steps you need to follow in order to form an LLC in Texas. You should also read the general section on forming an LLC for information applicable in any state.

1. Choose a business name for the LLC and check for availability.

  • 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 corpinfo@sos.state.tx.us.

2. Prepare and file a certificate of formation with the Secretary of State.

  • 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.

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.
  • 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.

Other Notable Requirements for Maintaining an LLC in Texas

 

Last updated on September 29th, 2010

   
 
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