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LLC

8 Basic Steps to Setting Up Your Texas LLC

Starting a Texas LLC is a straightforward process if you follow these essential steps. Whether you’re launching a new business or formalizing an existing one, these steps will help you establish a strong legal foundation.

Learn about the Limited Liability Corporation

FAQ

Step 1: Choose Your LLC Name

  • Your business name must be unique and distinguishable from other businesses registered in Texas.
  • Include “LLC” or “Limited Liability Company” in the name.
  • Use the Texas Secretary of State’s online search tool to check name availability.
  • Reserve your name for up to 120 days if you’re not ready to file immediately.

Step 2: Designate a Registered Agent

  • A registered agent is an individual or company responsible for receiving legal documents on behalf of your LLC.
  • Requirements for the agent:
    • Must be a Texas resident or a business entity authorized to operate in Texas.
    • Must have a physical address in Texas (no P.O. Boxes).

Step 3: File the Certificate of Formation (Form 205)

  • File your LLC’s Certificate of Formation with the Texas Secretary of State.
  • This document officially creates your LLC and includes:
    • Your LLC’s name.
    • Registered agent’s information.
    • LLC’s purpose (you can use “for any lawful purpose”).
  • Filing Fee: $300 (as of 2024).
  • Submit online, by mail, or in person.
  • Beneficial Ownership Information (BOI)

Step 4: Create an Operating Agreement

  • While not legally required in Texas, an Operating Agreement is highly recommended.
  • It outlines how your LLC will be managed, ownership percentages, profit-sharing, and more.
  • This document helps prevent disputes and provides clarity for all members.

Step 5: Obtain an EIN (Employer Identification Number)

  • Apply for an EIN through the IRS website—this is free.
  • You’ll need an EIN to:
    • Open a business bank account.
    • Hire employees.
    • File business taxes.

Step 6: Open a Business Bank Account

  • Separate your personal and business finances by opening a dedicated business bank account.
  • You’ll need:
    • Your EIN.
    • Certificate of Formation.
    • Operating Agreement.
  • Choose a bank that offers small business-friendly features like low fees and online banking.

Step 7: Obtain Business Licenses and Permits

  • Depending on your industry, you may need additional permits or licenses to operate legally in Texas.
  • Use the Texas Department of Licensing and Regulation (TDLR) website to research your specific requirements.
  • Examples include health permits, sales tax permits, or professional licenses.

Step 8: Stay Compliant

  • File an Annual Franchise Tax Report and Public Information Report:
    • Required by the Texas Comptroller’s Office to maintain your LLC status.
    • Due annually on May 15th.
  • Keep Your Registered Agent Information Updated:
    • Update the Secretary of State if your agent’s details change.

Why Form an LLC in Texas?

  • Limited Liability Protection: Safeguard your personal assets from business liabilities.
  • Flexible Tax Options: Choose to be taxed as a sole proprietorship, partnership, or corporation.
  • Business-Friendly State: Texas has no state income tax and a growing economy.

By following these 8 steps, you’ll establish a legally compliant LLC that sets your business up for success. Need more help? Reach out for guidance or access templates and tools to simplify the process!