A Texas Limited Liability Company (LLC) combines the personal asset protection of a corporation with the tax flexibility of a partnership. Under the Texas Business Organizations Code, LLCs shield your personal assets from business debts and liabilities while allowing profits and losses to pass through directly to your personal tax return.
Texas offers significant advantages for forming an LLC. The state imposes no corporate income tax on LLC profits, providing substantial tax savings compared to states with corporate-level taxation. However, Texas requires annual franchise tax reporting each May, regardless of whether you owe tax, adding ongoing compliance obligations that many other states don't impose through their simpler annual report systems.
Texas keeps LLC formation refreshingly straightforward compared to other states. You'll handle four essential requirements, while one critical document remains optional but will save you headaches in the long run.
The filing process offers two straightforward options:
You can reserve your desired name in advance for 120 days by submitting Form 501 ($40), but this step is optional unless you require additional time to gather documents.
Your LLC's name is a compliance requirement. Texas requires the name to end with "Limited Liability Company," "LLC," or "L.L.C.," and be distinct from every other business on file. Check the Secretary of State's database first to avoid the disappointment of discovering someone beat you to your perfect name.
Love a name but not ready to file? Complete Form 501 and pay $40 to hold it for 120 days while you finalize your business plans. Additionally, look out for restricted words. Anything suggesting a government agency, illegal activity, or a regulated profession (such as "bank," "insurance," or "university") will either be rejected or require additional paperwork and approvals.
Pick something memorable, easy to spell, and social-media-friendly. Texas considers "Bluebonnet LLC" and "Blue-Bonnet LLC" identical, so be careful with your spacing, symbols, and capitalization before submitting.
Texas won't approve your Certificate of Formation without a registered agent to accept legal papers during business hours. This person or company must be a Texas resident or authorized Texas business, maintain a physical street address (P.O. boxes won't work), and formally consent to the role.
Your registered agent options:
Texas calls its founding document the Certificate of Formation (Form 205), not Articles of Organization like many states. Filling it out isn't rocket science, but precision matters. You'll need to:
File online through SOSDirect or mail a paper form with $300 payment. Online filings typically appear within two to three business days; mailed forms take about a week or more after arriving in Austin.
After approval, you'll receive a stamped Certificate of Formation and a File Number. Keep both safe, as banks, insurers, and vendors will request them as proof that your business legally exists.
While Texas law doesn't require an Operating Agreement, this document provides essential legal protections and operational clarity for your LLC. An Operating Agreement establishes ownership structure, management procedures, and member rights, critical elements for maintaining your LLC's liability protection and preventing future disputes.
Key provisions to include:
Additional considerations for multi-member LLCs:
Complete your Operating Agreement within 90 days of formation, before commencing significant business operations. All members must sign the document, and although it's not filed with the state, it should be maintained with your corporate records.
Forming an LLC doesn't automatically give you the right to operate. Texas has no statewide general business license, but many industries face specific regulations:
Also, check city and county requirements, as zoning, signage, and sales tax permits often begin at the local level. If you sell taxable goods or services, apply for a free Sales Tax Permit through the Texas Comptroller before your first transaction. You'll submit collected taxes monthly or quarterly, depending on sales volume, with automatic penalties for late filings. You'll also need an Employer Identification Number (EIN).
Maintaining your LLC's good standing preserves liability protection and ensures continued authorization to conduct business in Texas. Texas streamlines ongoing compliance compared to many states, focusing on essential requirements:
Failure to meet ongoing requirements can result in:
Consistent compliance maintains your LLC's legal protections while building credibility with partners, lenders, and regulatory agencies.
How long does LLC formation take in Texas?
File online through SOSDirect, and most LLC filings are approved within 10–15 business days, though this can vary based on state backlog. Mailed filings may take 5–7 business days up to several weeks after arrival in Austin.
Can I be my own registered agent in Texas?
Yes, if you're a Texas resident with a physical street address and provide written consent. It's free, but professional services offer privacy and compliance reminders.
Do I need an attorney to form an LLC in Texas?
Texas doesn't require it. You can file directly or use online services, but complex ownership structures or industry-specific regulations often justify a brief consultation to avoid costly mistakes.
What's the difference between the Certificate of Formation and an Operating Agreement?
The Certificate of Formation creates your LLC with the state and becomes public record. An Operating Agreement is your internal contract covering ownership, voting, and profit-sharing rules. Texas doesn't require the agreement, but it strengthens liability protection.
Texas LLC formation involves managing registered agent requirements, ensuring proper documentation, and staying current with ongoing compliance obligations. Discern can form your Texas LLC while providing professional registered agent services and compliance tracking to keep your LLC in good standing.
Ready to form your Texas LLC without the paperwork hassles? Get started with Discern today.
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