Knowing the requirements and steps required to form an LLC in Texas is important. This comprehensive guide will show you how to create an LLC in just three easy steps. Continue reading to find out about Texas LLC requirements and fees. Also, how to register your business.
Texas LLC Filing Requirements
Before you file your limited liability company (LLC), it is a good idea that you are familiar with the steps and requirements. Before you can proceed with the filing process in Texas, like every other state, you will need to know certain requirements.
There are some unique requirements that an LLC must meet in Texas:
- Putting “LLC” in the name: Texas law mandates that “Limited Liability Company”, or “Limited Company”, be included in the name. The option to abbreviate “L.L.C.,” L.C.” or Ltd. is available. Co.”
- An LLC cannot share a name or trademark with an existing company. Your LLC name must stand out from other entities within the state. Your application will be rejected if your name is too similar to an already existing brand. You can request a Reservation, Renewal or Renewal form for the name or Form 505 to reserve it. You can keep the name for up 120 days by paying a $40 filing fee.
- Registered agent required: All LLCs in Texas must have a registered agent. A registered agent may be an individual Texan (including the LLC’s owners or workers) or a registered agent company with permission to operate within the state. In the event of a lawsuit, the agent will accept paperwork on your behalf. The agent must have a physical address in the state and not a P.O. box. Importantly, the LLC cannot be its own registered agent. A reputable agent will cost you between $100-300 annually. Do your research to ensure that you are satisfied with the service provided by the agent.
Doing Business in the State of Texas
SBA.gov’s Business Licenses and Permits Search Tool allows you to get a listing of federal, state and local permits, licenses, and registrations you’ll need to run a business.
In 5 Easy Steps, Start a Texas LLC
It’s easy to set up an LLC in Texas. These are the steps you need to take to get your Texas LLC up and running.
Name your business. Name your business, as we have discussed.
- Limited Liability Company
- Ltd. Co.
- Limited Company
You must also have a unique name that passes the business entity search test. An LLC cannot be formed with the same name as an existing entity in Texas. It is also a good idea to eliminate names that sound or look similar to existing businesses, particularly if they are located in your locality or industry. Trademark issues can arise from misleadingly similar names. Competing with another company using the same name can cause trademark problems.
You cannot include certain terms in your name. These are:
- State Department
- Other terms
As long as the Texas State Government allows you to use terms like bank, lawyer, university, or attorney, you are allowed to do so. These requirements must be met before you add any terms to your LLC in Texas.
You already know that an LLC can only be opened in Texas if it is registered. Now is the right time to find one. You will select a registered agent with a physical address within the state of Texas. To receive personal service of legal documents, this person must be present at the address during business hours.
Here are the links to the forms required for your LLC filing as well as the associated filing fees.
- Form 205: This is the most important paperwork you need to get your LLC started. You can either download it or complete it and file it online via SOSDirect. The filing fee is $300
- Form 304: LLCs based outside Texas must file an “Application to Register a Foreign Limited Liability Corporation” form. Download the form. The filing fee is $750
You should mail in duplicate any completed physical forms to P.O. Austin, Texas 78711-3697.
Additional costs for taxes and filing fees or hiring a registered representative can run between $100 to $1,000. Although LLCs are not required to file annual reports in Texas or pay reporting fees, they may be subject to a state franchise fee.
An Employer Identification Number (EIN), which is a free number, can be obtained. The IRS gives your Texas LLC a nine-digit number. This number is used to identify you when applying for bank accounts, credit accounts, and filing taxes. This number is essential for your Texas LLC.
Get your free EIN from the IRS. The application is quick and easy to complete. Your EIN will be issued instantly.
Each Texas LLC should have an operating agreement that outlines the company’s day-to-day business operations. Although this document is internal, it is vital for the operation of the company. It will provide clear guidelines so members and managers don’t get confused about who does what in the company. It will ultimately reduce conflict.
Cost to set up an LLC in Texas
A Texas LLC filing costs $300 Additional fees may apply if you hire a professional to file the forms.
Texas State Franchise Tax Fee
The annual franchise tax on most Texas LLCs is imposed on them. Additional information about how the tax is calculated is available on Texas Comptroller’s official website. You can find related tax documents.
After you have completed all necessary paperwork, you are able to:
- You can upload them online. Electronic filing of “No tax due forms” is required.
- Send the documents to P.O. Box 149348 Austin, Texas 78714-99348.
Correcting Texas LLC Filing Errors
Mistakes happen. If you make a mistake when you are filing an LLC, you must file a Certificate of Corrective Action or Form 403 with the Texas Secretary of State.
Be specific about what you want to change when you complete the document. The $15 filing fee is payable and cannot be done online.
Texas LLC FAQs
What is an LLC?
An LLC (or limited liability business) is a legal entity that is considered separate from its owner or members. This distinction protects owners from any debts incurred by the company and legal action against them.
How can you obtain an LLC in Texas?
Begin by choosing a name for your company. Make sure you follow the naming requirements. Register your company with the state and hire a registered agent. To ensure that all parties are on the same page regarding company management, you can use the IRS website to get a unique Employer ID Number.
Does Texas require an EIN to establish LLCs?
Federal law requires all LLCs with more than one member to apply for an Employer Identification Number (or EIN)
Is it possible to create an LLC for free in Texas?
You will typically pay $300 to register your Texas LLC. For new businesses 100% owned by veterans, there is no filing fee starting January 1, 2022. For the first five years of their existence, veteran-owned businesses don’t need to pay a franchise tax.
What are the advantages of a Texas LLC?
Because LLCs are more affordable than corporations that offer some liability protection, many entrepreneurs in Texas have set up LLCs. LLC finances can be treated separately from individual assets. You can also claim them on your taxes because they are pass-through tax entities.
There are exceptions for LLCs, whose members elect to be taxed like corporations.
What is the Texas tax treatment of LLCs?
LLCs do not have the same tax structure as corporations. LLCs are treated the same as sole proprietorships and general partnerships by default. All profits of the LLC are passed on to members who report them as income in their tax returns.
Qualifying LLCs may choose to be taxed either as an S-corporation, or a C-corporation. Talk to a tax professional if you have questions about taxes.
How can I dissolve a Texas LLC?
You must file a Certificate to Terminate, Form 651, with the Secretary of State in order to dissolve an LLC. This can be done in person or online. A filing fee of $40 is required.
How can I change the name of an LLC in Texas?
You will need to file a certificate stating that you wish to change the name of an LLC in Texas. Before you file the change, ensure that the new name is available.
How can I add a member of an LLC in Texas?
Follow the instructions in your operating agreement to add a member to your Texas LLC. You don’t need an operating agreement if you do not have one. Texas LLC law requires that all members approve the addition of a new member. Next, amend the operating agreement to add the new member and their responsibilities.
How can I change the ownership of a Texas LLC?
Texas LLC owners can change their own without filing a formal notice. You will however not be required to notify the new members or managers of the LLC when you file your annual Public Information Report with the state comptroller.
How can I add a DBA for a Texas LLC?
Sign in to the online portal for business services (SOSDirect). Complete the Assumed Name Certificate by going to the online portal (SOSDirect). To add the DBA name to the LLC-approved list, you will need to pay $25.
What are the various types of LLCs you can set up?
There are many types of LLCs available when you’re trying to decide how to start one. It is important to understand the different types of LLCs available so that you can choose the best business model for your company. These LLC structures include:
- A single-member LLC: The LLC is owned by one person. Although it is similar to a sole proprietorship this LLC offers additional tax benefits as well as liability protection.
- Multimember LLC: Standard LLCs that have more than one member are often divided into member-managed and manager-managed entities.
- L3C: These entities are also known as “low-profit liability companies” and act as a bridge between nonprofit LLCs (for-profit LLCs) where the business case is the main focus, rather than the earnings.
- Series LLC: Series LLC’s tiered business structures allow the topmost LLC to own a series of lower-tiered LLCs via unlimited segregation. Each LLC operates independently from the others; their assets are also primarily separate.
- PLLC: This type of business formation is available only to licensed professionals.
- Restricted LLC: Limited LLCs are exempt from tax for the first ten years of their formation. They cannot also make distributions to members. The articles of organization must state that the LLC is restricted.
Business808, a renowned consulting organization that aids startups in scaling and growing, is led by Andy Brooks as Editor-in-Chief.
Andy has over 12 years of consulting experience and is a pro at creating and managing profitable businesses. He has experience working with several LLCs and Registered Agent services and has a degree in business management. Andy enjoys providing useful information for Business808.
In addition to writing for Business808, Andy is a well-known author and speaker, and an active contributor to several online business publications, imparting his knowledge on how to grow an LLC.