How To Start an LLC In Texas

Texas is the best state to start an LLC because of its leading business climate and favorable regulatory environment. Choosing an LLC as a business structure offers several benefits, like flexible taxation and personal liability protection. As of April 2023, about 38,461 new business applications were received in Texas. These new business applications were also received from LLCs. The provisions for the formation and operation of a Texas LLC are outlined in the Business Organizations Code (BOC). The process of starting an LLC in Texas can be summarized in 6 steps:

What Is an LLC?

A limited liability company (LLC) is a distinct type of entity that combines the powers of a corporation and a partnership. The structure of an LLC may be likened to the following:

The owners of an LLC are called “members.”  Per BOC  §101.101(a), an LLC can have one or more members. A member of an LLC can be an individual, corporation, partnership, trust, or any commercial or legal entity. The liability of LLC members is limited to their investment, and they may enjoy pass-through tax treatment like partners in a partnership. The management of an LLC can be in the hands of managers or members. The management structure is designed by the LLC and its members, and the requirements must be in the certificate of formation. 

Step 1: Texas LLC Name Search

Texas business law requires that new LLCs ensure their names are distinguishable from existing LLCs in the Secretary of State’s records (BOC § 5.053). Therefore, all LLCs are advised to conduct a name search before registering a name with the SOS. 

Per BOC § 5.056, domestic and foreign LLC naming requirements are as follows:

Business founders can use the SOSDirect portal to conduct an LLC name search. Users must submit a request for SOSDirect Account to get a  User ID and Password to log in to the portal. A name search costs $1, payable from a pre-funded SOSDirect account. Additionally, requesters can use the Trademark Electronic Search System (TESS) maintained by the United States Patent and Trademark Office (USPTO) to ensure the desired name does not infringe on registered trademarks. Business owners that are not ready to register their LLCs can use the name they wish to register before filing the Certificate of Formation. A name reservation will hold the desired business name for 120 days. Name reservations can be renewed when the 120 days elapse. To reserve a name, the business owner must file an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) with the SOS. The filing fee is $40.

Step 2: Choosing an LLC Registered Agent in Texas

Per BOC §5.201, every domestic and foreign LLC must continuously maintain a registered agent and office in Texas. A registered agent is an individual or entity that receives the process, notice, or demand required on behalf of an LLC. Below are the requirements for choosing a registered agent in Texas:

How Do I Change the Registered Agent for My LLC in Texas?

To change a registered agent in Texas, business owners must complete and file a Change of Registered Agent/Office (Form 401) with the Texas Secretary of State. The form can be submitted by mail, fax, in person, or online. The filing fee is  $15, payable by personal checks, money orders, and credit cards. Upon filing the document, the SOS will return the appropriate evidence of filing to the filer, including a file-stamped copy of the document.

Step 3: LLC Filing Requirements in Texas

Intending business owners should do their due diligence in knowing LLC filing requirements in Texas before filing any paperwork with the Secretary of State (SOS). This will help avoid paperwork rejection. Below are the filing requirements for an LLC in Texas include:

Upon meeting the above filing requirements, an LLC can file the appropriate paperwork with the SOS before conducting business in Texas. Also, they must file franchise tax reports with the Comptroller of Public Accounts.

Do You Need a Texas Address for LLC?

Yes, the physical address of a Texas registered agent is required to create an LLC. Once the LLC has been successfully filed with the Texas Secretary of State, the registered agent’s address becomes the LLC’s official Texas business address.

How To Get a Virtual Address for LLC in Texas

The best way to get a virtual address for an LLC in Texas is to conduct a Google search for a list of virtual address service providers in the state. Compare at least three different providers who meet the LLC business’s requirements. List the address in the paperwork filed with the Texas Secretary of State for LLC formation. Also, use the virtual address to file for franchise tax with the Texas Comptroller of Public Accounts. Once the paperwork is filed and processed, LLCs can use their virtual address for all business-related communications.

Step 4: How To File for an LLC in Texas

A Texas LLC is formed by filing the appropriate form with the Texas Secretary of State (SOS). Domestic LLCs must file a Certificate of Formation (Form 205), while foreign LLCs must file an Application for Registration (Form 304). These forms can be filed by fax, mail, courier delivery, or in person. The completed form in duplicate must be submitted alongside a filing fee of $300 (domestic LLCs) or $750 (foreign LLCs). Payments can be made by cash (in-person submissions only), money orders, personal checks, or debit/credit cards (like Discover, LegalEase debit cards or American Express, Visa credit cards, and MasterCard). Checks or money orders must be payable to the SOS through a U.S. bank or financial institution. Credit card payments are subject to a statutory fee of 2.7% of the total fees. 

Fax applications should be made to (512) 463-5709. In-person applications should be made during office hours (8 a.m. to 5 p.m. (Central Time), Monday through Friday). Mail applications should be submitted to 

Business & Commercial Section

Texas Secretary of State

P.O. Box 13697

Austin, TX 78711-3697 

Documents sent by Federal Express or couriers should be sent to the following delivery address:

Texas Secretary of State

James Earl Rudder Office Building

1019 Brazos

Austin, TX 78701

After submitting a completed Form 205 or 304, the SOS will return the appropriate evidence of filing to the filer alongside a file-stamped copy of the document. 

How To Create an LLC Online in Texas

Although the SOS Business & Commercial Section accepts LLC registrations by fax, mail, and in person, registrations can also be made through electronic submission on SOSDirect. Here is how to create an LLC online in Texas:

Alternatively, Submitters can use the SOSUpload system to electronically submit a copy of the completed Form 205 or 304. Documents must be in PDF format. Individuals must have a SOSDirect account to upload filing documents using the System. While uploading a document, ensure all payment information, form instruction pages, confidential information, or personal information are excluded to avoid submission rejection. Submitters will be required to pay a $300 or $750 document fee, depending on if it is a domestic or foreign LLC. Payments must be made by s credit card (American Express, MasterCard, Discover, or VISA) or via a pre-funded SOSDirect account. Payments by credit cards attract additional fees. 

Can You Have Multiple Businesses Under One LLC in Texas?

Yes, a business owner can operate multiple businesses under one LLC in Texas. Individuals opting for this can do so under what the Texas Secretary of State (SOS) calls series LLC. The business owner must operate a series LLC in compliance with sections 101.601-101.621 of the Texas Business Organizations Code. The SOS does not have a distinct form that must be filed when forming a domestic series LLC. Founders can register their series LLCs by filing Form 205 with the SOS. They must add the information required by section 101.602(a)(1)-(2) of the Texas Business Organizations Code in the Supplemental Text area of the form. Founders must also maintain separate records for the assets of each series. Foreign series LLCs can register to operate in Texas by filing Form 313 (Word, PDF). However, if each or any series of the LLCs doing business in Texas transact business under a name separate from the LLC’s name, the LLC must file Form 503 (Word, PDF) in compliance with Texas Business & Commerce Code. 

How Long Does It Take to Set Up an LLC in Texas?

The Texas Secretary of State (SOS) processes non-expedited documents within 5 to 7 business days. However, expedited services are available for an additional fee of $25 per document. Due to increased submissions, non-expedited documents sent by fax or mail are usually processed between 70 and 72 business days. Expedited documents sent by fax or mail are processed within 12 to 14 business days. Electronic documents sent through SOSUpload are processed within 13 to 15 business days, while those sent through SOSDirect are processed within 10 to 12 business days. These timeframes are subject to change based on staffing, resources, and workload.

Step 5: How To Get an EIN for LLC in Texas

LLCs with employees or who are required to file certain Employment Tax and Excise Tax forms must obtain Employer Identification Number (EIN). An EIN can be obtained online, by fax, or by mail for free from the Internal Revenue Service (IRS). Fax and mail applicants must submit a Form SS-4 to the appropriate fax number or mailing address:

(For US applications)

Internal Revenue Service
Attn:  EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

(For applicants with no legal residence or place of business in the US)

Internal Revenue Service
Attn:  EIN International Operation
Cincinnati, OH  45999

Fax: (855) 215-1627 (within the U.S.)

Fax: (304) 707-9471 (outside the U.S.)

LLCs applying outside the U.S. should submit their applications by phone at (267) 941-1099. All calls should be between Monday and Friday from 6 a.m. to 11 p.m. (Eastern Time). 

Step 6: Do LLCs Pay Taxes in Texas?

Yes, LLCs pay taxes in Texas. Per Texas Administrated Code §3.581, all LLCs doing business in the state are required to file and pay franchise taxes with the Texas Comptroller of Public Accounts. LLCs can file franchise taxes:

LLCs can pay franchise taxes via Electronic Check, paper check, credit card, or TEXNET.

How Are LLCs Taxed in Texas?

The Texas Comptroller of Public Accounts requires all LLCs to file annual franchise tax reports on May 15. However, the next business day will become the due date if May 15 falls on a legal holiday, Saturday or Sunday. An LLC can request an extension of time to file a franchise tax report by submitting an appropriate form on or before the due date of the original report o the Comptroller’s office. Failure to file franchise tax reports on or before the due date attracts a $50 penalty. In Texas, franchise tax rates, thresholds, and deduction limits differ by report year. For example, The tax rate in 2022 and 2023 is 0.375% for retail and wholesale businesses and 0.75% for other businesses. The threshold limit for 2022 and 2023 is $1.23 million, while that for 2020 and 2021 was $1.18 million.

Texas LLCs are taxed as pass-through entities by default, meaning that the business itself does not pay income tax. Instead, members report the LLC’s income on their individual tax returns. Single-member LLCs are typically taxed as a sole proprietorship, while multiple LLC members are taxed as a partnership. 

Tax Benefits of an LLC in Texas

Below are the tax benefits of choosing an LLC as a business structure in Texas:

Do You Have To Renew LLC Every Year in Texas?

Unlike most states, the Texas Secretary of State (SOS) does not require business owners to renew their LLCs yearly. However, LLCs must file annual franchise tax reports with the Texas Comptroller of Public Accounts.

How Much Does It Cost To Start an LLC in Texas

Business owners are required to pay certain fees when establishing an LLC in Texas. The expenses likely to be accrued while forming an LLC include the following:

Can You Form an LLC In Texas for Free?

No, except if it is a veteran-owned business. Typically, individuals are required to pay $300 or $750 to file their LLC paperwork with the SOS. However, the SOS does not charge a filing fee for new LLCs that are 100% veteran owned.

How To Start an LLC in Texas for Free/At Minimal Cost

Only veterans can start an LLC for free in Texas. However, business owners can complete the filing process of their LLC for less by doing the following:

Step 7: What Businesses Should Consider Forming an LLC in Texas?

An LLC is often the best choice for medium- or higher-risk businesses due to its relatively low cost. Business owners with significant personal assets and desires to pay a lower tax rate than they would with a corporation should consider forming LLCs. 

What Are the Benefits of An LLC in Texas

Choosing an LLC as a business structure provides several benefits for all types of companies. Generally, LLCs provide the following advantages:

How Does an LLC Work in Texas

LLCs are hybrid entities that combine the features of a corporation with those of a partnership/sole proprietorship. In Texas, an LLC is a business structure with at least one member. A member can be an individual, trust, partnership, corporation, or any other legal or commercial entity. Per BOC §101.107, a member of an LLC cannot be withdrawn or expelled from the company. An LLC offers limited liability protection and pass-through taxation. Like corporations, LLCs legally exists as a separate entity from its members. As such, members cannot typically be held liable for business debts and obligations. 

To form an LLC, members must file a Certificate of Formation or Application for Registration with the Texas Secretary of State. LLCs do not expire in Texas. Therefore, there is no need to file any paperwork to renew an LLC in the state. Texas law requires all LLCs to file and pay franchise tax reports with the Texas Comptroller of Public Accounts.

LLC VS S Corp in Texas

An LLC is a legal business structure, while An S-corp is a tax classification. Texas LLCs can have unlimited members, but the shareholders of S corps are limited to 100. Members of an LLC can be partnerships and corporations, but shareholders of an S-corp cannot be partnerships and corporations. To become an LLC, founders must file Form 205 or Form 304 and pay the necessary filing fees to the Texas Secretary of State (SOS). In contrast, an S corps is created by submitting Form 2553, Election by a Small Business Corporation, signed by all the shareholders to the Internal Service Revenue (IRS). LLCs can have various classes of equity with various degrees of participation, but an S-corp can only have a single class of stock. Non-U.S. citizens/residents can be LLC members, but non-U.S. citizens/residents cannot be shareholders in S-corps. Only domestic corporations can elect to be S-corps. 

LLC vs. Sole Proprietorship in Texas 

An LLC is a business structure consisting of one or more members. A sole proprietorship is a business structure involving one person engaging in a business activity without necessarily having a formal organization. An LLC exists separately from its members. Therefore, the members cannot be liable for the business debts and liabilities. Conversely, a sole proprietorship is not a separate business entity. Therefore, a sole proprietor can be personally liable for business debts and obligations. 

A sole proprietorship is the most common and simplest business structure in Texas. It does not require filing any documents with the Texas Secretary of State (SOS). However, LLCs must file Form 205 or Form 304 and pay the required filing fees to the SOS. LLCs are subject to franchise tax by the Texas Comptroller of Public Accounts, but sole proprietorships are not.

A sole proprietorship can be a good business structure for low-risk businesses and individuals who want to test their business idea before forming a formal business organization. 

LLC vs. Corporation in Texas

LLCs and corporations are distinct business structures that offer their own strengths and weaknesses. LLCs are owned by members and managed by members, managers, or both. In contrast, a typical corporation is owned by shareholders, managed by a board of directors, and administration is usually in the hands of officers. 

Per BOC §5.056, LLCs names include the phrase “limited liability company” or “limited company”;  or abbreviations like “LC,” “L.C.,” “LLC,” “L.L.C.,” or “Ltd Co.” conversely, the name of a corporation must include the word “company,” “corporation,” “incorporated,” or “limited”; or abbreviations like Co.,” “Corp.,” or “Inc.”(BOC §5.054). a professional corporation’s name must contain the phrase “professional corporation” or an abbreviation of the phrase.

Another major difference between an LLC and a corporation is taxation. LLCs are pass-through entities, meaning their incomes are passed directly to their members and taxed as personal incomes. LLCs can also elect to be taxed as corporations. In contrast, the incomes of corporations are subject to double taxation. Their shareholders pay taxes on dividends, and they also pay taxes at the corporate level.

An LLC is easier to form than a corporation and provides more flexibility and protection for its members. A corporation can be a good business structure for medium- or higher-risk businesses, those that need to raise money, and businesses that want to “go public” or eventually be sold.

Business License vs. LLC in Texas

A business license is a different concept from an LLC. Obtaining a business license in Texas is not the same as forming an LLC in the state. A business license is a permit issued to businesses that allow them to operate in Texas. In contrast, an LLC is a type of business structure that combines the characteristics of a corporation and a partnership. A business license is usually required in the formation of an LLC. An LLC must be registered with the Texas Secretary of State (SOS), but a business license cannot be obtained from the SOS. A business license can be obtained from specific regulatory agencies with licensing and permitting requirements. 

Do I Need a Business License If I Have an LLC in Texas?

Texas does not have a state-wide general license that must be obtained by all LCCs transacting business in the state. However, all LLCs must register with the Texas Secretary of State (SOS). As a result, the certificate of formation received from the SOS satisfies the “general business license” requirement that exists within other states.

Although Texas does not have a general business license, an LLC may be required to obtain an occupational license or permit, depending on their business activity and location. Founders should review the Texas Business Licenses & Permits Guide provided by the Texas Economic Development Office to determine which state-level business license/ permit is required for their LLCs. The Texas Department of Licensing & Regulation (TDLR) lists occupations and industries that require business licenses in Texas. The Texas Commission on Environmental Quality (TCEQ) also lists business types requiring permits and licenses. Check the Occupational Licensing and Permits and Registrations pages on the TCEQ website for additional information on business licensing. LLCs whose business activities involve acholic beverages should get business licenses from the Texas Alcoholic Beverage Commission (TABC).

Some LLCs in Texas may be required to obtain federal licenses and permits. The U.S. Small Business Administration (SBA) provides information on federal licenses and permits on its website. 

How To Dissolve an LLC in Texas 

Texas law requires all LLCs who want to terminate their business operations to file instruments with the secretary of state (SOS). However, they would have to take the necessary internal steps to wind up their affairs before contacting the SOS. LLCs should review BOC Chapter 11 to understand how to wind up their affairs. To dissolve a business entity in Texas, a domestic LLC must submit two copies of the Certificate of Termination (Form 651), while a foreign LLC must submit two copies of Termination of Registration (Form 612) to the SOS. Domestic LLCs must submit a Certificate of Account Status for Dissolution/Termination issued by the Texas Comptroller of Public Accounts alongside their Form 651. Submitters can request a Certificate of Account Status online or mail completed Form 05-359 to the Comptroller at:

Tax Assistance Section

Comptroller of Public Accounts

P.O. Box 149348

Austin, TX 78714-9348

All forms should be submitted in duplicate by mail, fax, or courier delivery alongside the required filing fees. Filing a certificate of termination costs $40 while filing a termination of registration costs $15. Upon filing the appropriate document, the SOS will return the appropriate evidence of filing to the submitter and a file-stamped copy of the document.