How to start an LLC in Texas

Texas LLC vs. Sole Proprietorship

If you're currently operating as a sole proprietor, forming an LLC is one of the most important upgrades you can make.

The biggest difference between a Texas LLC and a sole proprietorship is liability protection.

A sole proprietorship does not legally separate the owner from the business, while an LLC can help protect personal assets from many business liabilities and lawsuits. A sole proprietorship is simple, but it offers no liability protection. If your business is sued or cannot pay its debts, your personal assets may be at risk. A Texas LLC helps create that separation from day one.

How to Form an LLC in Texas in 7 Steps

Follow these steps to form a Texas LLC:

Step 1: Choose Your Texas LLC Name

Your LLC name must be distinguishable from other registered businesses in Texas and must include one of the following:

• LLC
• L.L.C.
• Limited Liability Company

Before filing, search the Texas Secretary of State database to make sure your name is available.

Best practices before you file:

• Check Texas LLC name availability through the Texas Secretary of State
• Check domain availability for your website
• Search the USPTO trademark database to avoid conflicts
• Avoid restricted words unless properly licensed or authorized

Step 2: Appoint a Texas Registered Agent

Every Texas LLC must have a registered agent.

A registered agent is the person or company authorized to receive:

• Legal notices
• Service of process (lawsuit documents)
• Official mail from the state
• Compliance and franchise tax notices

Texas registered agent requirements:

• Must have a physical street address in Texas
• Must be available during regular business hours
• Must agree to serve as your registered agent

⚠️ IMPORTANT:

A P.O. Box does not qualify for a Registered Agent.

You can act as your own registered agent if you have a Texas address, but many founders use a professional service for privacy and reliability.

Step 3: File Your Texas Certificate of Formation

The Certificate of Formation is the document that officially creates your Texas LLC.

What you'll need to file:

• Your LLC name
• Principal business address
• Mailing address (if different)
• Registered agent name and Texas street address
• Management structure (member-managed or manager-managed)
• Organizer information

Texas LLC filing fee: $300 state filing fee

Once approved by the Texas Secretary of State, your LLC becomes an official legal business entity in Texas.

Step 4: Create an Operating Agreement

Texas does not legally require an operating agreement — but you should still have one.

An operating agreement is the internal document that defines:

• Ownership percentages
• Member roles and responsibilities
• How profits and losses are split
• Voting and decision-making rules
• What happens if a member leaves the business
• How the business can be dissolved

Even for a single-member LLC, an operating agreement helps strengthen your liability protection and makes it easier to open a business bank account.

Step 5: Get an EIN (Federal Tax ID)

An Employer Identification Number (EIN) is your business's federal tax ID.

You'll usually need an EIN to:

• Open a business bank account
• Hire employees
• File federal taxes
• Apply for business credit
• Work with payment processors

Step 6: Open a Business Bank Account

Once your LLC is approved and you have your EIN, the next step is to separate your finances.

You should open a dedicated business bank account as soon as possible.

This helps:

• Protect your liability shield
• Avoid commingling personal and business funds
• Simplify bookkeeping and taxes
• Build business credibility

Step 7: Understand Texas Business Licenses and Franchise Tax Requirements

Texas does not require a general statewide business license for every LLC. However, you may still need:

• A local city or county permit
• A professional or occupational license depending on your industry
• A Texas sales tax permit if you sell taxable goods or services
• Industry-specific state or federal licenses

Texas LLCs may also need to file annual franchise tax reports and Public Information Reports with the Texas Comptroller. Business licensing and tax requirements vary by industry, location, and business activities.

Texas LLC Annual Cost to Maintain

After your Texas LLC is formed, ongoing compliance requirements may include maintaining a registered agent, filing franchise tax reports, and filing Public Information Reports with the Texas Comptroller.

Franchise tax filing due date: May 15 each year

Filing agency: Texas Comptroller of Public Accounts

Some businesses may qualify for no-tax-due status depending on annual revenue, but filing obligations may still apply even when no franchise tax is owed.

Missing required filings can result in penalties, interest, or loss of good standing.

Common Texas LLC Mistakes to Avoid

Many Texas LLC filings are relatively straightforward, but founders still commonly run into issues after formation. Some of the most avoidable mistakes include:

Missing Texas Franchise Tax Filing Requirements

Some first-time business owners incorrectly assume Texas LLCs have no ongoing filing requirements because Texas has no personal state income tax. However, many Texas LLCs must still file annual franchise tax reports and Public Information Reports with the Texas Comptroller — even if no tax is ultimately owed. Missing required filings can result in penalties, interest, or loss of good standing.

Using a Home Address Without Considering Privacy

Texas LLC filings may become part of the public record through the Texas Secretary of State. Founders may not realize their registered agent or business address may appear in public business searches.

Mixing Personal and Business Finances

Combining personal and business transactions can weaken liability protection and create accounting complications. Opening a separate business bank account early is one of the most important post-formation steps.

Skipping the Operating Agreement

Texas does not legally require an operating agreement, but many banks, lenders, and business partners still expect one. It also helps clarify ownership, management responsibilities, and internal business rules.

Forgetting Local Licensing and Permit Requirements

Texas does not require a universal statewide business license for every LLC, but counties, cities, and regulated industries may still require permits or registrations. This is especially important for contractors, trucking companies, and professional service providers.

Choosing the Wrong Tax Structure Too Early

Many new founders hear about S Corporation tax elections before their business is profitable enough for the strategy to make sense. LLC taxation decisions often become more important after the business starts generating consistent income.

Texas Registered Agent Requirements

Texas requires every LLC to continuously maintain a registered agent.

Your registered agent must:

• Have a physical street address in Texas
• Be available during normal business hours
• Accept official legal and state documents on behalf of your business

Texas registered agents are responsible for receiving service of process, state compliance notices, official correspondence from the Texas Secretary of State, and franchise tax notices from the Texas Comptroller.

If you do not maintain a valid registered agent, your LLC can fall out of good standing or face administrative action from the state.

Should You Be Your Own Registered Agent?

You can be your own registered agent if:

• You have a Texas street address
• You're available during business hours
• You're comfortable having that address appear on public records

Many founders choose a professional registered agent instead for:

• Privacy
• Reliability
• Compliance support
• Flexibility when traveling or working remotely

Texas LLC Annual Filing Requirements

Texas does not require a traditional annual report through the Secretary of State. However, many Texas LLCs must still complete annual franchise tax and Public Information Report filings to remain in good standing.

Texas LLC annual filing basics:

• Due date: May 15
• Filing agency: Texas Comptroller of Public Accounts
• Filing requirement: may apply even if no tax is owed
• Penalties and interest: may apply for late filings

These filings are not traditional financial reports. They may simply update or confirm your:

• Business address
• Registered agent information
• Ownership or management details
• Company contact information

If required filings are missed, the state can eventually revoke your LLC's good standing or administratively forfeit the business.

Texas LLC Taxes: What You Need to Know

A Texas LLC can be an attractive option for business owners who want flexible taxation and a business-friendly environment.

1. No Texas Personal State Income Tax

Texas does not impose a personal state income tax. For Texas LLC owners, business profits generally pass through to the owner's federal tax return without an additional layer of Texas personal income tax.

2. Pass-Through Taxation by Default

By default:

• A single-member LLC is typically taxed like a sole proprietorship
• A multi-member LLC is typically taxed like a partnership

In many cases, the LLC itself does not pay federal income tax at the entity level. Instead, profits and losses pass through to the LLC owners.

3. Texas Franchise Tax May Apply

Texas LLCs may still have franchise tax filing requirements through the Texas Comptroller. Depending on annual revenue and filing status, some businesses may owe franchise tax, while others may qualify for no-tax-due status. Annual filings may still be required even when no franchise tax is owed. Because franchise tax rules can vary, many Texas LLC owners work with a CPA or tax professional to help maintain compliance.

4. You May Be Able to Elect S Corporation Tax Treatment Later

Once your business is profitable, you may be able to elect S Corporation tax treatment with the IRS to potentially reduce self-employment taxes.

This is a federal tax election — not a different Texas entity formation.

If your business is earning meaningful profit, it may be worth discussing with a CPA.

Why Founders Use BizUp Instead of Filing Directly with the State

You can file your Texas LLC directly through the Texas Secretary of State. Many founders do.

But for first-time business owners, the process often becomes more time-consuming after the filing itself, especially when trying to manage EIN registration, operating agreements, franchise tax compliance, registered agent requirements, and business documents across multiple systems.

BizUp was built to simplify the entire Texas LLC formation process in one place.

Instead of juggling Texas filing requirements, IRS registration steps, compliance deadlines, and formation records manually, founders can manage their business setup and ongoing requirements through a single dashboard designed specifically for new businesses.