Forming an LLC in Texas is simple with our free step-by-step instructions. Founder Matt Horwitz has made his career translating complex state laws into simplified steps anyone can follow. His work has been cited by Entrepreneur Magazine and Yahoo Finance.
In addition to complying with state requirements, LLCs with employees must obtain an Employer Identification Number (EIN), which is like a social security number for your business. Learn more about EINs in our EIN Guide.
Choose a Unique Business Name
Once you decide to form a new company, the first step is to choose a unique business name. The State of Texas doesn’t allow you to use words that indicate a governmental agency or certain types of businesses, such as “Bank” and “Insurer.”
When choosing a name for your LLC, keep in mind that the Secretary of State’s office only registers the name as your formal, legal business name—it doesn’t protect you from any trademarks registered with the federal government. It’s important to also check the name availability online to make sure that it is not already taken, either as a domain or social media handle.
If the name you want is already taken, you can try to get the other company to sign a consent to use of similar names form. However, this is a time-consuming process and it doesn’t guarantee that the other company will agree to it. It is best to avoid this step altogether.
Select a Registered Agent
An LLC needs a registered agent to receive different types of business documents, including tax forms and lawsuits. The Texas Secretary of State has a list of approved registered agents. The agent must be a resident of Texas or a third party business entity authorized to do business in the state.
In your Certificate of Formation, you must state how the LLC will be governed. You have the option of making it member-managed or manager-managed.
You can select someone you know to be your registered agent as long as they live in Texas, are available during business hours, and agree to have their address made public. You can also hire a professional registered agent service to handle these duties for you. A professional service also has experience filing all kinds of paperwork with the state and IRS. Failure to follow all legal requirements can lead to costly consequences for your business. It’s worth the effort to complete each step properly from the beginning.
File Articles of Organization
When you are ready to officially start your LLC, you will need to file a Certificate of Formation with the state. This is the equivalent of the articles of organization in other states. The form will ask you to specify a few basic details about your business, such as the name of the company, whether it will be member-managed or manager-managed and how profits will be distributed. You will also need to state if you want your LLC taxed as a sole proprietorship, partnership or corporation.
You will need to list your registered agent, which must be an individual or business authorized to receive service of process and other legal documents on behalf of the LLC. The agent cannot be the LLC itself, and it cannot be a P.O. box or mail forwarding service.
You will also need to provide your business purpose, which will be included in the operating agreement you draft. The purpose can be helpful if you plan to seek grants or preferential tax treatment from the government or banks.
File the Certificate of Formation
A certificate of formation is what formally establishes your LLC in Texas. You can file this form online, via SOSDirect for faster processing or by mail, fax or hand delivery to the Secretary of State’s office. This is an important step because it will confirm that the state formally recognizes your business as a legal entity. This will make it easier to get an Employer Identification Number, obtain business licenses and open a business bank account.
The certificate of formation will require you to list your registered agent and the address where the business is located. The address must be a physical street address in the state of Texas, not a P.O. box. You will also need to state whether your LLC is member-managed or manager-managed.
You may want to add an operating agreement at this time. An operating agreement is not required in Texas, but it can help preserve your limited liability by establishing the management and ownership structure of your LLC. It will also contain buyout provisions and establish financial practices.