How to Form an LLC
1. Find a Business Name
- Business Search: www.direct.sos.state.tx.us/corp_inquiry
Use the Name Availability Search tool on the SOSDirect site to see if your desired LLC name is available. Note that there is a $1 fee that is charged for each search. You can also perform a free franchise tax search through the Comptroller’s website.
Texas law requires that the name of an LLC include the phrase “limited liability company” or “limited company,” or an abbreviation of one of these phrases.[2]
2. Select a Registered Agent
Every limited liability company in Texas must designate and continuously maintain a registered agent in the state. The agent must either be an individual resident of Texas or another organization authorized to do business in the state.[3]
3. Register the LLC
There are two options for registering your LLC in Texas: online or by mail.
Option 1: File Online
Go to direct.sos.state.tx.us to begin the process of filing your LLC online.
Obtaining an SOSDirect account is necessary for using the state’s online business filing service. Your request for an account is typically granted within 10-15 minutes.
Use the dropdown menu to indicate whether you are forming a domestic or foreign LLC.
Select the type of LLC you are forming, then enter the name you wish to use in your filing. On the next page, enter the initial mailing address for your business.
At the bottom of the page, indicate whether you will attach a separate document for the agent’s consent or if the agent’s consent is already on file.
On the rest of the form, you will be asked to enter information about your LLC’s management type, upload any supplemental provisions, and add the name and address of the organizer.
When you go to submit your filing, you will be directed to the payment page. Once you pay the filing fee, your online submission will be complete.
Option 2: File By Mail
Complete the appropriate form and send the document, along with a check or money order for the filing fee, to the Secretary of State.
Certificate of Formation – Domestic LLC – For in-state entities.
Filing fee: $300 check or money order made payable to the Texas Secretary of State.
Mailing address: Business & Commercial Section, Secretary of State, P.O. Box 13697, Austin, TX 78711
Application for Registration – Foreign LLC – For out-of-state entities.
Filing fee: $750 check or money order made payable to the State of Utah.
Mailing address: Business & Commercial Section, Secretary of State, P.O. Box 13697, Austin, TX 78711
4. Obtain an EIN
- Apply Online: www.irs.gov
- Apply by Fax/Mail: Form SS-4
Every Texas LLC that has employees or operates as a corporation or partnership must obtain an Employer Identification Number (EIN) from the Internal Revenue Service to operate in the state.[4]
5. Write an Operating Agreement
An operating agreement is not required under Texas state law, although it is highly recommended. An operating agreement serves to clarify members’ roles, decisionmaking procedures, and other areas of an LLC’s operation.
Download: PDF, MS Word, OpenDocument
6. Choose a Tax Classification
The following are the most common tax classifications for LLCs:
- LLC – Under an LLC classification, a partnership or sole proprietorship is considered a “pass-through entity,” and its profits are taxed as income for the owners and members.
- S-Corporation – In an S-corporation classification, shareholders receive all profits and losses of the business, and they must pay income tax on them. An LLC must file IRS Form 2553 within 75 days of formation to file as an S-corp.
- C-Corporation – As a C-corporation, all business profits and losses are filed as a separate corporate entity. To be recognized under this classification, an LLC must file IRS Form 8832 within 75 days of formation.
7. File Annual Report
In most instances, an LLC in Texas is required to file an annual report, otherwise known as an annual franchise tax report, with the Texas Comptroller. This report is due on May 15 of each year following the year of the LLC’s formation.[5]