Forming An LLC In Texas

Forming an LLC in Texas is one of the most important legal steps a new business owner takes. Done correctly, it gives you liability protection, credibility, and a solid legal foundation. Done incorrectly — with missing documents, wrong filings, or no operating agreement — it can leave you personally exposed. This guide walks you through the exact steps to form an LLC in Texas, the costs involved, and where entrepreneurs most commonly go wrong.

Want an attorney to handle the formation for you? Call Holmes Law, PLLC at (832) 509-0445 for a free consultation.

How to Form an LLC in Texas — Step by Step

Step 1: Choose a Name for Your Texas LLC

Your LLC name must be distinguishable from all existing entity names on file with the Texas Secretary of State. It must include a required designator — “Limited Liability Company,” “LLC,” “L.L.C.,” “LC,” or “L.C.” Certain words like “Bank,” “Trust,” and “Insurance” require additional approvals. Before filing, you should also check the USPTO federal trademark database to ensure your name does not infringe an existing mark. See our full guide on Texas LLC name availability.

Step 2: File a Certificate of Formation

To officially create your LLC, you must file a Certificate of Formation (Form 205) with the Texas Secretary of State. This document includes your LLC name, the name and address of your registered agent, whether the LLC is member-managed or manager-managed, and the organizer’s information. The filing fee is $300. You can file online through the Secretary of State’s SOSDirect portal or by mail.

Step 3: Appoint a Registered Agent

Every Texas LLC must have a registered agent — an individual or entity with a physical Texas address who agrees to receive legal documents and official government correspondence on behalf of the LLC. The registered agent must be available during normal business hours. You can serve as your own registered agent, designate an attorney, or use a registered agent service. Under Texas Business Organizations Code § 5.201, failure to maintain a registered agent can result in the Secretary of State forfeiting your LLC.

Step 4: Draft an Operating Agreement

Texas does not legally require an LLC to have an operating agreement, but having one is critical. The operating agreement governs how your LLC is managed, how profits and losses are distributed, how members can transfer their interests, what happens when a member leaves or dies, and how the LLC will be dissolved if necessary. Without an operating agreement, your LLC is governed by Texas default rules under the Texas Business Organizations Code Chapter 101, which may not align with what you actually want. See our guide to Texas LLC operating agreements.

Step 5: Get an EIN from the IRS

An Employer Identification Number (EIN) is your LLC’s federal tax identification number. Even if you have no employees, you need an EIN to open a business bank account, file taxes, and hire contractors. You can apply for an EIN for free directly through the IRS website. The process takes about 10 minutes online and the EIN is issued immediately.

Step 6: Open a Business Bank Account

Keeping your business and personal finances completely separate is essential for maintaining liability protection. If you commingle personal and business funds, a court can “pierce the corporate veil” under Texas Business Organizations Code § 101.114 and hold you personally liable for business debts. Open a dedicated business checking account in the LLC’s name as soon as the LLC is formed.

Step 7: File Annual Franchise Tax Reports

Texas LLCs are subject to the state franchise tax and must file an annual report with the Texas Comptroller of Public Accounts. LLCs with annual revenue under the no-tax-due threshold (currently $2.47 million) still need to file a “No Tax Due” report each year. Failure to file can result in the LLC being forfeited by the state — which eliminates your liability protection.

Texas LLC Formation Costs

Item	Cost
Certificate of Formation filing fee (Texas SOS)	$300
Name reservation (optional, 120 days)	$40
Registered agent service (if using one)	$100–$300/year
Operating agreement (attorney-drafted)	Varies — contact us for a quote
EIN (federal tax ID)	Free (IRS)
Annual franchise tax report	$0 if under revenue threshold; varies above

Common LLC Formation Mistakes in Texas

• No operating agreement — leaving the LLC governed by default Texas rules that may not reflect your intentions
• Commingling funds — using personal accounts for business transactions which can void liability protection
• Wrong registered agent — using an address where no one is reliably available during business hours
• Not filing annual reports — Texas will forfeit your LLC if franchise tax reports are not filed, eliminating your liability protection
• Skipping the trademark search — getting your name approved by Texas SOS does not mean it is free from federal trademark liability
• Single-member LLC with no formalities — even a one-person LLC needs a bank account, EIN, and operating agreement to maintain its legal status

Texas LLC Formation FAQ

How much does it cost to form an LLC in Texas?

The Texas Secretary of State charges a $300 filing fee for a Certificate of Formation. Additional costs include a registered agent service ($100–$300/year if you use one), an attorney-drafted operating agreement, and any required business licenses. Total first-year costs are typically $500 to $1,500 depending on services needed.

How long does it take to form an LLC in Texas?

Online filings through SOSDirect are typically processed within 2 to 3 business days. Mail filings can take 5 to 7 business days. Expedited processing is available for an additional fee — same-day and 24-hour processing options are available through SOSDirect for urgent situations.

Do I need an operating agreement for my Texas LLC?

Texas law does not require one, but every LLC should have one. Without an operating agreement, disputes between members are resolved under Texas default rules which may produce outcomes you did not intend. An attorney-drafted operating agreement protects your interests and is especially important for multi-member LLCs, LLCs with outside investors, or any LLC where there is meaningful business or personal asset risk.

Can one person form an LLC in Texas?

Yes. Texas allows single-member LLCs. A single-member LLC provides liability protection that a sole proprietorship does not. It is taxed as a disregarded entity by default — reported on your personal tax return — but can elect S-corp tax treatment through the IRS once the business reaches sufficient profitability.

Should I form an LLC or a corporation in Texas?

For most small businesses, an LLC is the better choice because of its simplicity, pass-through taxation, and flexible management structure. A C-corporation makes more sense if you plan to raise venture capital, issue multiple classes of stock, or eventually pursue an IPO. An S-corporation may make sense for certain tax planning strategies. A Texas business attorney can help you evaluate which structure fits your specific goals. See our full comparison in Pros and Cons of an LLC in Texas.

What is the Texas franchise tax and does my LLC have to pay it?

The Texas franchise tax is a state business tax administered by the Texas Comptroller. LLCs with annual gross revenue under $2.47 million (current threshold) owe no tax but must still file a No Tax Due report annually. LLCs above that threshold pay a tax rate of 0.375% for most businesses (0.75% for certain businesses). Failure to file results in the LLC being forfeited by the state.

Related reading: LLC Name Availability Texas | Texas LLC Operating Agreements | Pros and Cons of an LLC in Texas | How to Dissolve an LLC in Texas