How to in Texas (2026) Form an LLC
Starting a Business in Texas — Series
Why Form an LLC in Texas?
When Texas Web Services LLC was formed, the decision to structure as an LLC rather than a sole proprietorship came down to one thing: liability protection. As an LLC, the business is a legally separate entity. If a client dispute, debt, or lawsuit arises, your personal assets — bank accounts, car, home — are generally shielded.
Beyond protection, an LLC gives your business formal legal standing. You can:
- Open a dedicated business bank account (most banks require LLC paperwork)
- Sign contracts under the business name
- Apply for business credit cards and loans
- Establish credibility with clients and vendors
- Take on partners or investors with defined ownership terms
Texas is one of the better states to form an LLC. There is no personal income tax, the filing fee is $300 (one-time), and there is no annual maintenance fee — unlike states like California that charge $800/year just to keep an LLC active.
📋 What You Need Before You Start
- ✓ Your desired LLC name (and 1–2 backups)
- ✓ A Texas registered agent name and address (can be yourself or a service)
- ✓ Names and addresses of all LLC members/managers
- ✓ A credit or debit card for the $300 filing fee
- ✓ An email address for your SOSDirect account
Step 1 — Choose and Verify Your LLC Name
Your LLC name must include one of the following designators:
- Limited Liability Company
- LLC
- L.L.C.
For example: Texas Web Services LLC, Smith Plumbing Limited Liability Company, or Lone Star Roofing L.L.C.
Your name must also be distinguishable from existing Texas business entities. Before filing, search the Texas Secretary of State's database to confirm your name is available.
🔍 Search for Your Business Name
Go to the Texas Secretary of State name availability search:
Search Texas Business Names →Note: The SOS search only checks existing registered entities, not trademarks. For brand protection, also check the USPTO trademark database at uspto.gov.
Name Restrictions to Know
- Cannot imply a government affiliation (no "FBI", "Treasury", etc.)
- Cannot use restricted words like "Bank", "University", "Insurance" without state approval
- Cannot be deceptively similar to an existing registered Texas entity
Reserve Your Name (Optional)
If you are not ready to file immediately but want to lock in your name, you can reserve it for 120 days by filing a Name Reservation (Form 501) with the Texas SOS for a $40 fee. This is optional — most people file the full Certificate of Formation right away.
Step 2 — Choose a Registered Agent
Every Texas LLC must designate a registered agent — a person or company that agrees to receive legal documents (lawsuits, tax notices, official government mail) on behalf of your LLC during normal business hours.
Requirements for a Texas Registered Agent
- Must have a physical street address in Texas (no P.O. boxes)
- Must be available Monday–Friday, 9am–5pm to receive documents
- Can be an individual (including yourself if you have a Texas address) or a registered agent company
Your 3 Options
Be Your Own Agent
Free
✓ No added cost
✗ Your home/office address becomes public record. You must be present during business hours.
Use a Registered Agent Service
$50–$150/yr
✓ Your address stays private. They handle receipt and forwarding.
✗ Annual fee. Adds a vendor relationship.
Use Your Attorney
Varies
✓ Combined legal + agent service.
✗ Most expensive option. Overkill for most small businesses.
Popular registered agent services in Texas include Northwest Registered Agent, Registered Agents Inc., and ZenBusiness. Most charge $49–$150/year. If you work from home and don't want your home address on the public filing, a registered agent service is the right move.
Step 3 — File Your Certificate of Formation (Form 205)
The Certificate of Formation is the official document that creates your LLC in Texas. It is filed with the Texas Secretary of State. The filing fee is $300.
How to File Online (Recommended)
- Create a SOSDirect account at sos.state.tx.us
- Select "Business Organizations" → "Domestic LLC" → "Certificate of Formation (Form 205)"
- Fill in the required fields:
- LLC name (with LLC/L.L.C. designator)
- Registered agent name and Texas street address
- Governing authority: member-managed or manager-managed
- Organizer's name and address (the person filing, not necessarily a member)
- Effective date (immediately upon filing, or a future date up to 90 days out)
- Pay the $300 filing fee by credit/debit card
- Receive your Certificate of Formation — typically within 2–3 business days online, 5–7 business days by mail. Download and save this PDF — you will need it often.
⚠️ Member-Managed vs. Manager-Managed
Member-managed means all LLC owners (members) have authority to act on behalf of the LLC. This is the default and the right choice for most small businesses where the owners run day-to-day operations.
Manager-managed means you designate specific managers (who can be members or outside hires) to run the LLC. The other members are passive investors. Choose this if you have silent partners or investors who won't be involved in operations.
Filing by Mail (Alternative)
Download Form 205 from the Texas SOS website, complete it, and mail with a $300 check payable to the Texas Secretary of State to:
P.O. Box 13697
Austin, TX 78711-3697
Mail processing takes 5–7 business days from receipt. Online is faster and recommended.
Step 4 — Write an Operating Agreement
Texas does not legally require an operating agreement, but every LLC should have one — especially if you have more than one member.
An operating agreement is a private internal document (not filed with the state) that governs how your LLC operates. It covers:
- Ownership percentages — what percentage each member owns
- Profit and loss distribution — how and when profits are paid out
- Voting rights — what decisions require a vote, and how votes are weighted
- Management structure — who has authority to sign contracts, open bank accounts, hire employees
- Member changes — what happens if a member wants to leave, sell their interest, or dies
- Dissolution — how the LLC is wound down if needed
✅ Why This Matters Even for Single-Member LLCs
Without an operating agreement, Texas default rules apply — and those rules are not always what you would choose. More importantly, banks often ask for your operating agreement when you open a business bank account. Having one makes the process faster and signals that your LLC is properly structured. Single-member LLC operating agreements are short (1–3 pages) and easy to draft.
Free operating agreement templates are available from the SOS website and legal sites like LegalZoom, Rocket Lawyer, and NOLO. For LLCs with multiple members, complex profit-sharing arrangements, or outside investors, having a Texas business attorney draft or review the agreement is worth the cost ($300–$800 for most small business attorneys).
Step 5 — Get Your EIN from the IRS
Once your Certificate of Formation is approved and you have your LLC officially formed, apply for your Employer Identification Number (EIN) from the IRS. This is the federal tax ID your LLC uses to open a business bank account, hire employees, and file taxes.
The EIN is free directly from the IRS and takes about 5 minutes online.
📖 Full Guide: How to Get an EIN for Free
We covered every IRS application method — online, fax, mail, and phone — in the previous post in this series.
Read: How to Get an EIN for Free →Step 6 — Open a Business Bank Account
Your LLC and your personal finances must stay separate. Commingling funds is one of the most common mistakes new business owners make — and it can expose you to personal liability even with an LLC, a concept called "piercing the corporate veil."
To open a business bank account in Texas, you typically need:
- Your Certificate of Formation (approved, with the Secretary of State's stamp)
- Your EIN from the IRS
- Your Operating Agreement
- A government-issued photo ID for each member present
- An initial deposit (varies by bank — many business checking accounts require $25–$100 minimum)
We cover this fully in Step 4 of this series.
What About the Texas Franchise Tax?
Texas levies a franchise tax on most LLCs. The good news: if your LLC's total annual revenue is below $2.47 million (the no-tax-due threshold for 2026), you owe $0. However, you must still file a No Tax Due report each year with the Texas Comptroller — even if you owe nothing.
For LLCs above the threshold:
- Retail and wholesale businesses: 0.375% of taxable margin
- All other businesses: 0.75% of taxable margin
Franchise tax reports are due May 15 each year (covering the prior calendar year). The Texas Comptroller's website at comptroller.texas.gov has free filing and a franchise tax calculator.
Annual Requirements to Keep Your Texas LLC Active
Unlike some states, Texas does not require an annual report with the Secretary of State. However, to keep your LLC in good standing, you must:
- File the Texas Franchise Tax report annually (May 15 each year) — even if no tax is owed
- Maintain a registered agent with a valid Texas address at all times
- Keep your registered agent information current — file a Change of Registered Agent (Form 401-A) if it changes
- File a Public Information Report (PIR) annually alongside the franchise tax report — this updates member/manager names and addresses on the public record
🚨 Forfeiture Risk
If you miss franchise tax filings, the Texas Comptroller can forfeit your LLC's right to do business in Texas. This means your LLC loses its liability protection and cannot sue or be sued as an entity. Reinstatement requires filing all past-due reports and paying penalties. Set a calendar reminder for May 15 every year.
Do I Need a Business License in Texas?
Texas does not have a general state business license — which surprises many new business owners. However, depending on your industry, you may need:
- Professional licenses — required for contractors, electricians, plumbers, cosmetologists, HVAC technicians, real estate agents, insurance agents, and many other regulated professions. Check the Texas Department of Licensing and Regulation (TDLR) at tdlr.texas.gov.
- Texas Sales and Use Tax Permit — required if you sell taxable goods or services. Free to obtain from the Texas Comptroller. We cover this in Step 3 of this series.
- Local permits — cities and counties may require a Certificate of Occupancy, zoning permit, or general business permit. Check with your city's development or licensing office.
- Health permits — required for food service, restaurants, and healthcare operations.
Texas LLC Formation: Full Cost Summary
| Item | Cost | Required? |
|---|---|---|
| Certificate of Formation (Form 205) | $300 | Yes — one-time |
| Name Reservation (Form 501) | $40 | Optional — holds name 120 days |
| Registered Agent Service | $50–$150/yr | Yes (can be yourself for free) |
| Operating Agreement | $0–$800 | Strongly recommended |
| EIN from IRS | $0 | Yes — free from IRS |
| Business Bank Account | $0–$100 deposit | Strongly recommended |
| Texas Sales Tax Permit | $0 | Required if selling taxable goods/services |
| Annual Franchise Tax Report | $0 (if under $2.47M revenue) | Yes — must file annually |
Total to launch: $300 required + optional registered agent service (~$100/yr). Everything else is free if you DIY.
Quick-Start Checklist
Texas LLC Formation Checklist
What Comes Next
With your LLC formed and your EIN in hand, the next step is making sure your business is registered to collect sales tax if you sell taxable products or services in Texas. Most service businesses — web design, consulting, cleaning, landscaping — do need a Texas Sales Tax Permit.
Next in the Series
Step 3 — How to Get a Texas Sales Tax Permit
Need Help Setting Up Your Business Online?
Once your LLC is formed, your next move is building a web presence that actually brings in clients. At Texas Web Service, we build websites for Houston small businesses that are fast, rank on Google, and turn visitors into customers. Whether you need a simple 5-page site or a full local SEO strategy, we can help you get found.
Book a free consultation → No pitch, no pressure — just a straightforward look at what your business needs online.
Frequently Asked Questions
How much does it cost to form an LLC in Texas?
How long does it take to form an LLC in Texas?
Do I need a registered agent for a Texas LLC?
Do I need an operating agreement for a Texas LLC?
Can I form a single-member LLC in Texas?
What is the Texas franchise tax and does my LLC owe it?
Do I need a business license in Texas to operate my LLC?
Chief Writer · Texas Web Service