A Step-by-Step Guide to Starting an LLC in Texas in 2025
If you’re an entrepreneur or small business owner, starting a Limited Liability Company (LLC) in Texas can provide you with liability protection, tax benefits, and a simplified structure to run your business. In this detailed guide, we’ll explain how to get an LLC in Texas, cover the costs, and explore why Texas is one of the best states to start an LLC.
By the end of this article, you’ll have a clear understanding of the process, costs, and benefits of forming an LLC in Texas in 2025.
Why Start an LLC in Texas?
Texas has long been recognized as one of the best states to set up an LLC, and for good reason. Its business-friendly climate, robust economy, and simple LLC formation process make it an excellent choice for entrepreneurs.
Here are some reasons why Texas is the best state for LLC formation:
- No State Income Tax: Texas is one of the few states with no personal income tax, which can save business owners a significant amount of money.
- Strong Economic Climate: Texas is home to industries like technology, healthcare, real estate, and energy, providing endless opportunities for new businesses
- Low Maintenance Cost: Compared to some other states, Texas offers competitive maintenance fees with no annual renewal fee.
- Flexible Management Structures: Texas allows LLCs to choose between member-managed and manager-managed structures, giving business owners flexibility in how they run their companies.
So whether you’re starting a real estate business and need help with creating an LLC for property in Texas, or you’re launching a law firm, this guide will help you navigate the process for all businesses.
What Is an LLC?
A Limited Liability Company (LLC) is a type of business entity that combines the liability protection of a corporation with the tax benefits and operational flexibility of a sole proprietorship or partnership. LLCs protect your personal assets from being used to settle business debts or liabilities, making them one of the best LLC structures for small business owners.
Step 1: Choose a Name for Your LLC
When exploring how to open an LLC in Texas, the first step is choosing a unique name. Here are the key rules to follow:
- Uniqueness: The name must be distinguishable from other businesses registered in Texas. You can search for existing names using the Texas Secretary of State’s online Company’s database.
- Inclusion of LLC Identifier: The name must include “Limited Liability Company,” “LLC,” or “L.L.C.”
- Avoid Restricted Words: Words like “bank,” “insurance,” or “university” require additional approvals.
Pro Tip: Reserve your business name with the Texas Secretary of State for $40 if you’re not ready to file your LLC yet.
Step 2: File a Certificate of Formation
The Certificate of Formation (Form 205) is the official document required to register your LLC with the state of Texas. Here’s what you need to know:
- Filing Fee: The cost to file the Certificate of Formation is $300.
- Information Required:
- LLC Unique Name
- Business Purpose
- Registered Agent Name and Address
- Management Structure (member-managed or manager-managed)
You can file the form online through the Texas Secretary of State website or submit a hard copy by mail.
Step 3: Appoint a Registered Agent
A registered agent is an individual or company responsible for receiving legal documents on behalf of your LLC. If you’re asking, “Can I be my own registered agent in Texas?”, the answer is yes. However, you must
- Have a physical address in Texas (P.O. boxes are not allowed).
- Be available during regular business hours.
Many business owners choose to hire a professional registered agent service for convenience and privacy, with costs ranging from $50 to $250 annually.
Step 4: Decide on an LLC Management Structure
Texas allows you to choose between two types of LLC management structures:
- Member-Managed LLC: The owners (members) are directly involved in the day-to-day operations of the business. This structure is common for small businesses.
- Manager-Managed LLC: Members appoint one or more managers to handle operations, while the members focus on ownership. This structure is ideal for larger LLCs or businesses with passive investors.
Choose the structure that aligns with your business goals and operating style.
Step 5: Obtain an EIN
An Employer Identification Number (EIN) is a unique number issued by the IRS for tax purposes. You’ll need an EIN to:
- Open a business bank account.
- File federal and state taxes.
- Hire employees.
You can obtain an EIN for free on the IRS website using your own SSN or ITIN, otherwise you will have to fax filled SS-4 form to IRS fax number to get EIN number.
Step 6: Open a Business Bank Account
Opening a separate bank account for your LLC is crucial to maintaining liability protection. This step prevents your personal and business finances from mixing, which is essential for maintaining the LLC’s “corporate veil.”
Step 7: Comply with State and Federal Regulations
After forming your LLC, you’ll need to stay compliant with ongoing requirements:
- File Franchise Taxes: Texas imposes a franchise tax on LLCs, but businesses earning less than $2.47 million in annual revenue are typically exempt.
- File Annual Reports:Ensure your LLC remains in good standing by filing annual reports with the state.
Special Considerations
Series LLC in Texas
If you’re starting a real estate business, consider forming a Series Limited Liability Company (Series LLC) in Texas. This unique structure allows you to create separate “series” within your LLC, each with its own assets, liabilities, and operations.
PLLC in Texas
For licensed professionals (e.g., doctors, lawyers, accountants), Texas requires forming a Professional Limited Liability Company (PLLC). This structure ensures compliance with state regulations governing professional services.
Costs of Starting an LLC in Texas
If you’re asking, “How much does an LLC cost in Texas?”, Here’s a breakdown:
- Certificate of Formation Fee: $308, State official fee with Credit Card Processing fee.
- Register Agent Services: $50-$250 annually (optional if you act as your own agent).
- LLC Attorney fee: If you choose to hire an attorney/ Services to help set up your LLC, you can expect to pay between $100 and $750, depending on the complexity of your business. Hiring an attorney is often the best choice for those looking for personalized legal advice and assistance.
- Franchise Tax: Varies depending on revenue (Threshold > $2.47 Million)
Looking for the cheapest way to start an LLC in Texas? Filing the paperwork yourself and acting as your own registered agent can significantly reduce costs.
Comparing LLCs and Sole Proprietorships
Many new business owners weigh the pros and cons of an LLC versus a sole proprietorship in Texas. While sole proprietorships are simpler and cheaper to set up, they do not provide liability protection. An LLC, on the other hand, separates your personal and business assets, offering greater peace of mind.
FAQs About Starting an LLC in Texas
1. What is a Certificate of Formation?
A Certificate of Formation is the official document that registers your LLC with the state of Texas.
2. Can I form an LLC for a law firm in Texas?
Yes, law firms can operate as PLLCs in Texas, provided they comply with specific professional regulations.
3. How much is an LLC in Texas?
The total cost varies but starts at $308 for the Certificate of Formation. Additional costs depend on registered agent fees, LLC Attorney Service Fees and franchise taxes.
4. What is the best state to register an LLC?
While the best state to register an LLC depends on your needs, Texas stands out for its low taxes, affordability, and business-friendly climate.
Conclusion
Starting an LLC in Texas is a straightforward process that offers numerous benefits, from liability protection to tax savings. Whether you’re a first-time entrepreneur or an experienced business owner looking for the best state to form an LLC, Texas is an excellent choice.
By following the steps outlined in this guide, you’ll have your LLC up and running in no time. Take advantage of Texas’s pro-business environment and lay the foundation for your company’s success in 2025 and beyond.