How To Start an LLC in Texas in 12 Easy Steps

Dive into this 12-step guide for how to start an LLC in Texas.

Have you decided to start your own limited liability company (LLC)? Perhaps you’ve got a great idea waiting to be realized, or maybe you just need a change of pace from the daily grind. 

Starting a Texas LLC can help you be your boss, create your schedule, and enter the world of commerce. It’s an exciting opportunity to turn your passion into a thriving business while enjoying the flexibility and independence of being an entrepreneur.

Ready to get started? Look at some resources for starting a business in Texas registered as an LLC.

What is a limited liability company (LLC)?

An LLC is a business structure that offers some of the advantages and protections of a corporation without the associated administrative hassle and cost. Unlike sole proprietorships, LLCs are designed to keep personal assets separate from business assets, providing a layer of protection for personal finances. 

However, it’s important to note that it’s not as easy to transfer ownership of an LLC as it is with a corporation. Additionally, your tax advantages may not be as comprehensive as with a corporation, so it’s essential to understand the differences between business structures in Texas before deciding.

Is an LLC right for you?

If you plan to start a business that includes employees, an LLC is the proper business structure for you. It’s also an excellent option to consider for early stage startups that may not have the time or resources to devote to setting up a corporation right away.

When deciding whether an LLC is the best fit for your business, consider factors such as your industry, growth plans, and the level of personal asset protection you require. Consulting with a business attorney or accountant can help you weigh the pros and cons and make an informed decision that aligns with your unique business needs and goals.

How to start an LLC in Texas in 12 steps

1. Choose an idea for your LLC
2. Name your Texas LLC
3. Create a business plan
4. Get an employer identification number (EIN)
5. File a Texas Certificate of Formation
6. Choose a registered agent in Texas
7. Obtain business licenses and permits
8. Understand Texas state tax requirements
9. Prepare an LLC operating agreement
10. Examine business insurance options in Texas
11. Understand financial considerations
12. Market your LLC

Step 1. Choose an idea for your LLC

Before starting your LLC, it’s crucial to take a step back and thoroughly examine your business idea.

Ask yourself: Is there a genuine demand for your product or service? Can it generate sustainable profits? Is it likely to be successful in the long run? Invest some time developing your idea to understand the type of business you want to operate and the kind of business owner you want to be.

To spark inspiration for your Texas LLC, consider the following strategies: 

• Research trending products and topics on social media and in search engines to identify potential opportunities.
• Identify a problem or challenge in your daily life and develop a solution that others may find valuable.
• Harness into a skill you already possess and can do at home or on the side.
• Explore ways to source products that are low-cost but high in demand, maximizing your profit potential.

Once you’ve settled on a promising product idea, validate it through market research before investing too heavily. This due diligence will help ensure that your business has a solid foundation and a higher likelihood of success.

Step 2. Name your Texas LLC

Choosing an LLC name is one of the first critical steps in establishing your LLC. Most registration steps on this list require you to have a unique business name that sets your enterprise apart.

Here’s a step-by-step guide to naming your Texas LLC: 

1. Brainstorm a short list of potential business names. The Shopify business name generator can help you create a memorable name that resonates with your target audience. 
2. Conduct an online search to ensure no other businesses already use your preferred names. 
3. Check the United States Patent and Trademark Office database to confirm your chosen names haven’t been trademarked. 
4. Use the Shopify domain name generator to see if a corresponding domain name is available.
5. Familiarize yourself with the State of Texas’s requirements for business names, outlined in the Texas Secretary of State name filings FAQ. Once you’ve settled on a compliant name, register it via SOSDirect.

If you plan to operate your LLC under a different name than the one you officially register, you will need to file for an Assumed Name Certificate, also known as a Doing Business As (DBA) name. This allows you to conduct business under a name that is different from your LLC’s legal name.

Step 3. Create a business plan

While the State of Texas doesn’t require you to write a business plan, it’s a crucial step that shouldn’t be overlooked. Most business loan officers will request a business plan as part of funding applications, and these documents serve as a valuable tool to keep your LLC startup process organized and on track.

A well-crafted business plan can help you envision the future of your business and plan accordingly.

A comprehensive business plan should include the following elements:

• Company description
• Market analysis
• Management and organization structure
• Products and services offered
• Customer segmentation and target market
• Marketing and promotional strategies
• Logistics and operations plan
• Financial projections and funding requirements

Crafting a business plan requires some upfront effort, but the long-term benefits are worth the investment. If you need inspiration or guidance, review some business plan examples and use a business plan template as a starting point.

Step 4. Get an employer identification number (EIN)

When starting your LLC in Texas, you must follow federal tax requirements, such as applying for an employer identification number (EIN). This unique tax identification number is necessary throughout many of the steps in the LLC registration process. It serves a similar purpose to your Social Security number (SSN) but is specifically for your LLC business. 

Before heading to the Internal Revenue Service (IRS) website to register through its interview-style application process, ensure you have your personal SSN or Individual Taxpayer Identification Number (ITIN) ready. Alternatively, you can register by fax, phone, or mail.

Step 5. File a Texas Certificate of Formation

In Texas, filing a Certificate of Formation, also known as a statement of information or articles of organization, registers your LLC with the Secretary of State’s office. A certificate of formation provides essential details about your company, such as its official entity name, contact information, and mailing address. 

You can file your LLC formation documents online via SOSDirect, the most convenient and efficient method. However, information on how to file using alternate methods, such as by mail or in person in Austin, is also available.

After filing your Certificate of Formation, you will encounter various costs associated with starting your LLC in Texas.

These LLC filing fees can vary based on your specific needs, but here’s a breakdown of typical costs:

• Certificate of Formation: $300
• Change of Registered Agent: $15
• Name Reservation (optional): $40
• Assumed Name Certificate (if applicable): $25

After forming your LLC, you’ll be required to submit an annual Public Information Report (PIR) to the Texas Comptroller of Public Accounts. This report helps the state keep up-to-date records of your LLC and must be filed by May 15 of each year.

In addition to the PIR, your LLC may need to file additional reports, such as the Franchise Tax Report. Texas LLCs that make over a certain revenue threshold must pay a franchise tax. LLCs that fall below the threshold must file a No Tax Due Report.

Failing to file these annual reports can result in penalties or losing your LLC’s good standing with the state, so it’s crucial to stay on top of these filings each year.

Step 6. Choose a registered agent in Texas

A registered agent is an individual or business entity you designate to receive court documents on behalf of your LLC, such as if you’re served with a lawsuit or pursued by debt collectors. This is part of the LLC business structure designed to protect your personal assets from liabilities incurred by your business. In Texas, you can’t serve as your registered agent.

When choosing a registered agent, you can appoint an individual, such as a trusted friend or family member, or hire a professional registered agent service. Professional services offer the advantage of reliability and experience in handling legal documents and maintaining your privacy by providing a separate business address for your LLC. 

You can find more information on registered agents in the Texas Secretary of State Registered Agent FAQ. Choosing a reliable registered agent who will promptly notify you of any legal documents received on behalf of your LLC is essential, as failure to respond to legal matters can have severe consequences for your business. Your registered agent must have a physical address in Texas, and cannot use a P.O. Box as their business address.

Step 7. Obtain business licenses and permits

Businesses in many industries throughout the country must obtain business licenses and permits to operate legally. Standard licenses and permits include:

• Alcohol sales
• Weights and measures
• Waste discharge

While you may not need a general business license to operate in Texas, you may need specific ones depending on your industry and location. For example, any business selling liquor must obtain a license from the Texas Alcoholic Beverage Commission. The licenses and permits required for your LLC can vary depending on where your business is located and the nature of your operations.

The Texas Business Licenses & Permits handbook provides comprehensive information on which industries require licenses and permits. The Texas Economic Development Business Permit Office administers licensing and permits, and applications can be submitted through the Governor’s Small Business Resource Portal.

Step 8. Understand Texas state tax requirements

Your LLC may be required to pay an annual franchise tax to the Texas Comptroller of Public Accounts. This tax is calculated using a revenue threshold and defined percentages, so you may not be required to pay it if your earnings fall below the threshold.

In addition to the franchise tax, most sales in Texas are subject to a flat-rate sales tax. Depending on your LLC’s location, you may also be required to pay an additional local sales tax. Make sure you understand your tax obligations well before making your first sale to ensure proper compliance and avoid potential penalties.

While Texas does not have state income tax, LLC members are still responsible for federal income taxes.

Step 9. Prepare an LLC operating agreement

An operating agreement is a document that outlines essential details about your LLC, such as:

• How your business operates
• Management structure and decision-making process
• Profit-sharing arrangements between stakeholders

Although you’re not required to submit an operating agreement to the State of Texas as part of the LLC registration process, it’s still wise. Without an operating agreement, Texas State default operating rules will apply to your enterprise, which could make it challenging to achieve your vision for the company. An operating agreement helps ensure your LLC is run according to your specific goals and preferences.

One of the most important decisions you'll make in your operating agreement is whether your LLC will be manager-managed or member-managed:

• Manager-managed: In this structure, one or more managers handle the daily operations while the members take a more passive role. This setup is when there are multiple LLC owners who don't want to be involved in the day-to-day business. 
• Member-managed: In a member-managed LLC, the members themselves run the business and make operational decisions. This is a common setup for small LLCs where the members want direct involvement in daily activities. 

This decision should be clearly outlined in your operating agreement to avoid confusion about who has authority to manage the business.

Consider using one of the many free operating agreement templates available online to help you write your operating agreement. These templates provide a solid foundation for structuring your agreement and can be customized to suit your LLC’s unique needs.

Step 10. Examine business insurance options in Texas

Though your LLC provides many protections against certain liabilities, the protection isn’t comprehensive. It’s a good idea to explore your insurance options to understand what’s covered and what needs additional policies. 

The Texas Department of Insurance provides a substantial amount of information on your insurance options, including:

• Commercial general liability: protects against claims of liability for bodily injury, property damage, and personal and advertising injury
• Professional liability: protects against lawsuits and claims of negligence, copyright infringement, and personal injury
• Worker’s compensation: pays for medical care and lost income for employees who become injured, ill, or deceased because of their jobs.

Consider consulting with an insurance professional to determine the specific coverage your LLC needs based on your industry, size, and potential risks. Adequate insurance coverage can provide peace of mind and protect your business from unexpected financial burdens.

Step 11. Understand financial considerations

To separate your business and personal assets, you can open a business bank account, apply for a business credit card, and even contract a business accountant. Working with a business accountant can help ensure your personal finances are protected, and your business finances are solvent and profitable.

Consider applying for a bank loan if your LLC needs additional capital during startup or regular operations. Having a complete business plan will strengthen your loan application. Shopify Capital may also be an option to help you access funding.

Establishing a solid financial foundation will set your LLC up for long-term success. Keep accurate records, monitor your cash flow, and make informed financial decisions to ensure the stability and growth of your business.

Step 12. Market your LLC

Develop a strategic marketing plan to promote your Texas LLC and raise brand awareness. A proactive marketing strategy is likely to be more effective than a haphazard approach. 

Your marketing plan should cover the following key elements: 

• Branding: Define who you are, what you stand for, and why you exist. This includes visual representations of your brand, like your logo, fonts, voice, and tone.
• Target market: Identify your target audience, their thoughts, and why they need your product. Understand the essential characteristics of your target audience.
• Website: Consider selling online to reach a large audience. You can build a complete online store with Shopify using customizable templates.
• Content: Determine the content you’ll create, curate, distribute, and promote, including both online and offline forms of content. 
• Social media: Choose which channels you’ll use and how you’ll approach them, including both organic and paid social media strategies. 
• Search engine optimization (SEO): If you plan to rely on Google to help your site gain visibility, conduct keyword research and analysis to understand how to best optimize your site.
• Paid advertising: Decide which paid advertising channels you’ll use, both online and offline. This could include paid social ads, paid search, local radio ads, event sponsorships, and more. 

Start your LLC in Texas today

Starting a new business venture is an exciting endeavor! Registering an LLC in Texas can be advantageous for small businesses, especially those seeking personal liability protection for their assets. However, it’s crucial to review and choose taxation options carefully; while there are benefits, such as shielding your personal assets, there are also some trade-offs to consider, like startup costs and more complex tax filings.

Despite these considerations, the ease and convenience of forming an LLC makes it a strategic choice for many entrepreneurs and business owners. The LLC structure balances personal asset protection and operational flexibility, making it an attractive option for starting a business in Texas.

With Shopify, you can start your Texas LLC and begin selling in minutes. Build your website, secure funding, and grow your brand with Shopify’s full suite of business tools to support entrepreneurs at every stage of their journey. From customizable templates to integrated payment processing and inventory management, Shopify provides the resources to launch and scale your LLC successfully. 

How to start an LLC in Texas FAQ

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

Depending on various factors, starting an LLC in Texas can take a month or longer. If your LLC is based in a location or industry that requires multiple licenses and permits, the process could take even longer. Planning ahead and allowing sufficient time to navigate the necessary steps and requirements is essential.

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

The cost of setting up a relatively straightforward LLC in Texas can range from several hundred dollars to more than $1,000. The exact amount will depend on the licenses and permits required for your business and any professional fees you incur, such as those for legal or accounting services. Budgeting accordingly and investing in these startup costs is essential when planning your LLC.

Do LLCs pay taxes in Texas?

Yes, LLCs in Texas are required to pay taxes at both the state and federal levels. This includes an annual state franchise tax and sales tax, among others. It’s crucial to understand your LLC’s tax obligations and to stay compliant with all applicable tax laws. Consult with a tax professional to ensure you’re meeting your tax responsibilities and to explore potential tax benefits available to your LLC.

This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Texas will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies.