Texas LLC Registration: From Formation to Compliance

1. What is a Limited Liability Company (LLC)?

A Limited Liability Company (LLC) is a flexible business entity that combines the liability protection of a corporation with the simplicity of a partnership. It protects your personal assets from business debts and lawsuits while allowing flexible management and tax options. In Texas, an LLC can be managed by its members or appointed managers, and it can choose how it wants to be taxed—sole proprietorship, partnership, or corporation.

2. Why Form an LLC in Texas?

Texas offers a large economy, strong entrepreneurial culture, and business-friendly policies. Forming an LLC in Texas provides several key benefits.

Benefits of a Texas LLC

1. Personal liability protection keeps your assets safe.
2. Flexible taxation options: default pass-through or elect S-Corp.
3. Simple management structure.
4. Higher trust and credibility for clients and banks.
5. Low formalities compared to corporations.

3. Legal Foundation of Texas LLCs

Texas LLCs are governed under Texas state law. Your LLC becomes official after filing the Certificate of Formation with the Texas Secretary of State.

Key Legal Highlights

1. Members are not personally responsible for business debts.
2. Operating Agreement defines rules & structure.
3. Flexible management choices.
4. Clear dissolution rules.
5. Nationwide recognition across all U.S. states.

4. Choosing a Name for Your Texas LLC

Your LLC name must follow Texas guidelines to avoid conflicts and legal issues.

1. Must include “LLC” or “Limited Liability Company”.
2. No misleading words like bank, trust, insurance (may require approvals).
3. Must be unique and distinguishable.
4. You may reserve the name (if needed) before filing.
5. A DBA/Assumed Name can be filed for branding.

5. Registered Agent Requirements

Every Texas LLC must maintain a registered agent in Texas. This is the person or company who receives legal notices and state correspondence on behalf of your LLC.

Who Can Be a Registered Agent?

1. An individual resident of Texas with a physical street address.
2. A business entity authorized to do business in Texas (professional registered agent service).

Why Use a Professional Registered Agent?

1. Protects your privacy (keeps your home address off public filings).
2. Ensures timely delivery of legal documents.
3. Helps you stay compliant even if you travel or relocate.

6. How to Register an LLC in Texas

Step 1: Appoint a Registered Agent

Choose a registered agent with a physical street address in Texas. The agent is responsible for receiving legal notices and state correspondence on behalf of your LLC.

Step 2: File the Certificate of Formation

File the Certificate of Formation (Form 205) with the Texas Secretary of State . This filing officially creates your Texas LLC.

State filing fee: $300

Step 3: Register for Texas State Taxes

Most Texas LLCs must register with the Texas Comptroller of Public Accounts for franchise tax and other applicable state taxes.

Step 4: Understand Texas Franchise Tax Requirements

Texas does not impose a personal income tax, but most LLCs are subject to the Texas Franchise Tax. Many small businesses qualify for the No Tax Due Threshold, meaning no tax is owed, but a report may still be required.

Franchise tax reports are typically due annually by May 15. Failure to file can result in penalties or loss of good standing.

Step 5: Adopt an Operating Agreement

Texas does not legally require an Operating Agreement, but it is strongly recommended. This document outlines ownership percentages, management structure, voting rights, and profit distribution.

Banks, investors, and payment processors often request an Operating Agreement before doing business with your LLC.

Step 6: Obtain an EIN

An Employer Identification Number (EIN) is required to open a business bank account, hire employees, and file federal taxes. You can apply for free through the IRS.

Step 7: Open a Business Bank Account

After completing Texas LLC registration, opening a dedicated business bank account helps separate personal and business finances and protects your limited liability status.

Most Texas banks require the following:

• Approved Certificate of Formation
• LLC Operating Agreement
• Employer Identification Number (EIN)
• Valid government-issued photo ID

Many Texas LLC owners open their bank account immediately after receiving their EIN to avoid payment or invoicing delays.

7. Tips to Stay Compliant

• Maintain an active registered agent in Texas
• File Texas franchise tax reports on time
• Keep accurate financial and ownership records
• Meet all federal and state tax deadlines

8. Texas LLC Fees & Costs

Texas is one of the most business-friendly states in the U.S., offering strong credibility, no personal income tax, and a predictable compliance structure. While the initial filing fee is higher than some states, ongoing costs remain relatively low for most LLCs.

Formation documents are filed with the Texas Secretary of State .

Franchise tax filings and payments are handled through the Texas Comptroller of Public Accounts .

9. Federal Requirements

1. Employer Identification Number (EIN)

Most businesses formed through Texas LLC registration must obtain an EIN from the IRS. The EIN is required for banking, hiring employees, working with payment processors, and filing federal tax returns.

Apply directly with the IRS: IRS EIN Application . Non-U.S. founders can apply without a Social Security Number.

2. Federal Tax Classification

By default, Texas LLCs are treated as pass-through entities for federal tax purposes, meaning profits and losses pass through to the owners’ personal tax returns.

• Single-member LLC: Reported on Schedule C (Form 1040)
• Multi-member LLC: Files IRS Form 1065
• S Corporation election (optional): File IRS Form 2553

10. Conclusion

Texas LLC registration offers entrepreneurs a powerful combination of tax advantages, flexible management, and long-term growth potential. With no personal income tax, a strong economy, and nationwide credibility, Texas is an excellent choice for both U.S. and international founders.

By forming your LLC correctly, maintaining an active registered agent, filing franchise tax reports on time, and meeting federal requirements, your Texas LLC can remain compliant and in good standing. With FormLLC, the entire process—from formation to ongoing compliance—is handled with clarity, accuracy, and confidence.