How to Form an LLC in Texas | 2025 Guide

If you're launching a business in the Lone Star State, it’s important to understand how to form an LLC in Texas. A limited liability company (LLC) offers the perfect blend of legal protection, tax flexibility, and operational simplicity—making it a preferred business structure for startups and small business owners.

Texas consistently ranks as one of the most business-friendly states in the nation, thanks in part to its pro-entrepreneur policies, streamlined filing process with the Texas Secretary of State, and no personal income tax. This guide will walk you through the step-by-step process of forming a Texas LLC, explain what it costs, and help you avoid common pitfalls.

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Step-by-Step Guide: How to Form an LLC in Texas

Step 1: Choose a Distinct Name for Your Texas LLC

Before you can form your Texas LLC, you must choose a legally compliant name. The name must include “Limited Liability Company,” “LLC,” or “L.L.C.” to reflect your business structure. The name has to be distinguishable from any existing business entity registered with the state.

To confirm availability, search the Texas Comptroller’s Taxable Entity Database.¹ You can be rejected if you use a name that’s too similar to another business. Avoid names that imply affiliation with government agencies or restricted industries unless you have proper authorization.

If you’re not ready to file but want to secure the name, reserve it for 120 days through the Texas Secretary of State for a $40 fee. This is a smart move if you're still preparing your formation documents.

Note: You’re not required to operate your business under your LLC’s official registered name. If you want to use a different name in day-to-day operations—perhaps something shorter, more brandable, or tailored to a specific product or service—you can file an Assumed Name Certificate (commonly called a DBA, or "doing business as"). This can be done with the Texas Secretary of State and your local county clerk for a $25 filing fee. The DBA allows you to operate legally under an alternate name while maintaining your LLC’s legal protections. It also helps inform the public and state agencies who are behind the business name.

Step 2: Designate a Registered Agent

To form a Texas LLC, you must appoint a registered agent—an individual or company responsible for receiving legal documents and official mail on behalf of your business. The agent must have a physical street address in Texas (not a P.O. box), and they must be available during regular business hours.

You can act as your own registered agent, but many business owners choose a professional service for privacy and reliability reasons.

Step 3: File the Certificate of Formation with the Texas Secretary

To officially establish your Texas LLC, you’ll need to file Form 205—known as the Certificate of Formation—with the Texas Secretary of State. This form includes key details such as your LLC’s legal name, your registered agent’s name and address, your business structure (member-managed or manager-managed), the organizer’s contact information, and your desired effective date if it differs from the filing date.

You can file online through SOSDirect² or submit the form by mail to:

Texas Secretary of State
P.O. Box 13697
Austin, TX 78711-3697

The filing fee is $300 by mail or approximately $308.10 if filed online, which includes card processing fees. Once approved, your company is officially recognized as a business entity in Texas.

Step 4: Draft an LLC Operating Agreement

While not required by the Texas Secretary of State, creating an LLC operating agreement is a smart and often essential step. This internal document outlines how your Texas LLC will operate and defines the rights and responsibilities of its members.

It should cover key details such as ownership percentages, how decisions are made, how profits and losses are distributed, and the process for adding or removing members. It should also include what happens if the LLC dissolves.

For a single-member LLC, the operating agreement is particularly important. It helps demonstrate that your limited liability company is a separate business entity, which is critical for protecting your personal assets.

Step 5: Obtain an EIN from the Internal Revenue Service

An Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue Service (IRS). It functions like a Social Security number for your Texas LLC and is required to open a business bank account, hire employees, file taxes, and apply for licenses or permits.

You can apply for an EIN online through the IRS website at no cost.³ Even if you're running a single-member LLC with no employees, having an EIN adds legitimacy to your business entity and makes financial and tax processes much easier to manage.

Step 6: Apply for Business Licenses and Permits

Texas does not require a general statewide business license, but your Texas LLC may still need specific licenses or permits based on your industry and location. City and county governments, as well as state regulatory agencies, often set additional requirements.

Here are a few common examples:

• Health permits for restaurants, food trucks, or other food-related businesses.
• Professional licenses for regulated fields such as medicine, law, real estate, or cosmetology.
• Sales tax permits for selling taxable goods or services, issued by the Texas Comptroller.

To find out exactly what your limited liability company needs, use the Texas Economic Development & Tourism Office’s Business Permit Office as a starting point.⁴ It offers tools and resources to help you comply with state and local licensing requirements.

Step 7: File Your Annual Franchise Tax and Public Information Report

To keep your Texas LLC in good standing, you must meet annual filing obligations with the Texas Comptroller. This includes the Franchise Tax Report and the Public Information Report (PIR).

If your LLC generates more than $2.47 million in annual revenue, you are required to pay state franchise tax. If you’re below that threshold, you still need to file a “No Tax Due Report.” Alongside this, the PIR confirms your LLC’s current address, ownership details, and contact information.

Both reports are due each year by May 15. Failing to submit them on time can result in late fees, penalties, or even the forfeiture of your LLC’s right to operate as a business entity in Texas.

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What Are the Legal Requirements for a Texas LLC?

To stay compliant and protect your legal status as a limited liability company, your Texas LLC must meet several ongoing obligations. These requirements ensure your business maintains good standing with the Texas Secretary of State and the Texas Comptroller.

Key legal requirements include:

• Maintaining a registered agent with a physical address in Texas.
• Filing the Certificate of Formation with the Secretary of State.
• Creating and retaining an LLC operating agreement (even though it’s not filed with the state).
• Obtaining an EIN from the Internal Revenue Service for banking and tax purposes.
• Filing your annual Franchise Tax and Public Information Report.
• Renewing local and industry-specific licenses and permits as needed.

Failing to meet any of these requirements can put your business entity at risk of penalties, loss of liability protection, or administrative dissolution.

Key Benefits of Starting a Limited Liability Company in Texas

Here’s why forming a limited liability company in Texas is often a smart move:

• No Personal Income Tax: Texas does not impose a personal income tax, allowing LLC profits to pass directly to members without an added state tax burden.
• Business-Friendly Climate: The state’s strong focus on Texas economic development provides a supportive environment through tax incentives, funding opportunities, and streamlined regulatory processes.
• Liability Protection: A Texas LLC helps shield your personal assets from business-related debts or lawsuits, as long as you maintain proper separation between business and personal finances.
• Flexible Business Structure: You can choose between a member-managed or manager-managed LLC setup and even elect S Corporation status with the Internal Revenue Service to optimize your federal tax strategy.

What Does It Cost to Form an LLC in Texas?

Here’s a breakdown of standard costs associated with setting up and maintaining a Texas LLC:

Item	Cost
Certificate of Formation (Form 205)	$300
Name Reservation (optional)	$40
Assumed Name/DBA Certificate	$25
EIN from IRS	Free
Registered Agent Service (avg/year)	$50–$150
Franchise Tax (if applicable)	Varies

Optional costs may include professional services for filing, legal consultation, or additional business support.

Most business owners can expect to spend between $400 and $600 to start a limited liability company in Texas, depending on whether optional services like a registered agent or DBA filing are needed.

Can I Form an LLC in Texas Without Living There?

Yes. You do not need to live in Texas to form or operate a business in the state. However, you must appoint a registered agent with a physical address in Texas.

You can also manage your LLC remotely, open a bank account, and file all required documents from out of state.

Can a Nonresident Open a Company in Texas?

Absolutely. Non-U.S. residents can form a limited liability company in Texas. The key steps include:

• Designate a registered agent in Texas.
• Obtain an EIN via IRS Form SS-4 (mail or fax only for foreign individuals).
• Comply with state and federal tax laws.
• Note: Some banks may require a U.S.-based manager or signatory to open an account.

How Does a Texas LLC Compare to Other States?

Choosing the right state to form your limited liability company can have a big impact on cost, compliance, and legal protection. While Texas is a popular option for its low taxes and business-friendly laws, it’s helpful to see how it compares to other top states for LLC formation: California, Wyoming, and Nevada.

Below is a side-by-side comparison of key features across these states:

Feature	Texas	California	Wyoming	Nevada
State Income Tax	None	Yes (up to 13.3%)	None	None
Annual Franchise/LLC Tax	Only if revenue exceeds $2.47M	$800 minimum every year	$60 annual report	Annual Business License Fee ($200) + Annual List of Officers ($150)
Privacy Protection	Limited	Minimal	Strong (anonymous ownership allowed)	High
Filing Fee (LLC Formation)	$300	$70 + $800 annual tax	$100	$75 (Articles of Organization) + $200 (Business License) = $275
Ongoing Compliance	Lows	High	Very Low	Moderate to High
Best For	In-state businesses, cost efficiency	Local operations with high margins	Asset protection, holding companies	Businesses prioritizing privacy, national reach or those not physically operating in Nevada

Texas is ideal for entrepreneurs operating within the state who want affordable formation, minimal ongoing costs, and no state income tax.

California is costly and heavily regulated, making it less attractive unless you’re physically located there and must operate locally.

Wyoming is great for privacy and long-term holding companies, but not ideal if you’re doing regular business in Texas—you’d still need to register as a foreign LLC.

Nevada if privacy is paramount, or you're running an online or multi-state business and don’t plan to physically operate in-state.

Frequently Asked Questions About Texas LLCs

Do Texas LLCs Offer Privacy Protections?

Texas does not support anonymous LLCs. However, hiring a registered agent can keep your personal address off public records.

Why Do Entrepreneurs Choose Texas?

With no state income tax, a low cost of entry, and one of the strongest economic development ecosystems in the U.S., Texas is ideal for startups and small businesses.

Is a Texas LLC Tax-Free?

At the federal level, LLCs pay federal income tax based on their tax classification. At the state level, many LLCs pay no franchise tax unless revenue exceeds $2.47 million.

What Are the Downsides of a Texas LLC?

No state is perfect for every limited liability company, and here are some possible drawbacks of a Texas LLC you should be aware of:

• Registered agent information is public: When you designate a registered agent, their name and physical address become part of the public record. This can be a privacy concern for business owners acting as their agents.
• No anonymous filing options: Unlike states such as Wyoming, Texas does not allow for anonymous LLC ownership. Member or manager names are generally accessible through public filings.
• Franchise tax filing is mandatory: Even if your LLC owes no tax, you’re still required to file an annual Franchise Tax Report and Public Information Report with the Texas Comptroller. Missing these filings can lead to penalties or loss of good standing.

Conclusion

If you're serious about launching or legitimizing your business, learning how to form an LLC in Texas is a practical and strategic first step. With no personal income tax, strong liability protection, and straightforward filing through the Texas Secretary of State, the state offers a rare mix of affordability, flexibility, and legal safeguards.

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Sources:

1. Taxable Entity Database | Texas Government Website
2. SOSDirect | Secretary of State - Texas
3. IRS website
4. Business Permit Office | Texas Government Website