How to Start an LLC in Texas?

Monisha Chaudhary

09 Apr, 2024

Operating a Limited Liability Company (LLC) in Texas requires you to have an idea about the costs of registering your business with the Texas Secretary of State. You would be required to pay $300 to file the registration paperwork. For that, you are first required to name your company. It should be a unique name different from others operating within the state. To ensure that the name you chose for the LLC is not already taken, you have to reach out to the Texas Secretary of State Offices or check with the Secretary of State website. If the name you chose does not show up in the state database, then you can reserve the name for 120 days for a cost of $40. You can reserve the name via the Secretary of State website or by filing it through email. With the name of your LLC, the phrase “limited company” or “limited liability company” should appear at the end. Even though Texas LLCs are not obligated to reserve a name, name reservation prevents other businesses from using the same name while you file the necessary paperwork. For your convenience, the Secretary of State’s office also provides filing paperwork known as the certificate of formation.

Cost of Registering an LLC in Texas

Filing the Certificate of Formation

Forming a new LLC requires filing a Certificate of Formation-Limited Liability Company (Form 205) with the Texas Secretary of State and paying a filing fee of $300. All LLCs should submit a certificate of formation to the Secretary of State’s office to gain official recognition in Texas. Important information, such as:

1. Business Info
2. Business Purpose
3. Name and Address of each company member

It is required to be given to complete the certificate. The certificate must also list the name of the registered agent, the person who will accept the company’s official documents on the company’s behalf. The certificate must mention the Address and include an electronic or written consent document from the appointed agent.

To obtain a certified copy of the Certificate of Formation, you must pay a $30 fee. You need to pay a fee of $5 to obtain a certificate of status. Suppose you wish to reserve a name for your LLC for 120 days before registering. In that case, you have to file an Application for Reservation or Renewal of Reservation of an Entity Name under Form 501 and pay a fee of $40.

Registered Agents

All LLCs are required to appoint a registered agent, who can be a Texas resident or any organization permitted to conduct business in Texas. Additionally, the agent is required to have a physical address in the state. In no case can an LLC be its own agent. To be considered as a registered agent, an individual or organization has to submit an appointment and consent form to the Secretary of State office, otherwise known as Form 401-A. Filing fees for Form 401-A amount to $15 for profit-based LLCs and $5 for non-profit-based LLCs. The document should provide the following information:

1. The name of the person or organization agreeing to become the agent.
2. Confirmation that the agent is located in Texas.
3. Physical, Texas Street Address.
4. The execution date of the agreement.

Completion of Certificate

Post the completion of the registered agent form, the certificate of formation should designate whether the LLC is member-based or manager-based. Include the entity name and the Address of each member and if there is any dissolution date. The certificate can be filed via the Secretary of State’s website or mailed the form, or given to the authorities in person. It generally takes 1-2 business days to get the approval. Approval shall be sent in the form of an email response with confirmation of your submission. To expedite the process, an additional fee of $25 is required to be paid, and the approval will be granted in a single business day. However, it may take longer if the officials find a problem with your application.

Operating Agreement

An operating agreement is an internal memo giving details about the operating structure of the LLC. Although it is not mandatory to draft this agreement under Texas Law, it is advised to have this document so that members are aware of the rules in place. An operating agreement includes:

1. Management Structure
2. Compensation Plan or share disbursement system among members
3. Roles, rights, and responsibilities of all members and employees.

An operating agreement is made only if your organization has more than one member, and the operating agreement should be filed when submitting a tax license.

Employee Identification Number (EIN)

An EIN is used by the Internal Revenue System (IRS) to identify the business and assess taxation where necessary. LLCs with more than one member should mandatorily apply for an EIN. An EIN can be obtained from the IRS website for free.

Cost of registering a foreign LLC in Texas

If you already have an LLC in another state but wish to conduct business in Texas, then you will have to register your LLC with the Texas Secretary of State as a foreign LLC. To register, you have to file an application for registration of a Foreign Limited Liability Company under Form 304 and pay a filing fee of $750. To obtain a certified copy of the Application for registration, you have to pay a fee of $30. Further, to obtain a certificate of status, you need to pay $5. If you want to reserve the name of your LLC for a period of one year before registering it, you have to file an application for registration of the entity name under form 502 and pay a fee of $40.

What is the yearly cost of an LLC in Texas?

No annual registration fee is imposed on LLCs in Texas. However, an annual franchise tax statement has to be filed with the Texas Comptroller. However, if certain changes are to be made by the LLC, like amending the articles of the organization or changing the registered agent, then the Texas Secretary of State must be notified under the appropriate form, and a fee of almost $15 must be paid. For most changes, the fee is $15, but for changing the registered agent, an additional fee of $15 is required for a consent form signed by the registered agent.

So, the basic cost of forming an LLC in Texas comes to $300. The basic total for registering a foreign LLC in Texas is $750. Further, the optional costs, such as the certified copy of the filing documents, obtaining a certificate of status, and hiring an outside registered agent, could raise the total cost by $85 to $535.

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