Starting a business is an exciting venture, and one of the first decisions you’ll make is how to structure it legally. A Limited Liability Company (LLC) is one of the most popular business structures because it offers flexibility, limited liability protection, and tax benefits. In Texas, forming an LLC is relatively simple, but there are important steps to ensure your business is set up correctly. In this guide, we’ll walk you through the process of opening an LLC in Texas, from initial planning to maintaining compliance after your LLC is formed. If you're not sure about handling the process yourself or simply prefer to delegate it, don't worry! At CARNELIAN, we offer a full service to create your LLC in Texas, making sure everything is in order from the start. Let us help you get your business up and running quickly and efficiently! Contact us info@carneliandigital.net
1. Choose Your LLC Name
The first step in creating your LLC is to pick a unique name. In Texas, the name must include “Limited Liability Company” or one of its abbreviations (e.g., “LLC” or “L.L.C.”). It’s important to make sure your name is distinct from any other registered business name in Texas to avoid confusion and potential legal issues.
Tips for Choosing a Name:
Avoid using words that could mislead people about your business's purpose (e.g., “bank,” “insurance,” etc.).
Check if your desired name is available by conducting a name search on the Texas Secretary of State website.
Consider securing a matching domain name for your website.
2. Designate a Registered Agent
A Registered Agent is a person or business entity responsible for receiving legal documents on behalf of your LLC, such as government correspondence or legal notices. In Texas, your LLC must have a Registered Agent with a physical address in the state (P.O. boxes aren’t allowed).
You can either appoint:
An individual, such as yourself, a business partner, or an employee, who lives in Texas and can accept legal documents.
A professional Registered Agent service, which typically charges an annual fee and ensures you don’t miss any important deadlines or documents.
3. File the Certificate of Formationn be filed online, by mail, or in person.
Information Needed:
To officially create your LLC, you’ll need to file a Certif
LLC name and address
Registered Agent information
Whether your LLC will be managed by members or managers (members are owners, while managers are appointed to handle the day-to-day operations)
The duration of the LLC (perpetual or for a set number of years)
Filing Fee:
The filing fee for the Certificate of Formation is $300.
Once submitted and approved, the Secretary of State will provide you with a certificate confirming your LLC’s existence. This can take several days to a few weeks, depending on your filing method.
4. Create an Operating Agreement
While not required by Texas law, having an Operating Agreement is highly recommended. This internal document outlines how your LLC will be run, the roles and responsibilities of its members, and how profits and losses will be divided.
The Operating Agreement serves as an essential reference point in the event of a dispute or decision-making process and helps maintain the LLC’s limited liability protection by proving the entity is separate from its owners.
If you’re the sole member, an Operating Agreement can still be beneficial, as it sets the groundwork for future growth or investment in your LLC.
5. Apply for an Employer Identification Number (EIN)
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is required by the IRS for tax purposes. An EIN is needed for various reasons, such as opening a business bank account, hiring employees, and filing taxes.
How to Get an EIN:
You can apply for an EIN for free directly on the IRS website. The application process is quick, and you’ll receive your EIN immediately upon completion.
6. Register for State Taxes
Depending on your business type and location, you may need to register for state taxes in Texas. For most LLCs, this will include:
Sales Tax Permit: If you sell goods or services subject to sales tax, you need to register for a Sales Tax Permit through the Texas Comptroller of Public Accounts.
Franchise Tax: Texas LLCs are required to pay an annual franchise tax, but the amount depends on your revenue. However, many small businesses qualify for a no-tax-due status if they make less than a certain threshold.
State Employer Taxes: If you plan on hiring employees, you must register for Texas State Employer Taxes, including unemployment insurance tax and employee withholding tax.
Where to Register:
You can register for all state taxes through the Texas Comptroller of Public Accounts website.
7. File Annual Reports
After forming your LLC, you are required to file annual reports with the Texas Secretary of State. These reports update your LLC's contact information and confirm its continued good standing. Your Annual Franchise Tax Report is due every year on May 15th, and it’s submitted along with the annual franchise tax payment (if applicable).
Failure to file the report or pay the tax can result in penalties, interest, and potentially the dissolution of your LLC.
8. Obtain Business Licenses and Permits
Depending on the type of business you're starting, you may need specific permits or licenses to operate legally in Texas. Common examples include health permits, building permits, and professional licenses.
You can check the Texas Department of Licensing and Regulation (TDLR) or local government websites to determine which licenses or permits you need based on your business activity.
9. Open a Business Bank Account
Once your LLC is official, it’s time to open a business bank account. Keeping your personal and business finances separate is essential for maintaining limited liability protection.
To open an LLC bank account, you’ll typically need:
Your LLC’s EIN
A copy of the Certificate of Formation
Your Operating Agreement (if applicable)
A valid ID
10. Stay Compliant with Ongoing Requirements
After you’ve successfully formed your LLC, it’s important to stay compliant with Texas regulations. Some ongoing responsibilities include:
Filing annual reports (as mentioned earlier).
Paying annual franchise taxes (if applicable).
Keeping your business records up-to-date.
Following local regulations and zoning laws.
If you're not sure about handling the process yourself or simply prefer to delegate it, don't worry! At CARNELIAN, we offer a full service to create your LLC in Texas, making sure everything is in order from the start. Let us help you get your business up and running quickly and efficiently!
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