Thinking about starting a business in Texas? Honestly, forming an LLC here was one of the best decisions I made for my consulting gig last year. The process isn't as scary as it sounds, but there are some tripwires you'll want to avoid. Let me walk you through exactly what you need to know about how to open an LLC in Texas without the fluff.
Texas Advantage: No state income tax? That's right. Plus, the $300 filing fee is cheaper than California's $700. I remember doing a happy dance when I realized how much that saves over time.
Why Texas Loves LLCs (And Why You Should Too)
Texas is practically rolling out the red carpet for small business owners. Besides the cowboy hats and barbecue, here's what makes it special:
- Liability Protection - Your personal assets stay separate from business debts
- Tax Flexibility - Choose between pass-through or corporate taxation
- Zero Personal Income Tax - Keep more of your hard-earned profits
- Minimal Compliance Hassles - No annual reports required (unlike most states)
When I formed my LLC here last spring, I was shocked how many out-of-state clients started treating my one-person operation like a "real company" overnight.
Your Step-by-Step Guide to Opening a Texas LLC
Let's cut to the chase – here's what you actually need to do:
Naming Your Texas LLC
This seems simple until you try it. Texas has stricter naming rules than my grandma's etiquette class:
- Must include "LLC," "L.L.C.," or "Limited Liability Company"
- Can't imply government affiliation (no "FBI Consulting LLC")
- Avoid restricted words like "Bank" or "University" without special licenses
Check name availability on the Texas Secretary of State site. Pro tip: Search for similar spellings too – my first choice "LoneStar Analytics" was taken by a defunct company that never dissolved!
Consider reserving your name ($40 for 120 days) if you're not ready to file yet.
Designating a Registered Agent
This is where I messed up initially. Your registered agent must:
- Have a physical Texas address (no PO boxes)
- Be available during normal business hours
- Accept legal papers on your behalf
| Option | Cost | Pros | Cons |
|---|---|---|---|
| Yourself | Free | Zero cost | Must always be available; your address becomes public record |
| Professional Service | $100-$300/year | Privacy protection; never miss important documents | Extra expense |
I used a service after getting served papers at Thanksgiving dinner. Not fun.
Filing Your Certificate of Formation
This is the big one – your official registration with the state. You'll need:
- LLC name and purpose
- Registered agent details
- Management structure (member-managed or manager-managed)
- Organizer's name and address
File online through SOSDirect ($300) or by mail ($300 + processing time). Expedited service costs extra but saves headaches – regular processing took 15 business days for me last year.
Watch Out: Don't fall for third-party sites charging $500+ for this! Go directly to the Texas Secretary of State website.
Creating an Operating Agreement
Texas doesn't require this, but skipping it is like getting married without a prenup. Cover these essentials:
- Member ownership percentages
- Voting rights and procedures
- Profit/loss distribution
- Buyout rules if someone leaves
When my partner and I started our LLC, we spent $500 with a lawyer to draft ours. Worth every penny when we later disagreed about reinvesting profits.
Getting Your EIN (Employer Identification Number)
Apply for your free EIN directly through the IRS website. You'll need it for:
- Opening business bank accounts
- Hiring employees
- Federal tax filings
The online process takes 10 minutes if you have your LLC formation documents handy.
Handling Texas Franchise Tax
Don't panic – most small LLCs owe $0! But you must file annually by May 15th.
| Revenue Threshold | Tax Rate | Due Date |
|---|---|---|
| Under $1.23 million | $0 (but must file!) | May 15 annually |
| Over $1.23 million | 0.375% - 0.75% |
I almost got penalized my first year because I didn't realize no-tax LLCs still need to file!
Local Licensing and Permits
This varies wildly depending on your business:
- Sales Tax Permit (required if selling physical goods)
- Zoning Permits (especially for home-based businesses)
- Professional Licenses (contractors, childcare, etc.)
Check your city/county websites. My Austin-based LLC needed three separate permits costing about $150 total.
Cost Breakdown: What to Expect
Here's what opening my LLC actually cost:
| Expense | Mandatory? | Cost Range |
|---|---|---|
| Texas Certificate of Formation | Yes | $300 (state fee) |
| Registered Agent Service | Highly Recommended | $100-$300/year |
| Business Licenses/Permits | Depends | $0-$500+ |
| Operating Agreement | No (but use one!) | $0 (DIY) - $1,000 (attorney) |
Post-Formation Must-Dos
Opening your LLC is just the beginning. Don't make my mistakes:
- Open a Business Bank Account - Mixing personal and business funds voids liability protection
- Get Business Insurance - General liability policies start around $500/year
- Set Up Accounting - QuickBooks or hire a bookkeeper ($150/month)
- Build Business Credit
- Build Business Credit - Apply for a DUNS number and business credit card
Top 5 Mistakes New Texas LLC Owners Make
- Ignoring franchise tax filings ($50 penalty even if no tax owed)
- Using personal accounts for business (hello, audit risk!)
- Not separating member assets (your house isn't safe if you co-mingle funds)
- Forgetting city permits (Houston fined my friend $2,000 for this)
- DIY-ing legal documents ($100 template cost me $3,000 to fix later)
FAQs: Your Texas LLC Questions Answered
How long does it take to open an LLC in Texas?
Typically 10-15 business days for standard processing. You can pay $50-$100 for expedited service (1-2 days). Mine took 11 days without expediting.
Can I be my own registered agent?
Technically yes, but I don't recommend it. You'll get spam mail, process servers at your door, and your address becomes public record. Worth $150/year for privacy.
Do I need a Texas business license?
Texas doesn't have a general state business license. But your city or county might require one – check locally. My Dallas LLC needed one but my friend in Amarillo didn't.
When is Texas franchise tax due?
Annually by May 15th. File online through WebFile even if you owe $0. Missing this deadline hurts!
Can I change my LLC name later?
Yes, but it costs $150 to file an amendment. Cheaper to get it right the first time when opening your Texas LLC.
How often must I renew my LLC?
Texas doesn't require annual renewals! Just maintain your registered agent and file franchise tax reports. Way easier than most states.
Final Reality Check
Opening an LLC in Texas was simpler than I expected, but the devil's in the details. That first franchise tax report almost slipped past me, and I still regret cheaping out on the operating agreement template. But three years later? Best decision ever.
Texas makes it genuinely business-friendly. Where else can you form an LLC over breakfast tacos and have everything filed by lunch? Just stay on top of the franchise tax deadlines – trust me on that one.
Got specific questions about your situation? Drop me a note. I'm not a lawyer, but I've been through the trenches opening two Texas LLCs and made every mistake so you don't have to.