Form a Texas LLC

How to File an LLC in Texas

Texas Business LLC Set Up

Setting up an LLC in Texas is a big move and anyone that does usually has invested a lot of time and money into it. Forming an LLC in Texas requires many important steps that must be followed first. There are various entity types that the state of Texas requires to operate a business legally. The most common type is the LLC. Filing an LLC is not a difficult task. Organize your plans and follow the steps below to learn how to set up an LLC in Texas.

Name Search

Every Texas LLC has to have a legal name. The name must be unique. There cannot be another business in the State of Texas that shares the name you have for your business. Keep this in mind when setting up your LLC formation Texas. You will need to ensure the name you have chosen is not taken by another business. This is an important step to follow to ensure you don’t have any delays with your filing. Texas has three ways to do this. Before following any of these steps, be sure to brainstorm any name ideas you have. You should have at least two in case your top name choice is not available.

Phone Call

Start by calling 512-463-5555 during their normal business hours, Monday – Friday, 8am – 5pm. It’s best to contact them early in the morning within the first hour of operation to avoid long hold times. Let them know you would like to verify if your chosen LLC name is available to use. The operator will verify that the name you have chosen is available. If it is available, move on with the next steps in the filing process. Keep in mind that the name check will only check for names that are currently registered. There is a small chance that the name you’ve chosen is not available by the time you’ve submitted all of your documents to set up your LLC. If this is the case, the State of Texas will refund any fees associated with your filing. Review the Texas Filing Code 79.45 for additional details.

Email

Consider emailing the Texas Secretary of State’s office to get a quick response about your chosen name. You can email them by clicking on this link or sending an email directly to corpinfo@sos.texas.gov. This link should open your email client for you to compose your message. Use the message template below to request a name search verification.
Greetings,

I wish to verify an active name registration for the following names:

  1. [Name One]
  2. [Name Two]
  3. [Name Three]

Please contact me with any questions

Thank You,

Your Name

Your Email Address

Your Phone Number

Kill two birds with one stone by asking for your top three names in case your top choice is not available. This may prevent you to go through the name search process a second or third time.

You will get a response that verifies the name registration status of the names you’ve provided. If your name is available, proceed to the next steps of the LLC Texas filing process.

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Online Search

The Texas Secretary of State’s office has an online database that allows you to conduct a Texas LLC lookup for your chosen name. Although this is a good tool to use, it is not the most reliable for a Texas LLC search because Email and phone will place the search in the hands of a state representative who will ultimately give you the desired result. If you are unable to inquire by phone or email, online is your next best option.

To get started, visit the Taxable Entity Search webpage. The page will load to a form that directs you to begin your search. Your search should encompass various variations of your chosen name. Always leave off the LLC designation when searching. For example, if your business name is “Chili Pepper’s Tex-Mex Tavern, LLC,” These are the name variations you should search for:

  1. Chili Pepper’s Tex-Mex Tavern
  2. Chili Pepper’s Tavern
  3. Chili Pepper Tavern
  4. Chili Pepper Tex-Mex Tavern
  5. Chili Pepper’s
  6. Chili Pepper

You should be looking for results that return a similar entity already registered. Keep in mind the industry should play a factor in your consideration. There may be a business called “Chili Pepper’s Swimming School.” You would still be able to use your chosen name but keep in mind you may face trademark issues when it comes to advertising and branding your business. The best thing to do is to ensure your name is completely unique and let someone else form another industry worry about trademark issues should they want to have similar wording in their business name.

Once you have found a unique name for your LLC, move on to the next steps of the filing process.

Registered Agent

The registered agent in the state of Texas must meet a set of requirements before they can be used as your registered agent. The registered agent is required per Texas statute section 5.201. The registered agent is the individual or business you have selected to receive legal mail on behalf of the business. The registered agent must meet some key requirements to be listed on your LLC filing.

  • Must have a legal address in Texas
  • Must be available during normal business hours
  • Cannot have a PO box as their official address
  • If an entity, must be legally recognized in the State of Texas

Service of process, or other legal mail, will be received by your registered agent. It is important that you chose a registered agent that is dependable and one that you can trust. You do not want to miss out on important communication like writs, subpoenas, or a summons.

Who Can be a Registered Agent

  • Be your own registered agent
  • Hire a friend or family member
  • Hire an business or other entity

Whichever option you chose, ensure they have a legal Texas address. The registered agent is listed publicly as the point of contact for your LLC. If you will list yourself as your own registered agent, keep this in mind especially if your business is a home-based business. If you are concerned about the privacy and protection of your home, it is best to use a registered agent that has a separate address. You can hire an entity that specializes in business development and set up to be your registered agent. Their address must be a legal Texas address.

Your registered agent must consent to service. You should complete form 401-A and include it with your registration records. It is not required to file this form with the State of Texas. If you list a registered agent without their consent, you could face fines and legal issues.

Always stay up to date with your registered agent’s information. If they move, dissolve, or no longer become available to be your registered agent, you must update it immediately with the Texas Secretary of State’s office. Do this by filing form 401 or updating the status online on SOSDirect.

After you have chosen your registered agent and verified they meet all of Texas’s requirements, move on to the next steps.

Certificate of Formation

The Texas Certificate of Formation is the form that organizes your business start-up details with the Texas Secretary of State. This form will require key information about your business such as the owners, officers, and the managers. Once this form is processed, your business will be regarded as a legal entity.

Fees

The fee to file the certificate of formation is $300. The fee is the same for online and mail filing. However, filing online incurs an additional $8.00 fee.

Processing Times

When filing online, the processing time is 2-3 business days after submission.

When filing by mail, the processing time is 7-10 business days after submission.

It is faster to file online. We recommend filing online since the fee to file is the same for mailing your Texas LLC formation documents into the Texas Secretary of State’s office.

Texas has filing procedures for LLCs depending on the type of business you are forming. Any business that requires professional licensure, such as a doctor’s office or law practice, must file a Professional LLC (PLLC). The filing instructions are different. If this falls into your business type, skip ahead to “Professional LLC Filing.”

How to form an LLC in Texas.

File Online with SOSDirect

  1. To get started filing online you must create an account with SOSDirect. Get started with this by setting up an account. Use your business name, your name, or any other officer or manager’s name. Next, provide your contact information. Lastly, create a password. Now that you have created your SOSDirect account, you can begin the filing process.
  2. Enter your credit card information. Texas requires this step early in the filing process to weed out fraudulent filings. You won’t be charged anything until you’ve completely processed your filing.
  3. Review the terms and conditions carefully and agree to them. After you have agreed to them, you will receive a user ID assigned to you by email within 30 minutes. If you do not receive this communication, contact the SOS by phone at (512)-475-2755 or by email to sosdirect@sos.texas.gov.
  4. Once you have received your user ID, go back to SOSDirect Login and use your credentials to log in.
  5. Once you have logged in, click on “Credit Card” on the top of the page and re-enter your credit card information. After you have done so, you will be directed to a page that will provide you with a session ID. This session ID should be recorded because you will use it to check on the status of your filing after it has been sent.
  6. Go to the Menu and click “Business Organizations”
  7. You will see “Reservation Formation Registration Documents”. Click on this and you will see the option to click on “Domestic Limited Liability Company” and then click “Filing Document.”
  8. Next, click on “Certificate of Formation” in the “Filing Type” dropdown, then click continue.

Completing the Formation Sections

The certificate of Formation is made up of 3 articles which form the business structure.

Article One – Entity Type and Name

  1. Select LLC type. In this case, you will select, “Limited Liability Company.”
  2. Enter your entity name. Remember to ensure you’ve done the entity name search mentioned earlier.

Article Two – Registered Agent Information

You will have two options on how to fill this section out. Fill it out based on the type of agent you’re using for your LLC.

If it is an entity:

  1. Enter the entity business name and leave the first and last name fields blank.
  2. Enter the entity’s legal address

If it is an individual:

  1. Enter the individual’s first and last name
  2. Enter the individual’s address

In both cases, select whether you want to upload the consent to serve as a registered agent form that shows your registered agent gives their consent to be your registered agent. Remember, this upload is not required by Texas.

Article Three – Governing Authority (Management)

The governing authority section of your formation articles designates the officers of the LLC and who will serve as managers of the LLC. You must know how you plan to manage your LLC for this section.

Your LLC can be managed by the LLC members, called member-managed, or it can be managed by managers hired by the LLC members, called manager-managed.

  1. Selected how your LLC will be managed: member-managed or manager-managed.
  2. Enter each member’s name and address until all have been entered. If you have managers instead, enter each manager’s name and address.

Other Formation Processes

After you’ve completed your Articles, you will have a few more sections to complete to close out the formation process.

Supplemental Provisions/Information

This section allows you to add additional information about your LLC. Usually, legal designations are loaded here or other documents advised by your attorney.

Attachment/Letter of Consent

You can attach any letters of consent to this section. Since you have already been given the option to attached the registered agent letter of consent in the registered agent article section, this section may not be beneficial.

Organizer

Enter the name and address of the person completing the formation documents. This does not have to be a member of the LLC or the registered agent. The organizer does not become a part of the entity by being listed as the organizer.

Execution

Whoever is the organizer must enter their name here which will serve as an electronic signature.

Delayed Effective Date

This section allows you to delay the start date of your LLC up to 90 days into the future. If you do not wish to set a future date as the effective date, leave this section blank.

You have now completed all of the necessary data for the Certificate of Formation. Review each section carefully for accuracy. Make changes where needed.

Click “Submit Filing”. Your card will be charged $300 Texas LLC filing fee plus a convenience fee of 2.7%.

You can expect your LLC to be approved within 3 business days. After it is approved, you will receive the following documents:

  • Welcome Letter – Welcoming your business as a legal entity with the State of Texas
  • Certificate of Filing – This is your legal document certifying that your LLC is legally registered.
  • Certificate of Formation – this will be the Texas certified document with the Secretary of State’s seal.

Filing By Mail

To file by mail, you must download form 205 and mail it in. The Certificate of Formation form has the same sections that are found when filing online. There are three articles that you much complete. Review page 1 of the form which gives you instructions. It will also provide you with some definitions. Refer to the steps in the online filing section above for additional guidance.

You can include the consent to serve as registered agent form with your mail-in filing. The state of Texas will keep this form on file for record purposes, but it is not required.

Payment

Prepare a check or money order and send it to the Secretary of State for Texas. The check or money order should be made out to “Secretary of State.” Make the payment out for $300 for the filing fee.

Your packet should include the payment, 2 copies of the Certificate of Formation, and your Consent to Serve as Registered Agent and mail to:

Corporations Sections

Secretary of state

Po Box 13697

Austin, TX 78711-3697

Texas Approval Process for Mail-in Forms

The process to approve your mailed-in documents will take 7 – 10 business days. There may be additional time added to this for mail courier. Once your filing is approved, you will receive three notices by mail:

  • Welcome Letter – Welcoming your business as a legal entity with the State of Texas
  • Certificate of Filing – This is your legal document certifying that your LLC is legally registered.
  • Certificate of Formation – this will be the Texas certified document with the Secretary of State’s seal.

If you would like to track the status of your filing, you can do so online by using the Texas Business Filing Tracker

Put in part or all of your entity name in the search engine. You will see the status of your filing. Please allow time for the Texas Secretary of State’s office to receive your filing before attempting to search for the status.

Texas Professional Limited Liability Company (PLLC)

The Texas professional limited liability company, or PLLC, is a special type of LLC designation for those business owners in the State of Texas who will operate a professional service business. This designation gives these owners additional liability protections that they may not get through a regular LLC. Some of the professional services that could form a PLLC are:

  • Lawyers
  • Doctors
  • Veterinarians
  • Certified Public Accountants
  • Dentists
  • Other professional service requiring certifications

Generally, you are required to obtain to have board certification or some type of state sanctioned license to perform these services. Having the necessary licensure will be the very first step in to form a PLLC. Before getting started, ensure you’ve verified your license status for each member of the PLLC. You should also check with the licensing board for the profession to ensure there are no additional requirements to be met before forming a Texas PLLC.

You can file your PLLC online through SOSDirect or by mail. To file by mail, download Form 206 to get started. The Professional Certificate of Formation sections are much like the sections required for filing a regular LLC. Refer to this section for additional guidance.

Name

Naming your PLLC will follow the same guidelines as naming a regular LLC. Your name should be unique and the name should have Professional Limited Liability Company or PLLC in it.

Members

All members of the PLLC must be licensed in the state of Texas to perform the professional services governed by the PLLC. The members are responsible for keeping their licenses up to date.

Some PLLCs may have variety of professional services such as a general physician’s office. There are no rules against this but you are recommended to consult with your attorney when structuring complex PLLC situations.

Liability Protections

The PLLC will offer some general liability protections that are afforded to those starting an LLC. Generally, the LLC limits liability to the business and not to the members of the LLC. In a PLLC, the members are shielded from certain cases where other members of the practice are involved in negligence or malpractice.

The limited liability designation also restricts creditors from collecting on debts that the PLLC owes. You should consider the laws in Texas for PLLC and see if your profession requires additional malpractice insurance at set limits.

Limited Liability designations do not prevent you from being liable in all cases. Consider if you are negligent in your operations, you may be subject to penalty through malpractice cases. Limited Liability does not waive certain tort laws that you may be subject to should you be found at fault for someone else’s injuries.

Why Form a PLLC Over a Professional Corporation?

A professional corporation and a PLLC have similar attributes. They are different in how the owners take advantage of the business structure. With a PLLC, the owners are called members who share a certain percentage of interest in the business. With a professional corporation, the owners are considered shareholders and they share stock of ownership in the business.

Other notable differences in the PLLC and the PC is how they are taxed. PLLC members may take advantage of being a pass-through entity for tax purposes which prevents them from being double taxed, whereas the PC will be doubled taxed-once at the ownership level through dividends and once at the entity level through an income tax on revenues.

A professional seeking to start a private practice would benefit best to file their business as a PLLC. The PLLC is simpler to maintain and the tax structure may be more advantageous. Although the PC and the PLLC may be very similar, most business owners seeking to start a professional service business opt to start with the PLLC.

Texas Veterans LLC

The State of Texas offers special exemptions for veterans who wish to start an LLC. Those seeking to get these exemptions will benefit from a $0 filing fee and 5 years exemption from Texas’ Franchise Tax. There are a few requirements that must be met:

The LLC members must all be honorably discharged veterans from any branch in the US Armed Forces. They must also be 100% owners of the LLC. This means there cannot be any member in the LLC that is not a veteran of the US Armed Forces. This LLC formation type restricts members who are active military members.

You must follow these steps to form your Texas Veteran’s LLC.

  1. Obtain a copy of your DD-214. This form will verify that you have been released from duty. Contact the military to obtain this form. Do so through milConnect or the National Archives. There are two forms types and you must obtain one or both, Member copy 4 or Service copy 2.
  2. Remember this form is to prove you are no longer active duty. Your personal information is not relevant and should be redacted.
  3. Next, obtain a Letter of Verification of Veteran’s Honorable Discharge from the Texas Veterans Commission (TVC).
  1. Submit a letter requesting proof of honorable discharge. Your wording could look something like this:

Hello,

Senate Bill 1049 directs my ability to verify my status as an honorably discharged Veteran of the United States Military. Please see my DD Form 214 attached.

  1. Be sure to include your full legal name, phone number, complete address and email address.
  2. Print out the letter and sign it and mail it to:

Texas Veterans Commission

Attn: VEP

PO Box 12277

Austin TX, 787111

You can also send it by email to SB1049@TVC.texas.gov. The TVC will process your request in 7 -10 business days. Once completed, they will send you a Letter of Verification along with a Unique ID that you will require in the next step.

Certification of New Veteran-Owned Business

Obtain the Certification of New Veteran-Owned Business form the Texas Comptroller website.

To find the form, you can search for it by title or scroll down to “Additional Franchise Tax Forms,” Click on “Certification of New Veteran-Owned Business, then click on “05-904” to download the form.

Form 05-904

  1. Enter your chosen LLC Name
  2. List all members of the LLC, their unique IDs from their Letter of Verification in the previous step, and how much of the LLC they will own.
  3. Have each member sign the form.

This form will be sent to the Secretary of State’s office for Texas.

Creating your Veteran LLC

Name Rules

The State of Texas governs how Veteran Organizations can be named. Your organization name cannot contain the following words in any form or abbreviation:

  • Veteran
  • Foreign
  • Legion
  • Spanish
  • Disabled
  • War
  • World War

This type of LLC cannot imply that it is affiliated with or intended to benefit war veterans or their families.

Certificate of Formation

This step will be similar to the certificate of formation steps already covered. Download Form 205 to begin.

Refer back to the Certificate of Formation section for LLCs earlier in the article to be guided step by step on completing the Certificate of Formation form.

The Texas Veteran LLC can only be filed by mail. Mail you completed documents to the Texas Secretary of State’s office.

Be sure you have the following:

  • Letter of Verification
  • Certification of New Veteran-Owned business: Form 05-904
  • Certification of Formation: Form 205

Mail all forms together to:

Corporate Sections

Secretary of State

PO Box 13697

Austin TX, 78711

The biggest benefit of starting a Veteran-Owned LLC is the cost breaks. This break is extended to those veterans who may have already started an LLC in Texas but has paid the origination fees for a regular LLC. If you are a veteran and you’ve filed an LLC and all members in the LLC are honorably discharged veterans of the US military, you may be due a refund. Your LLC must be filed any time after January 1, 2016. To get a refund for your filing fees:

  • Create a cover letter asking for a refund. Include your name, contact information, LLC name and LLC file number
  • Obtain a Letter of verification from the TVC
  • Complete form 05-904 (Certification of New Veteran-Owned Business)

Send the documents to the Secretary of State’s office as if you were filing a new Certificate of Formation. Your documents will be reviewed and if you are determined to be eligible, you will be refunded your filing fees and your LLC will be reclassified as a Veteran-Owned Business in the State of Texas.

Remember your existing LLC must meet the name requirements for Texas Veteran LLCs.

Other benefits of the Texas Veteran’s LLC is not having to pay franchise tax for five years. We will discuss this in greater detail in the Tax section.

Operating Agreement LLC Texas

The operating agreement within a LLC directs the LLC Members on how to operate the LLC. This agreement pulls together key factors about ownership, management, and how decisions will be made for the business. Every LLC should have an operating agreement. It will come in handy if there is ever a disagreement among the members. The operating agreement will help legal matters be determined should a fall-out between members make it to a court of law.

Your LLC’s operating agreement should list the LLC’s name and effective date

It should designate who the members have agreed to be the registered agent

The purpose of the LLC should be outlined and how long the LLC ill last should be noted.

A discussion about taxation should be listed.

Ownership

Key factors about the LLC Members’ ownership will be listed in the operating agreement. Each member shares a % interest in the LLC. This is usually determined by the % of investment to total investments made to fund the LLC. This % ownership also helps to determine % of liability against members. This is where the “limited” in limited liability derives. The operating agreement should be very clear on the members of the LLC and the % they own in the LLC.

It is best to use funding amounts to calculate percent ownership. Each member should fund their agreed upon dollar amount into the LLC with an indisputable method of payment that traces the payment back to the member. The operating agreement should discuss how members can leave the LLC through the sale of their invested interest in the LLC.

Profits and % distributions

You should consider an accountant to assist you with determining how profits should be accounted for. At minimal, profits should be determined based on each members % ownership. The operating agreement will outline when the owners will take a distribution from the LLC’s profits. This could be once a quarter or once monthly or at any periodic rate determined by the members. The member’s profitshare will be based according to their ownership. If a two-member LLC splits ownership down the middle, then each member owns 50% of the LLC. If the profits from quarter 1 were $10,000 and the LLC votes to retain $2,000 and pay the remaining $8,000 as dividends, then each member receives payment of $4,000. Including parameters for profits in the operating agreement will reduce the chances of confusion and problems among members.

Voting Rights

Generally, voting rights are determined by the percentage of ownership across members. The operating agreement should outline how the members will take matters to a vote. If it will be based on majority ownership, then decisions could be made by a single member if they own 51% or more of the LLC or a combination of members who own 51% or more of the LLC.

Members should vote on the management format for the LLC. They should consider the pros and cons of having a hired manager or electing one of the members to be a manager. The operating agreement will also note how the manager will manage the LLC. It should answer the following questions:

  • Will the manager have sole managerial authority?
  • What issues should the manager consult members on before making a decision?
  • Will the manager be involved in board decisions?
  • What will be the manager’s salary or other compensation?
  • What will be the process to remove a manager from his/her position?

There are many other questions to consider. They will be determined based on your LLC’s needs.

Single Members

An operating agreement will be just as beneficial to a single-member LLC as it is to a multi-member LLC. The cornerstone of having an LLC is the ability to separate the business from the owner in liability situations. A well-thought out and thorough operating agreement can prove your case in a court of law about your business and it’s separation from you as the owner.

Because a single-member LLC can easily be operated as a sole proprietorship, the lines can become blurred and proving separation for the sake of the limited liability benefit of an LLC can become cumbersome. Your operating agreement would help alleviate the problems that may arise form that scenario.

In addition, if you are planning to take on an additional member In the future, an operating agreement could be the written proof that any prior financial success the organization has incurred is the result of your current operating agreement. It could be easily agreed upon with a few amendments for new members being added to the LLC.

Where else does your operating agreement matter?

The State of Texas does not require you to file your operating agreement with them to form your LLC. The operating agreement is for your LLC’s operations. It will help you to establish business relationships with other businesses. As mentioned, the operating agreement will become much needed in a court situation with you, your LLC and a claimant. It may also be requested by financial institutions who you are seeking to get funding or credit from. It may also be required by future investors who may be interested in investing in your business as silent members.

Silent members do not have much say in how a business operates but a well-drawn out operating agreement will give them more confidence that what they are investing in is the right decision for them.

Other factors

Your LLC’s operating agreement becomes legally binding once all members have signed the document. You won’t need to have it notarized or sealed by any official state office. For this reason, you should consider an attorney or a business services organization for assistance in drafting your LLC’s operating agreement. You may also consider consulting with a CPA about including taxation discussions in your operating agreement.

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Employee Identification Number (EIN)

Your next step is to apply for an employee identification number, more commonly referenced to as EIN. Securing an EIN is totally free. You can obtain one directly from the IRS. You don’t have to have an entity formation to apply for and be issued an EIN. For this reason, you should wait until your LLC is approved before applying for the EIN.

Don’t be confused because of the word “Employee” in the name. This does mean that you will have to have employees in your LLC before you can secure an EIN. The EIN is like your personal SSN. The IRS uses it to track your tax obligations. Other business will also request your EIN through a document called the W-9 whenever they do business with you. This is to ensure that all parties are in compliance with the IRS. Some organizations follow this strictly and will not do business with you or send you payment for services unless you have a valid W9.

If you have a single-member LLC, the IRS may require your personal social security number before issuing your EIN. This is because most single-member LLCs operate as sole proprietorships and any revenue earned through the LLCs EIN will be attached to you personally.

The EIN can be referred by other names as well. It is called Employer ID number, Tax ID number, or Federal Tax Number. Tax ID number or TIN is the most common alternate name for the EIN.

In most cases, you will need an EIN before you can open a bank account. You won’t be able to file taxes for your LLC without an EIN. You absolutely won’t be able to pay your employees without an EIN.

LLC Taxation

There are multiple tax situations your LLC will be subject to depending on the number of members. The IRS will default all single-member LLCs as a disregarded entity and tax them as such. This means that the single member will pay taxes on the revenue of the business only. There will be no double taxation involved. Most times, this revenue is filed on the owner’s personal tax returns on a schedule dedicated for that purpose.

Multi-member LLCs are taxed as partnerships. There is also no double taxation that takes place. However, a multi-member LLC may elect to be taxed as a corporation by filing Form 8832 after they have been issued their EIN. They will be treated as a corporation for tax purposes, and if they elect to be taxed as a C corporation instead of a S corporation, they will be subject to double taxation. The S Corporation designation is the most popular because it enables the pass-through activity where the members are only taxed once on the business revenues.

Apply for EIN

Go the IRS website to apply for your LLC’s EIN. Complete the electronic forms and submit. You will be issued your EIN document instantly.

There is no longer an option to apply for an EIN by phone. The IRS discontinued this service.

You must have an SSN or ITIN before you can apply. Follow these steps when applying online.

  1. Tell what type of business you have
  2. How many members does the LLC have
  3. The form will ask you about being a Qualified Joint Venture. Since Texas is a community property state, if you and your spouse are the only joint-members of the LLC, you may be taxed as a qualified joint venture. This will treat you and your spouse as one owner for tax purposes.
  4. If you are choosing qualified joint venture, it will ask you to select if you wish to be treated as a single-member LLC or a multi-member LLC
  5. Select why the LLC is requesting an LLC. For most, it will be to start a new business.
  6. Designate the EIN Responsible Party. You will have to put in information about this person. See below for more information.

The IRS requires an individual, much like the registered agent, to be on file with the EIN application. They are called the EIN Responsible Party. This person will be considered the contact person for your LLC in regards to matters related to the IRS and your business. The person is usually a member of the LLC. Unlike a registered agent, the EIN Responsible Party cannot be another business or entity. The IRS system will block your application if your EIN Responsible Party listed is a business.

  1. Enter your business physical address information. The IRS will do an address check. This will also be the address where the IRS will send communication to you. If you want mail to be sent to an address that’s different from your physical address, you will see an option to list a different mailing address.
  2. The IRS will ask you about your LLC. It will request its name, location, business purpose, etc.
  3. Now you will be asked how you want to receive your EIN letter. You can receive it immediately in a PDF format. You will need to have a PDF Reader enabled on your computer. You can elect to have it mailed to you and you will receive it in up to 4 weeks.

This completes your EIN filing process. Your LLC is now set for Federal taxation.

Franchise Tax

The State of Texas requires all LLCs regardless of their business operations or Federal filing status to file Texas Franchise Tax. This tax is assessed for doing business in Texas. The Franchise Tax is one of three various tax rates.

  1. 0.375% of taxable revenue for wholesalers and retailers
  2. 0.75% of taxable revenue for all other businesses
  3. 0.331% of taxable revenue for businesses using the EZ computation method.

Texas has a “no tax threshold” and although there the Franchise Tax is assessed on all businesses, most businesses, about 90%, won’t be taxed due to the no tax threshold. To meet the threshold, a business must have revenues greater than $1,130,000 or have a tax bill less than $1,000.

All Veteran LLCs are exempt from the Texas Franchise Tax for the first five years of business operations. Most of these will still fall within the 90% of businesses who fall within the no tax threshold.

Even if your LLC does not have to pay the Texas Franchise Tax because it falls within the no tax threshold, it still must file tax forms with the state of Texas.

  • Public Information Form (Form 05-102)
  • No Tax Due Report (Form 05-163)

Whenever a Texas LLC is subject to the franchise tax, it must file the following forms:

  • Public Information Report (Form 05-102)
  • EZ Computation Report (Form 05-169) or a Long Form (Form 05-158-A & Form 05-158-B)

Visit the Texas Comptroller Website for more details about special situations and other rules regarding the Texas Franchise Tax.

Licensing and Permits

Texas does not have a state-level business license requirement. You still may have regulatory permits and licenses to obtain depending on the type of business or service you are providing. You should also check with your local municipalities for local tax rules and requirements.

Check the Texas.gov website to see a list of probably licenses you may require for your business.

Sales and use and resellers permits

Texas requires sales and use tax if you plan to sell tangible goods or conduct taxable services within the state of Texas. You must register for a sales tax permit at WebFile.

Texas also requires a Resellers certificate if you will be conducting retail business in the state. You are a reseller if you buy finished goods and resale them to the consumer. If your business falls into this category, you must complete form 01-339.

You will present the certificate to those you buy goods from to avoid paying sales tax on those goods. You will ultimately pay tax on the resale of those goods.

Contact the Texas Comptroller if you have more questions about how to start an LLC in Texas or any other topics on running an LLC in the State of Texas.