You have a few options when it comes to starting a business in Texas. From a legal perspective, there are three main types of Texas for-profit business entities: LLCs, S Corporations or C Corporations. For most entrepreneurs, we believe an LLC provides the right mix of liability protection and ease of administration.
The bare minimum needed to start a TX LLC is a completed Certificate of Formation, a business name and a fee you pay to the Texas Secretary of State. We recommend taking some other steps before formally starting your LLC:
- Research your target market to make sure there’s a demand for the products and services you provide.
- Create a comprehensive business plan that defines the most important aspects of your Texas business.
- Write an Operating Agreement that covers how you will run your LLC.
- Read industry guides to give you a starting point in your niche.
After you’ve created your Texas LLC, you will also need to review your business license requirements, understand ongoing filing needs, set up a separate business bank account and get an accountant.
You register a business by completing and filing a Certificate of Formation (Form 205) with the Texas Secretary of State. You will need to gather information about your business, fill out the form and send it to the Secretary of State with your filing fee. This will formally create your LLC in Texas.
You can file your Certificate of Formation on the Secretary of State website or mail it in. Alternatively, Incfile can guide you through every step of the process by getting details from you and filing the form on your behalf — for free! There’s no additional charge for our basic LLC filing service, so all you need to do is pay the Texas state filing fee.
At the time of writing the fee charged by the Texas Secretary of State is $300. You can always check the latest Texas filing fees here. You can also pay an additional $50 for expedited filing through Incfile, which will create your LLC faster. Some LLC filing services do charge you extra to prepare and submit your filing documents, but at Incfile, we do this for free — so you only pay the state fee.
Once you’ve gathered together all of your information and filed your Certificate of Formation (or had Incfile do it for you), it can take up to a week for the Texas Secretary of State to legally create your LLC. If you pay an additional $50 expedited fee, your LLC can be formed in as few as two days.
There are a few ways to register your Texas LLC name.
- If you’re creating a new business and your business name is unique in Texas and meets state naming rules, you simply include it in your Certificate of Formation.
- If you want to change the legal name of your business, file Form 424 - Certificate of Amendment with the Secretary of State.
- If you just want to do business under a different name, file Form 503 - Assumed Name Certificate with the Texas Secretary of State, or we can do that on your behalf.
If you want to prevent people from using your business name across the U.S., you can file a trademark for the name. We can help.
In other states, the formal documents that you file to start a corporation or LLC might be known as Articles of Incorporation. In Texas, this document is called a Certificate of Formation, and it performs the same functions as the Articles of Incorporation.
Yes, you can start a Series LLC in Texas. This is a special type of LLC where you create one “overall” business and then have individual, series LLCs within it, each counted as separate legal entities.
You change your Texas Registered Agent by filing Texas Form 401 with the Secretary of State. Here at Incfile, we provide a free Texas Registered Agent service for the first year if you file through us. If you’ve been using a different Registered Agent and want to switch to us, we’ll file Form 401 on your behalf.
You can find the Registered Agent for a specific Texas business by searching the Texas Comptroller of Public Accounts website. Once you’ve searched, select “Details” and you’ll see the Registered Agent name.
As an LLC, any business profits you earn will be reported on your personal 1040 filing and reported and taxed as “pass-through” income. You will typically need to pay:
- Self-employment or payroll tax on all business profits
- Federal income tax on profits after you meet your tax-free allowance
- Sales tax for selling taxable products and services
Note that unlike many other states, Texas does not have a state income tax.
Texas charges a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods. You will also need to pay sales tax if you provide a taxable service. You can find a full list of taxable services here.
You will need to file a Texas State Sales Tax Application with the Texas comptroller. You can complete this process online.
The base rate for Texas sales tax is 6.25 percent, and there may be additional sales tax depending on your region, county or city. Once you know your overall sales tax amount, calculate the value of all your taxable products and services. Then, multiply that by your sales tax rate to understand how much you will need to pay.
Once your LLC’s sales tax application is approved, you will receive a letter with instructions on how often you must file a sales tax return and pay sales taxes. Returns and payments may be due monthly, quarterly or annually.
Some businesses will need to pay a franchise tax in Texas.
- Typically, if your business has margins of less than $1,180,000 (for 2020 and 2021) a year, you will not need to pay franchise tax.
- If your margin is higher than this, you will pay a franchise tax of between 0.375 and 0.75 percent.
- You can find more franchise tax details on the Texas comptroller website.
The types of business licenses you need will vary depending on your type of business, industry, location and various other factors. We can research the types of business licenses you might need for you.