How to open your LLC in Texas
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[seopress_breadcrumbs]Registering an LLC in Texas is an excellent option for foreigners who want to set up their LLC in the United States in a state with a dynamic, growing economy and a welcoming business environment.
Although the $300 cost of opening an LLC in Texas is a bit high compared with other states, the registration process is simple and the state offers many tax and legal benefits for business owners. In addition, Texas is one of the few states that has no state personal income tax, which can be very attractive for entrepreneurs.
If you are considering opening your LLC in Texas but don't yet know whether it's the best option for you, or if you have questions about the steps to follow, don't worry. In this complete guide, we'll give you all the information you need to know before forming your LLC in the state of Texas. Let's get started!
Table of contentsWhy open an LLC in Texas?
There are many reasons why registering an LLC in Texas can be a great option for you:
Limited Liability
If your Texas LLC is sued or runs up debt, the limited liability that LLCs enjoy ensures that its members' personal assets are not exposed. This is what is known as the corporate veil, which is essentially a legal barrier that separates personal assets from business assets.
Tax Advantages
Forming an LLC in Texas can also give the business tax benefits. In a Texas limited liability company, the company's operating costs and expenses can be deducted from its gross income. Texas limited liability companies can also deduct the depreciation of company assets as part of the LLC's balance sheet.
In addition, like every LLC, Texas LLCs also benefit from "Pass-Through Taxation": the company's tax liabilities pass through to the members' personal tax returns.
Tax flexibility
An LLC can choose how it is taxed. LLCs are taxed as "Sole Proprietorships" if they are single-member LLCs, or as "Partnerships" if they have several members. However, LLCs can elect to be taxed as an S Corporation or as a C Corporation.
Series LLC
Texas is one of the few states that allow series LLCs. This essentially lets you create a single LLC with an unlimited number of LLCs under it, while paying to form only one LLC.
Series LLCs are very popular for separating assets and liabilities among several real estate properties, franchises, branches or other types of businesses.
Easy to form and maintain
Opening an LLC in Texas is easy. It can be done online on the Texas Secretary of State's website. It usually takes about 2 weeks, and the filing fee is $300, which is affordable for most businesses.
Another important advantage of forming your LLC in Texas is the lack of legal restrictions on who can be a member of an LLC. Specifically, the Texas Business Organizations Code does not impose residency or age requirements on who can be a member of an LLC. A member can be an individual, partnership, corporation, trust or any other legal or business entity, and does not need to be a Texas resident.
Who can open an LLC in Texas?
Anyone can open an LLC in Texas, whether a single individual, a company, a group of people or a foreign company. Texas law does not set specific requirements regarding the residency or nationality of an LLC's owners, which means owners can be residents of anywhere in the world.
How to register an LLC in Texas
Now that you know Texas is your preferred state when it comes to opening your LLC in the United States and that you meet the requirements to open one, let's look at the steps to follow to have an LLC up and running in Texas.
1. Choose your LLC's name
Choosing the LLC's name is the first step. Names must meet Texas naming requirements. These are the most important requirements to keep in mind:
- Your business name must include the words Limited Liability Company, LLC, or L.L.C.
- Your name must not already be registered by another LLC in Texas. To check name availability in Texas, we recommend using this LLC name checker.
- The company name cannot contain words used to name a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)
- Certain restricted words (bank, attorney, credit union, etc.) may require additional documentation and licensing procedures.
Additional considerations:
- Domain availability for your website: before deciding on your company name, it's a good idea to check whether the domain is available.
- Reserve your name: If you are not going to open your LLC right away but want to reserve your name, you can do so for up to 120 days by paying a reservation fee and filing the corresponding form with the state authority.
2. Choose the registered agent
Whether you decide to register your LLC in Delaware, open it in Florida, form it in Wyoming or in New Mexico, every LLC must have a registered agent. A registered agent is the person or entity authorized to receive notices and other official legal documents on behalf of your LLC. Once the registered agent receives the documents, it is responsible for forwarding them to the LLC's owners.
A registered agent can be an individual (including yourself or an employee of your LLC) or an entity that offers a registered agent service. They must meet the following criteria:
- Entities (or companies) must offer registered agent services.
- The agent must have an address in Texas.
- The agent must be on site and available to accept documents during regular business hours.
If you are interested in an entity that offers registered agent services, we have these recommended companies, which take care of registering your LLC and providing registered agent services, with annual renewal
3. Prepare and file the Certificate of Formation
The Certificate of Formation (commonly called Articles of Organization in other states) is a document that officially establishes your LLC in Texas by submitting basic information about it.
To form your LLC, you must download, complete and file the Certificate of Formation with the Texas Secretary of State. Filing it costs $300. Although it may seem like a lot of work, it simply means filling out a relatively simple online form and submitting it. You can also send it by mail.
To prepare your Certificate of Formation, you will usually need the following information:- Your LLC's name
- The name and address of your registered agent.
- A reason why you formed the LLC
- The LLC's duration (perpetual or with an end date)
- Management structure: will the LLC be managed by managers or by members?
- Name and address of each member or manager
- Name and address of the LLC's organizer
- The Certificate's effective date.
- The person forming the LLC must sign the Certificate.
5. Draft your Operating Agreement
An operating agreement is a document that describes how your LLC will conduct its business. This document lists the details of the financial, legal and management rights of all the LLC's members: distribution of dividends, exit clauses, non-compete clauses, capital contributions...
Texas does not require LLCs to file an operating agreement, but it is an essential part of your business. Having a written operating agreement is useful for several reasons, including resolving disputes that may arise over financial arrangements and other potential litigation. Without an agreement in place, the courts make decisions based on state law, not necessarily on what is best for the interests of the LLC and its members.
What you include in your operating agreement is up to you, your partners and the specific needs of your business. Here we have a free template that will give you a good foundation for drafting your operating agreement. .
Download the Operating Agreement template
6. Get an EIN
The Employer Identification Number (EIN) assigned by the IRS is used to identify your LLC for tax purposes. EINs are free and available on the IRS website.
The EIN will help us with the following:
- Filing and managing taxes at the state and federal level.
- Opening a business bank account.
- Hiring employees.
Delegate the opening of your Texas LLC and avoid all these complex processes
What do I do after registering my LLC in Texas?
Registering your LLC is only the beginning. Once you have completed all the previous steps, there are a few points we recommend you take into account.
Open a bank account dedicated to your Texas LLC
To benefit from the protection of your personal assets that opening an LLC in Texas offers, it's essential that you keep your personal assets separate from the company's.
To do that, you need to open a business bank account, 100% dedicated to your Texas LLC's activities.
Also, by having a bank account used exclusively for your company, you'll get other added benefits such as simple, unified bookkeeping, which will save you a lot of time when meeting your tax obligations and filing financial reports.
The recommended banks for your business account as a non-U.S. resident are Mercury, Relay, Revolut, AirWallex, Wise, Bank of America, Chase.
Plan your Texas LLC's taxes
Texas requires all LLCs to file an Annual Franchise Tax Report with the Texas Comptroller of Public Accounts every year. Your rate will be determined by your LLC's total revenue and/or the type of business you own. Most businesses will not pay any tax. However, you will still have to file a report. Here is a quick breakdown of the rates:
- If your total revenue is $1,230,000 or less, you will probably not pay tax.
- If your revenue is over $1,230,000 but under $20 million, you will pay 0.331%.
- Retail or wholesale businesses with revenue over $20 million will pay 0.375%.
- Businesses that are not retail or wholesale with earnings over $20 million will pay 0.75%.
If your Texas LLC has U.S. employees, you will have to pay employer taxes.
Meet your annual obligations
Your LLC must meet certain obligations every year, such as renewing the Registered Agent.
As we said before, if your LLC does not have a registered agent, you will be failing to meet the state's legal requirements and could miss important notices and documents. .
Then there is the Texas annual report we mentioned earlier, which must be filed every year before May 15. The first report does not have to be filed until the year after your LLC is formed.
The late penalty is $50 + 5% interest on the amount due + an additional 5% interest if it is more than 30 days late.
Apply for licenses
The State of Texas does not require a general "business" license. However, some types of businesses require state licenses. For more information, visit the Texas Department of Licensing and Regulation. You can also download the Texas Business Licenses and Permits Guide. Most Texas cities and counties do not require a local business license. Check your city or county government's website to determine local requirements.
What is an LLC?
A limited liability company, or LLC, is a business structure that legally separates the company from its owners, which protects the company's members from legal liabilities. In addition, the LLC offers tax transparency, which means that taxes are not paid through the company; instead, the LLC's members pay taxes individually as natural persons. If all of the LLC's members are foreigners and do not have U.S. citizenship, then no taxes have to be paid in the United States.
How much does an LLC cost in Texas?
The cost of registering a Texas LLC is $300. This does not include other costs such as renewing the registered agent or paying the annual franchise tax (which, for many businesses, is $0).
How long does it take to open an LLC in Texas?
According to the Texas Secretary of State, the standard processing time for LLC formation documents is 10 to 12 business days. Timelines can fluctuate depending on demand and staffing capacity.
What are the obligations of a Texas LLC for Nonresidents?
A Nonresident's Texas LLC must: File the Annual Franchise Tax Report with the Texas Comptroller of Public Accounts every year. Renew its registered agent.
How many members can a Texas LLC have?
Texas LLCs can have a single member (single-member LLC) or more members (multi-member LLC).
How are Texas LLCs taxed?
By default, Texas LLCs are taxed as pass-through entities. This means the LLC's profits are distributed to the members, who then report their shares on their personal tax returns. LLCs can also file paperwork with the IRS to be taxed as an S-corp or a C-corp.
Are Texas LLCs anonymous?
Although Texas law does not allow anonymous LLCs to be formed within the State of Texas, you can protect your LLC's privacy by forming your LLC in a state that allows anonymous LLCs (Delaware, Wyoming, Nevada or New Mexico) and then continuing to do business in Texas.
Written by
Ignacio Navarro
Ignacio Navarro is a Certified Public Accountant, founder of Start Companies and a specialist in U.S. companies for entrepreneurs, freelancers and digital businesses in Latin America. With training in international taxation and studies at UCEMA, he advises non-resident clients on forming and maintaining LLCs, opening bank accounts, invoicing, accounting and taxes. His experience combines tax strategy, compliance and practical vision for operating in the U.S. in a simple, organized and professional way.
