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by Mike Vestil 

How To Start An LLC In Texas For Free

Starting a business in Texas is exciting and involves a few key steps to get you going. One of the most critical steps is ensuring that all your paperwork is in order with the state government.

In this article, I’ll break down each step for setting up an LLC in Texas (including the needed paperwork) so you can start your business venture today, and if you're wondering how to start an LLC in Texas for free, we've got you covered.

Steps To Start An LLC In Texas

Here are the main steps to consider when forming a Texas LLC.

Create Your Certificate Of Formation

The first thing you need to do when registering an LLC in Texas is file your Certificate of Formation – Limited Liability Company. This document must be filed with the Secretary of State's office, and a $300 fee is associated. However, for those looking for free LLC Texas options or wondering how to get an LLC in Texas for free, there are services and promotions that might cover this fee. Once this document has been submitted and approved, you can set up your business.

  • The name and address of your business
  • The purpose of your business
  • The name and address of your registered agent
  • Whether or not you want to create a professional LLC

You can file your certificate online or by mail. The typical cost to set up an LLC in Texas is $300. Depending on your situation, you may also have additional filing fees or taxes that you will need to pay when setting up your business. 

However, from January 1st, 2022, all veteran-owned businesses have become eligible for free filing fees and a five-year exemption from the franchise tax. This opportunity allows 100% veteran-owned businesses to hit the ground running without any financial burden.

Obtain Business Licenses

Once you have filed your Certificate of Formation – Limited Liability Company, obtaining a Certified Copy is essential. This Copy proves that your LLC was officially formed and registered with the state government. This document costs an additional $30, but it's necessary to have this copy if you need further documentation proving your LLC exists.

Depending on where you plan on operating, there may be additional permits or licenses that you will need to obtain as well. Additionally, if you plan on hiring employees, then it is essential to familiarize yourself with all applicable labor laws and regulations so that you can ensure compliance at all times.

Name Requirements For Your LLC

When forming an LLC in Texas, it's important to note that the name of your business must be distinguishable from other companies registered with the Secretary of State. This means it must contain at least one unique element, such as a word or phrase that another company is not using in Texas.

In addition, the name of your LLC must also include a designator, such as "LLC," "L.L.C.," or "Limited Liability Company" at the end. This helps to ensure that all businesses registered in Texas are distinguishable from one another.

Registered Agent

A registered agent is required, and the LLC cannot act as its registered agent. The registered agent must have a physical street address within Texas and accept legal documents on behalf of the company, such as tax documents and court summonses.

Articles Of Organization

The next step when forming an LLC in Texas is filing Articles of Organization with the Secretary of State's office. These documents provide basic information about your business, including its name, address, purpose, members/managers/owners, etc. 

They should be done carefully, as any errors may lead to delays or additional fees. It's also important to keep copies of all filing paperwork for future reference should any questions arise regarding ownership or management structure at any point in time after a formation has been completed.

Filing Process

Once you have all relevant paperwork filled out, there are two ways you can proceed: filing online or mailing them in. Online filing is faster than traditional paper filing and often results in fewer errors. However, if there are mistakes in your LLC filing, you must file a Certificate of Correction or Form 403 with the Texas Secretary of State—this has an associated fee of $15 per application type.

Taxes

Most Texas LLCs are subject to an annual state franchise tax (also known as a privilege tax). This fee varies depending on how much revenue your LLC generates, so it's important to calculate it ahead of time. One can find the official documents related to this taxation process on the Texas Comptroller's website.

Open A Business Bank Account

A business bank account is another crucial part of forming an LLC and separating personal from business assets.

The first step is to open a business bank account using the EIN and fund it with money that one will only use for business purposes. A dedicated account can help with taxes, limit liability, and make it easier for investors or lenders to do due diligence on the company.

File Your Annual Report

At the end of the financial year, you must file a Texas annual report with the state comptroller's office. This document is required every year by all entities registered in Texas. 

The purpose of this form is to update any changes related to ownership information or business activities of the entity since its formation date.

The Difference Between LLCs And Corporations 

When it comes to forming an LLC or corporation in Texas, there are several key differences that you should be aware of. For example, LLCs offer more flexibility regarding management structure and ownership rights than corporations.

Corporations must have a board of directors that meets regularly and decides how they will run the company. On the other hand, LLCs don't need boards or directors but instead rely on their members (or owners) to make operational decisions. 

Another critical difference between LLCs and corporations is taxation. Corporations are taxed separately from their owners, so they may owe corporate and personal income taxes on any profits they generate. On the other hand, LLCs are "pass-through" entities, meaning that all profits and losses pass through directly to their members, who then pay personal income taxes on those profits/losses.

Alternative Business Structures In Texas 

If an LLC or a corporation isn't suitable for your needs, you can also establish other types of businesses in Texas. These include sole proprietorships and partnerships. Both offer benefits and drawbacks depending on your company's operations and how many people are running it. 

Before deciding which type of legal entity would best suit your needs, it's essential to understand all available options to make an informed decision regarding the future success of your business venture. 

Using A DBA

A DBA might be the answer if you don't want to form a separate entity but still want an official name under which you can conduct business transactions.

This entity protects your legal representation from liabilities related to transactions under that DBA name.

This option only requires registration with local agencies but offers no liability protection, so it's essential to weigh all potential risks before moving forward with this option too! 

Conclusion

When forming a business in Texas, there are many different entity types to choose from depending on the needs of your particular venture.

The above information outlines the differences between LLCs and corporations and alternative business structures in Texas, such as sole proprietorships and partnerships. 

It is essential to understand all available options to make an informed decision regarding the future success of your business venture.

Further reading on MikeVestil.com: Check out these step-by-step guides to form LLCs in other states:

Whether you start an LLC in Missouri or want to know the cost of an LLC in Maryland, it is essential to understand the laws and regulations in each state.

In addition, knowing which agency to go with can help you make better business decisions if you decide you need help. Here's information on the LegalZoom LLC cost for formation.

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About the author 

Mike Vestil

Mike Vestil is the author of the Lazy Man's Guide To Living The Good Life. He also has a YouTube channel with over 700,000 subscribers where he talks about personal development and personal finance.

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