Forming an LLC in Texas: Form 205 Step by Step

A limited liability company is the most common entity for small businesses in Texas, from Austin consultancies to early-stage startups that are not yet raising money. Forming one is mostly paperwork: a single state form, a fee and a few decisions. The Texas Secretary of State publishes detailed instructions for Form 205, the Certificate of Formation for a Limited Liability Company. Here is what they cover.

Before you file

• Pick a name that is available and includes an LLC designation; the Secretary of State checks names on filing.
• Choose a registered agent and a registered office address in Texas.
• Decide on management: run by its members, or by managers.
• Decide who signs as organizer.

What Form 205 asks for

Article	What you provide
1. Entity name	The LLC’s name, with an accepted LLC designation, distinguishable from existing entity names
2. Registered agent and office	An agent who has consented to serve, and a Texas street address
3. Governing authority	Whether the LLC initially has managers (and their names and addresses) or is managed by members
4. Purpose	Any lawful purpose; the form provides a general purpose
Supplemental provisions	Optional provisions you choose to add
Organizer and execution	Name and address of the organizer, and signature

The registered agent

According to the instructions, the registered agent can be a domestic or registered foreign entity, or an individual resident of Texas. The person must have consented, in writing or electronically, to serve, although a copy of the consent is not filed. The registered office must be a street address where legal papers can be personally served on the agent during normal business hours. It does not have to be your principal place of business, but it may not be solely a mailbox service or telephone answering service.

Members or managers

The certificate must say whether the LLC initially has managers. If it does, list each initial manager’s name and address. If it does not, list the initial members who will govern. Many single-owner LLCs are member-managed; LLCs with passive investors often choose managers.

The organizer

Only one organizer is required. It can be a natural person 18 or older, or an entity, that has capacity to contract. The organizer signs the certificate, and it does not need to be notarized. The instructions warn signers to read the statements on the form carefully before signing; the Business Organizations Code imposes liabilities and penalties for false filings.

Filing and fees

The filing fee for an LLC certificate of formation is $300. Business filings can be made online through the Secretary of State’s SOSPortal system. Since January 1, 2022, the certificate must also give an initial mailing address for the entity, which the Comptroller uses for franchise tax correspondence.

After the LLC exists

• Get an EIN from the IRS. The IRS asks you to form the entity with the state first, or the EIN application may be delayed. See Getting an EIN for Your Austin Business: Free, Online and in the Right Order.
• Open a business bank account in the LLC’s name and keep business money separate.
• Write a company agreement setting out ownership, decisions and what happens if a member leaves.
• Register for taxes: a sales tax permit if you sell taxable goods or services, and franchise tax reporting every year. See Texas Sales Tax Permits for New Businesses: Who Needs One and How It Works and The Texas Franchise Tax for Startups: Who Files, Who Pays and When.
• File an assumed name with the Secretary of State if the LLC will operate under a name other than its legal name. See Assumed Names (DBAs) in Texas: When and Where to File.
• Check city permits for your location and activity. See Austin Business Permits and Zoning: Opening a Storefront, Office or Studio.

Keeping it in good standing

The instructions note that an LLC must maintain a registered agent and registered office in Texas, and must file a statement with the Secretary of State if either changes. The Comptroller also warns that an entity may forfeit its right to transact business in Texas if it fails to file its required franchise tax Public Information Report or Ownership Information Report, even when no tax is due.

Common mistakes

• naming a registered agent who has not agreed to serve;
• using a mailbox service as the registered office;
• forgetting the annual franchise tax report or information report;
• mixing personal and business money in one account.

The bottom line

Forming a Texas LLC takes one form, a $300 fee and a few choices: name, registered agent, management and organizer. The real work comes after: an EIN, a bank account, a company agreement and the yearly franchise tax filing. If you are still deciding on structure, start with Choosing a Business Structure in Texas: Sole Proprietorship, LLC or Corporation.