How to incorporate in Texas

Texas Limited Liability Company Filing Fees

Perhaps the largest difference between states when it comes to incorporating or forming a limited liability company is the fee schedule.

In Texas, the filing fees for LLCs is the same as for for-profit corporations.

Here is the current Texas LLC fee schedule, as of November 2008:

How to Incorporate a Texas LLC - Filing Texas Articles of Organization

In Texas, Articles of Organization are not called Articles of Organization...instead, the formation document for a limited liability company in Texas is called a "Certificate of Formation".

But don't be confused--it means the same thing.

Texas is one of a growing number of states which permits you to incorporate your LLC directly with the Texas Secretary of State.

The url for forming a Texas LLC online is:

Click here to incorporate an LLC in Texas through the Secretary of State.

You'll have to open an account with the Secretary of State, and several other steps.

Understand that this only files your Texas Certificate of Formation.

You're also going to need an Operating Agreement, which you'll have to either draft on your own (don't even think about it) or hire an attorney.

A better solution is to let a service like Legalzoom form your Texas limited liability company.

Legalzoom will, in addition to filing your Texas Certificate of Formation, provide the following services:

• Customized Texas Operating Agreement
• Preliminary check of the availability of your LLC name in Texas
• Obtaining your Federal Tax Identification (FEIN / EIN)
• Corporate resolution to open a bank account
• Membership Certificates
• Membership transfer ledger (how you keep track of who owns what shares in your LLC--for investors, partners, etc.)
• Accounting software
• Registered Agent services

How to Incorporate in Texas - Foreign LLCs

If you already have an LLC formed in another state and want to transact business in Texas, you'll need to acquire a certificate of authority as a foreign limited liability company.

Note: Just because you ship products to Texas customers, that alone does not qualify as "transacting business in Texas" for the purposes of requiring you to file as a foreign Texas LLC.

Texas statute defines what it means to "transact business" in Texas. None of the following constitute "transacting business" in Texas for the purpose of requiring you to register your foreign LLC in Texas:

Without excluding other activities which may not constitute transaction of business in this state, a foreign limited liability company shall not be considered to be transacting business in this state, for the purposes of this Act, by reason of carrying on in this state any one (1) or more of the following activities:


(1) Maintaining or defending any action or suit;


(2) Holding meetings of its members or managers or carrying on other activities concerning its internal affairs;


(3) Maintaining bank accounts;
(4) Maintaining offices or agencies for the transfer, exchange, and registration of securities issued by it, or appointing and maintaining trustees or depositaries with relation to its securities;

(5) Voting the stock or other equity interest of any person;

(6) Effecting sales through independent contractors; (7) Creating as borrower or lender, or acquiring, indebtedness or mortgages or other security interests in real or personal property;

(8) Securing or collecting debts due to it or enforcing any rights in property securing the same;

(9) Transacting any business in interstate commerce;

(10) Conducting an isolated transaction completed within a period of thirty (30) days and not in the course of a number of repeated transactions of like nature;

(11) Exercising the powers of executor or administrator of the estate of a non-resident decedent under ancillary letters issued by a court of this state, or exercising the powers of a trustee under the will of a non-resident decedent, or under a trust created by one or more non-residents of this state, or by one or more foreign limited liability companies if the exercise of such powers, in any such case, will not involve activities which would be deemed to constitute the transacting of business in this state in the case of a foreign limited liability company acting in its own right;

(12) Acquiring, in transactions outside Texas, or in interstate commerce, of debts secured by mortgages or liens on real or personal property in Texas, collecting or adjusting of principal and interest payments thereon, enforcing or adjusting any rights and property securing said debts, taking any actions necessary to preserve and protect the interest of the mortgagee in said security, or any combination of such transactions;

(13) Investing in or acquiring, in transactions outside of Texas, royalties and other non-operating mineral interests, and the execution of division orders, contracts of sale and other instruments incidental to the ownership of such non-operating mineral interests.

Again, you let Legalzoom handle the paperwork for obtaining your Texas foreign qualification for a fee (scroll down to the lower right hand column under "Additional Business Services" and click on "Foreign Qualifications".

Texas Single Member LLCs

Yes, Texas does permit single member LLCs.

Texas LLC Franchise Tax

All Texas limited liability companies are required to pay the Texas Franchise Tax.

This includes single member LLCs taxes as sole proprietorships.

The good news is that small businesses are likely to avoid the franchise tax if their revenue is small enough.

A taxable entity qualifies to file a no tax due report if it meets one of the criteria below:

• zero Texas receipts,


• total revenue, annualized per 12 month period on which the tax is based, of less than or equal to $434,782.00. (TTC 171.002(d) specifies $300,000 or less, but the actual highest revenue when you take into account the E-Z computation and discounts is $434,782),


• qualifies as a passive entity under TTC 171.0003.

Note that an LLC cannot qualify as a passive entity, so the basic rule is that you can avoid the franchise tax if your LLC has less than $434,782.00 in revenues during the taxable year (as of 2008).

Intuit's TurboTax Online an approved vendor by the Texas Comptroller's office for calculating the franchise tax.

Your Small Business LLC Incorporation Questions Answered

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