Texas LLC Formation & Operating Agreement Checklist

A practical starter checklist for small business owners forming a Texas LLC

Prepared by Prasla Law Firm PLLC · Greater Houston, Texas

How to use this checklist

This checklist walks through the decisions and steps that typically matter when forming a Texas limited liability company. It is organized in the order most owner-operated businesses encounter them: decisions you make before filing, the filing itself, post-formation setup, operating-agreement essentials, banking and tax, and ongoing compliance.

This is a starter checklist, not a substitute for legal advice. Every business is different. Tax elections, multi-member governance, outside investment, real estate holdings, and licensed professions all change the analysis.

Section 1 — Before you file

[ ] Confirm the LLC is the right entity. For most closely held Texas businesses, the LLC is the default choice, but a sole proprietorship, S-Corp election, C-Corporation, or series LLC may fit better depending on ownership, funding plans, and tax posture.
[ ] Confirm ownership structure. Single-member, multi-member with equal ownership, or multi-member with unequal interests — each has different default rules under the Texas Business Organizations Code.
[ ] Decide manager-managed vs. member-managed. Member-managed is simpler for small owner-operated LLCs. Manager-managed makes sense when passive owners want a designated operator.
[ ] Check name availability. Search the Texas Secretary of State business name database. The name must be distinguishable from existing Texas entities and must include "LLC," "L.L.C.," or an approved variant.
[ ] Reserve the name (optional) with Form 501 if you are not filing immediately.
[ ] Confirm no trademark conflict. Search the USPTO database for federal trademarks and the Texas SOS trademark register for state marks.
[ ] Secure the matching domain and core social handles before you file — name conflicts after formation are a common and expensive mistake.
[ ] Identify a registered agent with a Texas physical street address available during business hours. Options: you (if Texas resident), another member, or a commercial registered agent service.
[ ] Decide the effective date. Late-year formations sometimes benefit from a January 1 effective date to avoid a short-year franchise tax filing.

Section 2 — Filing the Certificate of Formation

[ ] Complete Form 205 (Certificate of Formation — Limited Liability Company) with the Texas Secretary of State.
[ ] Pay the state filing fee at submission. REQUIRES VERIFICATION — confirm current fee at sos.state.tx.us before filing.
[ ] Confirm required contents: entity name, registered agent and office, governing authority (member- vs. manager-managed), purpose, organizer's name, effective date.
[ ] Save the filed Certificate and the state-assigned file number in your permanent company records.

Section 3 — Immediately after formation

[ ] Apply for a federal Employer Identification Number (EIN) at irs.gov. Free. Takes minutes online. Required even for single-member LLCs that will open a bank account or hire employees.
[ ] Obtain a Texas Comptroller Webfile number once the SOS files show through to the Comptroller (typically a few days).
[ ] Register for Texas sales tax permit if you will sell taxable goods or services.
[ ] Register for Texas Workforce Commission employer accounts if you plan to hire W-2 employees.
[ ] Apply for any industry-specific state or local licenses (food service, contractor, cosmetology, liquor, medical, firearms, etc.) — the LLC formation does not automatically authorize regulated activity.
[ ] Apply for city or county business permits where the business operates.
[ ] File a DBA / Assumed Name Certificate if operating under any name other than the exact LLC name.

Section 4 — Operating Agreement essentials

Texas does not require an LLC to have a written operating agreement, but operating without one means default Business Organizations Code rules control — and those defaults rarely match what members actually want. A written agreement is strongly recommended even for single-member LLCs.

Core provisions to address:

[ ] Capital contributions — what each member contributes (cash, property, services) and the value assigned
[ ] Membership interests — percentage ownership, profit/loss allocation, voting rights
[ ] Management structure — member-managed or manager-managed; scope of manager authority; matters requiring member approval
[ ] Decision-making thresholds — which decisions require majority, supermajority, or unanimous consent (admitting new members, taking on debt, selling substantial assets, dissolving, amending the agreement)
[ ] Distributions — when and how profits are distributed; tax distributions to cover pass-through tax liability
[ ] Transfer restrictions — whether members can sell or assign interests; right of first refusal; drag-along and tag-along rights
[ ] Buy-sell provisions — triggering events (death, disability, divorce, bankruptcy, termination of employment, voluntary withdrawal); valuation method; payment terms
[ ] Non-compete, non-solicitation, and confidentiality — if appropriate to the business and enforceable under Texas law
[ ] Dispute resolution — negotiation, mediation, arbitration, or court; venue and governing law
[ ] Dissolution procedures — triggering events; liquidation steps; distribution waterfall
[ ] Amendment procedure — vote required to modify the agreement itself

Single-member LLCs benefit from a simpler operating agreement that documents the owner's sole membership, confirms limited-liability intent, and establishes decision-making authority for banks and other third parties.

Section 5 — Banking, accounting, and tax setup

[ ] Open a business checking account in the LLC's exact name. Do not commingle personal and business funds — commingling is the single fastest way to put the LLC's liability shield at risk in Texas.
[ ] Set up bookkeeping from day one (QuickBooks, Xero, or similar).
[ ] Decide federal tax classification. A single-member LLC is a disregarded entity by default; a multi-member LLC is a partnership by default. Either can elect S-Corp or C-Corp treatment by filing the appropriate IRS form. Do not elect without running the numbers with a CPA.
[ ] Consult a CPA before the first tax year closes if an S-Corp election is under consideration — the payroll mechanics and "reasonable compensation" requirement are non-trivial.
[ ] Establish a records-retention system for contracts, invoices, receipts, payroll, meeting minutes, and resolutions.

Section 6 — Ongoing Texas compliance

[ ] File the annual Texas Franchise Tax Report with the Texas Comptroller. REQUIRES VERIFICATION — confirm current filing threshold, due date, and no-tax-due form requirements at comptroller.texas.gov.
[ ] File the Public Information Report (PIR) annually with the franchise tax report.
[ ] Keep the Registered Agent and office current — amend the SOS record promptly on any change.
[ ] Renew all applicable licenses and permits.
[ ] Hold and document required member or manager meetings per the operating agreement. Even informal annual consent resolutions help preserve the liability shield.
[ ] Maintain required records: current member list, capital account history, tax filings, key contracts, and significant decisions.
[ ] Update the operating agreement when membership, management, or contribution structure changes.

Section 7 — Common mistakes we see

Filing a Certificate of Formation without ever signing an operating agreement
Commingling personal and business funds
Using the LLC name inconsistently on contracts (missing "LLC," wrong abbreviation, DBA without filing)
Missing the franchise tax filing and PIR
Adding a co-owner informally without amending the operating agreement, capital accounts, or tax filings
Using an online-template operating agreement that does not actually fit the business
Leaving a former member on the books because no one wants to address the separation
Skipping buy-sell provisions and then facing a member death, divorce, or bankruptcy without a framework

Next step

If you are forming a new Texas LLC, restructuring an existing one, or addressing a gap in your operating agreement, we can help. We routinely work with owner-operated businesses that need more than a template and less than a full-time general counsel.

Schedule a consultation: 713-955-4045 · znp@praslalaw.com · www.praslalaw.com

IMPORTANT LEGAL NOTICES

The information in this checklist is for general educational purposes only and is not legal advice. Reading this checklist does not create an attorney-client relationship. For advice about your specific situation, consult a licensed attorney.

Prasla Law Firm PLLC · 800 Bonaventure Way, Suite 154, Sugar Land, Texas 77479

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