September 08, 2025

Forming an LLC in Texas: Legal Steps and Common Pitfalls to Avoid

Limited Liability Company (LLC) Business Concept, Business team analyzing data and using tablet on desk with limited liability company icon on Vr screen.Forming a Limited Liability Company (LLC) in Texas is a smart move for entrepreneurs seeking to protect their personal assets, streamline management, and unlock growth opportunities. As one of the most trusted business structures, an LLC provides a flexible yet secure foundation for startups and established ventures alike. In McAllen, business owners routinely turn to Villeda Law Group for step-by-step legal guidance—because every stage of the process matters.

If you’re preparing to launch your business, make your first decision a strategic one: partner with the best business attorneys in Texas committed to protecting your investment and future.

Legal Steps to Forming an LLC in Texas

A successful LLC formation involves several key steps, each with legal requirements that can affect your company’s future. Here are the essential legal steps every entrepreneur should follow when establishing an LLC in Texas:

First, it’s necessary to select a unique name for your LLC. Texas law requires every LLC name to be distinguishable from other businesses on file with the Secretary of State and to include the phrase “Limited Liability Company” or “LLC.” Checking name availability using the Texas SOSDirect portal helps prevent rejections and disputes down the line. Business attorneys in McAllen, Texas can assist in this crucial first step.

Next, you must file the Certificate of Formation (Form 205) with the Texas Secretary of State. This document establishes your LLC’s legal existence and includes its name, address, registered agent, and management structure. Any error or omission can lead to delays, so work with a knowledgeable attorney.

Every Texas LLC must appoint a registered agent with a physical Texas address. This agent is responsible for receiving all official communications and legal documents. Selecting a reliable agent—and keeping information updated—ensures your company never misses a critical notice.

Although not required by law, it is wise to draft an operating agreement. This internal document details ownership, member roles, profit sharing, and procedures for resolving disputes. Many business owners in McAllen rely on business lawyers to prepare a clear, tailored agreement that prevents future misunderstandings.

You will also need to obtain an EIN (Employer Identification Number) from the IRS, which is essential for tax filings and opening business bank accounts. Depending on your business activity, registering for state taxes, permits, or licenses may also be required. 

Finally, maintaining compliance and good standing is critical. Texas LLCs are required to file annual reports and franchise tax returns. Failing to meet these requirements can result in penalties or even administrative dissolution. 

Common Pitfalls to Avoid in LLC Formation

While forming an LLC in Texas is often a straightforward process, there are several critical mistakes that can jeopardize your new company’s future. Below are the top five pitfalls every entrepreneur should watch for:

  1. Choosing a Non-Compliant or Duplicate Business Name
    Selecting a business name that fails to meet Texas standards or is already in use can result in legal disputes or rejection by the Secretary of State.
  2. Failing to Prepare a Comprehensive Operating Agreement
    Many new LLCs encounter problems when they skip or rush the operating agreement. Without clear, written rules about management, ownership, and profit allocation, disputes among members can arise and disrupt operations.
  3. Appointing an Unreliable Registered Agent
    Naming an unreliable registered agent—or failing to update their information—can lead to missed legal notices, lawsuits, or important government correspondence. Such oversights may threaten your LLC’s good standing or even result in administrative dissolution.
  4. Overlooking Required Tax Registrations and Local Permits
    Neglecting necessary tax registrations, licenses, or permits can expose your business to fines, audits, or forced closures. Attorneys in McAllen, TX can help you identify all applicable local, state, and federal requirements, ensuring your business operates legally from day one.
  5. Missing Annual Reports or Franchise Tax Filings
    Forgetting to file required annual reports or franchise tax returns can cause your LLC to fall out of good standing, leading to costly penalties or even involuntary dissolution.

By being proactive and working closely with experienced business lawyers in McAllen, you can sidestep these common errors and set your company up for lasting success with the Villeda Law Group.

Build Your Business on a Solid Foundation with Villeda Law Group

Choosing the right legal partner makes all the difference when forming an LLC in Texas. Villeda Law Group stands out for its commitment to clear communication, careful planning, and proven results. With over 40 years serving entrepreneurs across the Rio Grande Valley, Villeda Law Group is the business law firm that business owners trust for every stage of their company’s life cycle. Contact us today to schedule your consultation and ensure your new venture begins with strength, compliance, and peace of mind.