Benefits of Starting an LLC in Texas
Texas consistently ranks among the most business-friendly states in the country, and its LLC laws reflect that reputation. Here are four reasons forming a Texas LLC makes sense.
No State Income Tax
Texas is one of the few states that imposes zero personal income tax, meaning your LLC’s pass-through profits are not taxed at the state level.
Franchise Tax Exemption for Small LLCs
LLCs earning under $2.47 million in annual revenue owe $0 in franchise tax, effectively eliminating any state-level business tax for the vast majority of small businesses.
Series LLC Option
Texas allows series LLCs, letting you create separate “series” within a single LLC, each with its own assets, liabilities, and members, without forming multiple entities.
No Publication Requirement
Unlike states such as New York and Arizona, Texas does not require you to publish a notice in a newspaper after forming your LLC, saving you time and money.
Quick Facts About a Texas LLC
1Name Your Texas LLC
Your LLC name must be distinguishable from every other entity on file with the Texas Secretary of State. It must also include a designator such as “Limited Liability Company,” “LLC,” or “L.L.C.”
Texas naming rules prohibit words that imply your LLC is a government agency or that suggest a purpose your LLC is not authorized to pursue. Words like “bank,” “insurance,” or “university” may require additional approval or licensing.
Before you settle on a name, run a search using the Texas Comptroller’s business name search tool to check availability.
If you find a name you want but are not ready to file, you can reserve it for 120 days by submitting a name reservation application with a $40 fee to the Texas Secretary of State.
2Choose a Registered Agent in Texas
Every Texas LLC must have a registered agent who accepts legal documents and official state correspondence on the LLC’s behalf. Your registered agent must be an individual who resides in Texas or a business entity authorized to do business in the state. The agent must have a physical street address in Texas; a P.O. box does not qualify. An LLC cannot serve as its own registered agent.
You have three practical options:
- Be your own registered agent. Free, but your personal address becomes part of the public record and you must be available at that address during normal business hours.
- Ask a friend or family member. Also free, but they take on the same availability and public-record obligations.
- Hire a professional registered agent service. Typically $50 to $300 per year. You get a dedicated business address, privacy from public filings, and reliable document handling. Compare the best registered agents in Texas to find the right fit.
Yes. Texas law requires every LLC to continuously maintain a registered agent with a physical street address in the state. You can act as your own agent, appoint someone you trust, or hire a professional service.
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3File Your Texas Certificate of Formation
The certificate of formation (Form 205) is the legal document that officially creates your LLC with the Texas Secretary of State. The filing fee is $300 regardless of whether you file online or by mail. This fee covers the creation of the LLC entity only.
The form requires:
- Your LLC’s name (with a proper designator)
- The registered agent’s name and physical Texas address
- The name and address of each organizer
- Whether the LLC will be member-managed or manager-managed
- The LLC’s purpose (a general statement is acceptable)
- The LLC’s duration (perpetual unless otherwise stated)
| Filing Method | Fee | Processing Time |
|---|---|---|
| Online (SOSDirect) | $300 | 10-15 business days |
| Mail (Form 205) | $300 | 4-8 weeks |
| Online with Expedited | $325 | 10-12 business days |
If you choose to file by mail, send your completed Form 205 and a check or money order for $300 to:
Mail Filing Address
Secretary of State
P.O. Box 13697
Austin, TX 78711-3697
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4Get an EIN for Your Texas LLC
An Employer Identification Number (EIN) is a federal tax ID for your LLC. You need one to open a business bank account, hire employees, and file federal taxes. The IRS issues EINs for free, and you can apply online at IRS.gov during business hours. The process takes about five minutes, and you receive your EIN immediately upon completion.
5Create a Texas LLC Operating Agreement
Texas does not legally require an operating agreement, but operating without one is a mistake. This internal document defines how your LLC is owned, managed, and operated. Without it, Texas default LLC laws govern your business, and those defaults may not align with what you and your co-members actually agreed to.
Your operating agreement should cover:
- Each member’s ownership percentage and capital contributions
- How profits and losses are distributed
- Voting rights and decision-making authority
- Rules for adding or removing members
- What happens if a member wants to leave or passes away
- Dissolution procedures
Even single-member LLCs benefit from an operating agreement. It reinforces the legal separation between you and your business, which strengthens your personal liability protection.
It is not legally required, but it is strongly recommended. An operating agreement protects your liability shield, prevents disputes between members, and gives you control over how your LLC operates instead of relying on state default rules.
6Open a Business Bank Account
A dedicated business bank account keeps your personal and LLC finances separate. This separation is essential for maintaining your limited liability protection. Most banks will ask for:
- Your filed certificate of formation (or a stamped copy from the Secretary of State)
- Your EIN confirmation letter from the IRS
- Your operating agreement
- A valid government-issued photo ID
How Much Does a Texas LLC Cost
The $300 filing fee is the big-ticket item. Beyond that, most costs are modest or optional. Here is a full breakdown of what you can expect to pay when forming and maintaining a Texas LLC.
| Item | Cost | Frequency | Notes |
|---|---|---|---|
| Certificate of Formation (online) | $300 | One-time | Filed through SOSDirect |
| Certificate of Formation (mail) | $300 | One-time | Filed using Form 205 |
| Expedited Processing | $325 total | One-time | $25 added to filing fee; 10-12 business days |
| Name Reservation | $40 | One-time | Reserves name for 120 days; optional |
| Registered Agent Service | $50 – $300 | Annual | Free if you serve as your own agent |
| EIN | $0 | One-time | Free from the IRS |
| Operating Agreement | $0 – $200 | One-time | Free templates available; attorney-drafted costs more |
| Public Information Report | $0 | Annual | Filed with franchise tax report by May 15 |
| Certificate of Good Standing | $15 | As needed | Requested from Secretary of State |
Certificate of Formation (online)
$300 · One-timeFiled through SOSDirect
Certificate of Formation (mail)
$300 · One-timeFiled using Form 205
Expedited Processing
$325 total · One-time$25 added to filing fee; 10-12 business days
Name Reservation
$40 · One-timeReserves name for 120 days; optional
Registered Agent Service
$50 – $300 · AnnualFree if you serve as your own agent
EIN
$0 · One-timeFree from the IRS
Operating Agreement
$0 – $200 · One-timeFree templates available; attorney-drafted costs more
Public Information Report
$0 · AnnualFiled with franchise tax report by May 15
Certificate of Good Standing
$15 · As neededRequested from Secretary of State
How Does Texas Compare
Texas Filing Fee
$300
National Average
$127
Texas’s $300 filing fee is well above the national average. However, the state makes up for it with no personal income tax, a $0 franchise tax for LLCs under $2.47 million in revenue, and a free annual report filing, making the ongoing cost of maintaining a Texas LLC very low.
Texas LLC Taxes
State Income Tax
Texas has no state personal income tax. Your LLC’s pass-through income is not subject to any state-level income tax, regardless of how much you earn. This is one of the primary financial advantages of operating in Texas.
Texas Franchise Tax
Texas imposes a franchise tax (sometimes called the “margin tax”) on most business entities, including LLCs. However, LLCs with total annual revenue under $2.47 million owe $0 in franchise tax. Even if your LLC falls below this threshold, you still must file a franchise tax report each year by May 15. Filing is not optional just because you owe nothing.
LLCs that exceed the $2.47 million revenue threshold pay a tax rate of 0.375% (for retail and wholesale businesses) or 0.75% (for all other businesses) on their taxable margin.
Sales Tax
The Texas state sales tax rate is 6.25%. Local jurisdictions can add up to 2% on top of that, bringing the maximum combined rate to 8.25%. If your LLC sells taxable goods or services, you must obtain a sales and use tax permit from the Texas Comptroller of Public Accounts before collecting sales tax.
Federal Tax Classification
By default, the IRS treats a single-member Texas LLC as a disregarded entity (taxed like a sole proprietorship) and a multi-member LLC as a partnership. In both cases, profits pass through to the members’ personal federal tax returns. You can elect S-corp or C-corp taxation with the IRS if a different structure benefits your situation.
Texas LLCs pay no state income tax. They are subject to the state franchise tax, but LLCs with revenue under $2.47 million owe $0. At the federal level, single-member LLCs are taxed as sole proprietorships and multi-member LLCs are taxed as partnerships, unless you elect otherwise with the IRS.
After Forming Your Texas LLC
Public Information Report and Franchise Tax Report
Texas does not have a traditional annual report. Instead, every LLC must file a Public Information Report (PIR) along with a franchise tax report by May 15 each year. Both are filed with the Texas Comptroller of Public Accounts, not the Secretary of State.
There is no fee for filing the PIR. If your LLC’s revenue is below the $2.47 million threshold, your franchise tax amount is $0, but you must still file the report. Missing the May 15 deadline triggers a $50 penalty, and additional penalties and interest apply if you owe franchise tax and pay late.
Business Licenses and Permits
Texas does not require a general state business license. However, depending on your industry and location, you may need specific licenses or permits from state agencies or local governments. Businesses selling taxable goods or services must register for a sales and use tax permit with the Texas Comptroller.
BOI Reporting
As of March 2025, FinCEN revised its Beneficial Ownership Information (BOI) reporting rule so that it only applies to companies formed outside the United States. Domestic LLCs, including those formed in Texas, are exempt from BOI reporting requirements.
Texas does not have a traditional annual report, but every LLC must file a Public Information Report and a franchise tax report with the Texas Comptroller by May 15 each year. There is no filing fee for the PIR, and LLCs with revenue under $2.47 million owe $0 in franchise tax.
Dissolving a Texas LLC
If you decide to close your Texas LLC, you need to file a certificate of termination with the Texas Secretary of State. The filing fee is $40.
Before filing for dissolution, make sure all outstanding franchise tax reports are filed and any taxes, penalties, or interest owed to the Texas Comptroller are paid. The Comptroller must provide a tax clearance letter before the Secretary of State will process your termination.
If your LLC was administratively forfeited for failing to file franchise tax reports, you can reinstate it by paying $75 plus all delinquent franchise taxes, penalties, and interest. Reinstatement restores your LLC to good standing as if the forfeiture never occurred.
No. A Texas LLC has perpetual existence by default and does not expire. However, the state can administratively forfeit your LLC if you fail to file required franchise tax reports. You must formally dissolve the LLC by filing a certificate of termination ($40) if you want to close it.
Frequently Asked Questions
The state filing fee is $300 for the certificate of formation, whether you file online or by mail. Expedited processing adds $25. Beyond the state fee, you may pay for a registered agent service ($50 to $300 per year) and optionally a name reservation ($40). The EIN from the IRS is free.
Online filings through SOSDirect typically take 10 to 15 business days. Mail filings take 4 to 8 weeks. Expedited processing is available for an additional $25, which brings online processing to approximately 10 to 12 business days.
Yes. Texas fully allows single-member LLCs. One person can form, own, and operate an LLC. The IRS treats a single-member LLC as a disregarded entity by default, meaning profits are reported on your personal tax return.
Texas is excellent for LLCs. There is no state income tax, the franchise tax is $0 for businesses earning under $2.47 million, the annual compliance filing is free, and the state offers series LLC formation. The $300 filing fee is higher than average, but the low ongoing costs more than offset it for most business owners.
