Texas is one of the most popular states for new businesses, and its LLC rules are a big reason. There’s no personal state income tax, no annual report fee, and most small LLCs owe no franchise tax at all. The trade-offs are a higher-than-average filing fee of $300 and a yearly reporting requirement that many owners overlook because they owe nothing.
Here’s how to form a Texas LLC and keep it in good standing.
What a Texas LLC costs
Table of Contents
| Item | Cost | When |
|---|---|---|
| Certificate of Formation (Form 205) | $300 | At formation |
| Public Information Report | $0 | Every May 15 |
| Franchise tax | $0 at or below $2.65 million in revenue | Every May 15 |
| Late report penalty | $50 per report | If filed late |
| Assumed name certificate (if you use a DBA) | Small state fee | When you register the name |
For most small LLCs, the ongoing state cost is $0 a year, as long as the paperwork is filed on time.
Step 1: Choose your LLC name
The name must include "Limited Liability Company", "Limited Company", or an abbreviation such as "LLC", "L.L.C." or "Ltd. Co." It must be distinguishable from other entities on file with the Secretary of State. Search the state’s records through SOSDirect or ask the Secretary of State’s office.
Check federal trademarks, domains and social handles too. Our 10-step naming checklist walks through each check.
If you want to trade under a different name from your LLC’s legal name, file an assumed name certificate (a DBA) with the Secretary of State.
Step 2: Appoint a registered agent
Every Texas LLC must have a registered agent with a physical street address in Texas (not just a PO box), available during business hours to accept legal papers. You can serve as your own agent, name another person, or hire a registered agent company. The agent must consent to the appointment.
Step 3: File the Certificate of Formation (Form 205)
File Form 205 with the Texas Secretary of State, online through SOSDirect or by mail, and pay the $300 fee. You’ll include:
- The LLC’s name and the registered agent’s name and address.
- Whether the LLC will be managed by managers or by its members, and the names and addresses of the initial managers or governing members.
- The organizer’s name and address.
Expedited processing is available for an extra fee. Note that Texas puts governing persons on the public record, and the yearly Public Information Report keeps that record current.
Step 4: Write a company agreement
Texas calls the operating agreement a company agreement. It isn’t filed with the state, but every LLC should have one. It sets out ownership percentages, voting, how profits are shared, and what happens when members join or leave. For multi-member LLCs it’s essential; for single-member LLCs it helps prove the business is separate from you.
Step 5: Get an EIN and open a business bank account
Apply for a free EIN on the IRS website. You’ll need it for a bank account, payroll and tax filings. Then open a separate business account, and keep business money out of your personal accounts. See choosing a business bank account.
Step 6: Register for taxes and licenses
- Sales and use tax permit. If you sell taxable goods or services, register with the Texas Comptroller of Public Accounts. The permit is free.
- Employer accounts. If you hire, register with the Texas Workforce Commission for state unemployment tax.
- Professional and trade licenses. Texas doesn’t license general contractors statewide, but it does license many trades and professions. Electricians and air conditioning contractors are licensed by the Texas Department of Licensing and Regulation, and plumbers by the Texas State Board of Plumbing Examiners.
- Local permits. Cities and counties handle building permits, health permits and some business registrations. Check with your city.
Step 7: Understand the franchise tax and the Public Information Report
This is where many new Texas owners get caught out.
Texas imposes a franchise tax on most entities formed or doing business in the state, including LLCs. But for reports due in 2026 and 2027, the no-tax-due threshold is $2.65 million in annualized total revenue. If your revenue is at or below that, you owe no franchise tax.
Since the 2024 report year, businesses below the threshold no longer file a separate No Tax Due Report. But every LLC must still file a Public Information Report (PIR) with the Comptroller each year, listing its officers, managers or members and its registered agent. It’s due May 15, starting the year after the LLC is formed. There’s no fee, but late reports carry a $50 penalty, and failing to file can eventually cost your LLC its right to do business in Texas.
Above the threshold, franchise tax is calculated on your margin, generally at 0.375% for qualifying retail and wholesale businesses and 0.75% for most others.
How a Texas LLC is taxed
Texas has no personal income tax, so LLC profits that pass through to owners aren’t taxed by the state as income. Owners still pay federal income tax and self-employment tax. The franchise tax is the only state-level tax on the LLC itself, and most small businesses owe nothing.
An LLC can elect S corporation tax treatment with the IRS to reduce self-employment tax once profits are steady; Texas franchise tax rules still apply either way. Ask a tax professional.
Special types of Texas LLC
Texas offers two variations worth knowing about.
Professional LLC (PLLC). Licensed professionals, such as doctors, dentists, lawyers, accountants and architects, generally form a professional limited liability company rather than a standard LLC. The certificate of formation must state the professional service, and members must hold the relevant license. The liability shield protects owners from business debts, but not from their own professional malpractice.
Series LLC. Texas is one of the states that allow a series LLC, a single LLC that can create separate "series", each with its own assets, members and liabilities. Real estate investors sometimes use one to hold several properties under one umbrella. Series LLCs are more complex to set up and maintain, banks and lenders don’t always understand them, and other states may not recognize the separation between series. They’re worth discussing with a Texas business attorney before you choose one.
For most single-owner service businesses, shops and contractors, a standard Texas LLC is the right choice.
Your Texas LLC compliance calendar
| Deadline | Filing | Paid to |
|---|---|---|
| May 15 each year (from the year after formation) | Public Information Report; franchise tax report if above the threshold | Texas Comptroller |
| Monthly, quarterly or yearly | Sales tax returns, if you hold a permit | Texas Comptroller |
| Quarterly | State unemployment tax, if you have employees | Texas Workforce Commission |
| Whenever details change | Certificate of amendment or change of registered agent | Secretary of State |
| As required | Trade and local license renewals | Licensing agency or city |
Mistakes to avoid
- Assuming "no tax due" means "nothing to file." The Public Information Report is still required every year.
- Using a PO box for the registered agent. Texas requires a physical address.
- Trading under an unregistered name. File an assumed name certificate for any DBA.
- Skipping the company agreement, especially with partners.
- Forgetting the sales tax permit before your first taxable sale.
Frequently asked questions
How long does it take to form a Texas LLC? Online filings through SOSDirect are often processed within a few business days; expedited service is faster for an additional fee.
Do I need to file anything in my first year? Your first Public Information Report is generally due May 15 of the year after formation. Sales and payroll returns start as soon as you register for those taxes.
Is the $300 fee refundable if my filing is rejected? Generally not. Check your name and details carefully before filing.
Should I form in Texas or another state? If you live and do business in Texas, form in Texas. An out-of-state LLC doing business in Texas must register as a foreign LLC, which costs more and adds paperwork.
Can I be my own registered agent? Yes, if you have a physical Texas address and are available there during business hours. That address becomes part of the public record.
Does a single-member Texas LLC need a company agreement? It isn’t filed with the state, but it’s strongly recommended. Banks sometimes ask for it, and it helps show the business is separate from you.
Next steps
Work through the Start a Business A–Z guide, estimate costs with the startup cost calculator, and learn about taxes and bookkeeping.
This guide is general information, not legal or tax advice. Thresholds and fees change; check the Texas Secretary of State and Comptroller before you file.
Sources
- Stripe, How to start an LLC in Texas (citing the Comptroller's 2026 and 2027 threshold)
- State Business Compliance, Texas LLC taxes and fees 2026
- State Business Compliance, Texas Certificate of Formation fee confirmed (September 2026)
- Texas Comptroller of Public Accounts
Last reviewed October 18, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.
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