Texas LLC Quick Facts
$300
Texas Secretary of State
Certificate of Formation
None
No annual report required
Varies (see below)
Fees and requirements shown are based on our most recent review. Always verify current information at the Texas Secretary of State website.
Why Form an LLC in Texas?
Texas is consistently ranked among the top states for business formation. With a population exceeding 30 million and a gross state product that rivals many countries, the Lone Star State offers entrepreneurs a massive market and a supportive business environment.
Key advantages of forming a Texas LLC include:
- No state income tax: Texas does not impose a personal income tax, which means LLC members who live in Texas keep more of their pass-through income.
- Favorable franchise tax threshold: Texas LLCs with total revenue below $2.47 million (as of our last review) owe no franchise tax. Many small businesses fall below this threshold.
- No annual report: Unlike many states, Texas does not require an annual report filing, reducing your ongoing compliance burden.
- Strong legal protections: Texas provides solid personal liability protection for LLC members and has well-established business law.
Steps to Form Your Texas LLC
Choose a Name for Your Texas LLC
Your LLC name must be distinguishable from all other business entities registered in Texas. It must include "Limited Liability Company," "LLC," or "L.L.C." at the end.
You can search for available names using the Texas Secretary of State's SOSDirect database. If you find the perfect name but are not ready to file, you can reserve it for 120 days by filing a name reservation application with a $40 fee.
Tips for choosing a name:
- Check that a matching domain name is available for your website.
- Make sure the name does not infringe on existing trademarks (search the USPTO database).
- Avoid restricted words like "bank," "insurance," or "university" unless you have the required licenses.
Appoint a Registered Agent
Texas requires every LLC to designate a registered agent. This is a person or business entity authorized to receive legal documents, government correspondence, and service of process on behalf of your LLC.
Your registered agent must have a physical street address in Texas (P.O. boxes are not accepted) and be available during normal business hours.
You can serve as your own registered agent, but many business owners prefer to use a professional registered agent service for privacy and reliability. Most LLC formation services include at least one year of registered agent service.
See our best LLC services for providers that include registered agent service with formation.
File a Certificate of Formation
In Texas, the formation document for an LLC is called the Certificate of Formation (Form 205). You file this with the Texas Secretary of State. The filing fee is $300.
You can file online through the SOSDirect system or by mail. Online filing is faster, with typical processing times of a few business days. Mail filings can take several weeks.
Information you will need:
- LLC name
- Registered agent name and address
- Whether the LLC is member-managed or manager-managed
- Names and addresses of governing persons (managers or members)
- The LLC's purpose (a general statement is acceptable)
- Duration of the LLC (perpetual is the default)
Create an Operating Agreement
Texas does not legally require an operating agreement, but creating one is strongly recommended for every LLC. This internal document defines the ownership structure, member roles, profit-sharing arrangements, voting procedures, and what happens if a member leaves.
Without an operating agreement, your LLC defaults to the rules in the Texas Business Organizations Code, which may not match your intentions. An operating agreement also helps establish your LLC as a separate legal entity, which strengthens your personal liability protection.
Learn more in our guide to LLC operating agreements.
Get an EIN (Employer Identification Number)
An EIN is essentially a Social Security number for your business. You will need one to open a business bank account, hire employees, and file federal taxes. Applying for an EIN is free and can be done online through the IRS website in a matter of minutes.
If your LLC has more than one member, an EIN is required. Even single-member LLCs benefit from having one, as it keeps your personal Social Security number off business documents and bank accounts.
Texas Franchise Tax
While Texas has no state income tax, it does impose a franchise tax (also called a margin tax) on most businesses, including LLCs. However, there is a generous "no tax due" threshold.
As of our most recent review, Texas LLCs with total revenue at or below $2.47 million owe no franchise tax. You must still file a franchise tax report each year (due May 15), but if you are below the threshold, you simply file a "no tax due" report.
For LLCs above the threshold, the tax rate is generally 0.375% for retail and wholesale businesses and 0.75% for other businesses, calculated on the LLC's taxable margin.
Franchise tax thresholds and rates can change. Verify the current figures with the Texas Comptroller website.
After You Form Your Texas LLC
Once your LLC is officially formed, take these additional steps to set your business up for success:
- Open a business bank account: Keep personal and business finances separate to maintain your liability protection.
- Obtain necessary licenses and permits: Check with your city and county for local business license requirements. Some industries require state-level licenses as well.
- File your franchise tax report: Even if you owe no tax, you must file an annual report with the Texas Comptroller by May 15.
- Consider business insurance: General liability insurance, professional liability insurance, or other coverage depending on your industry.
- Keep records: Maintain detailed records of financial transactions, member meetings, and major business decisions.
Start Your Texas LLC Today
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Disclaimer: The information on this page is for general educational purposes only and does not constitute legal or tax advice. Filing fees, tax thresholds, and state requirements change periodically. Always verify current information with the Texas Secretary of State and the Texas Comptroller, or consult a qualified attorney or tax professional.
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