How to Form an LLC in Texas
$300 filing, no state income tax, and a franchise tax that doesn't apply until revenue crosses $1.23 million. For most new LLCs, Texas is effectively a zero-tax state.
Contents 9 sections
exas is the second-most-populous state in the country and; for small and mid-sized entities; one of the best-priced. The $300 Certificate of Formation is a one-time cost, there's no annual report fee, and the franchise tax has a "no-tax-due" threshold ($1.23 million in annualized total revenue for 2026) that exempts most first- and second-year LLCs entirely. Founders coming from California or New York routinely find their recurring compliance cost drops by 80% or more.
Before you file
- Nexus check. If you operate in Texas; office, employees, meaningful sales; TX is your natural home state. If you don't, forming in TX while operating elsewhere creates double foreign-qualification costs. TX is not a shopping state; it is a home state.
- Name. Search the SOSDirect business name database. Name must include "Limited Liability Company," "LLC," "L.L.C.," "Limited Company," or "LC."
- Registered agent. A TX street address is mandatory. The registered agent must consent in writing; TX has enforced this since 2010 and the form (Form 401-A) is the usual way to document consent.
The Texas Secretary of State SOSDirect portal is the canonical filing path for a Certificate of Formation. Every Texas LLC also has a Public Information Report and a franchise tax report obligation with the Texas Comptroller of Public Accounts; the franchise tax has a no-tax-due threshold but filing is not optional.
Filing the Certificate of Formation
File online through SOSDirect, by mail, or via fax. Online is fastest (usually 2–3 business days; expedited same-day available for an extra $25).
| Item | Value |
|---|---|
| Certificate of Formation fee | $300 |
| Annual report fee | $0 (Public Information Report filed with the franchise tax return) |
| Franchise tax threshold (no tax due) | $2,650,000 in annualized revenue (2026) |
| Franchise tax rate above threshold | 0.375% (retail/wholesale) or 0.75% (most other businesses) |
| Franchise + PIR due | May 15 each year |
| SOS portal | sos.state.tx.us/corp |
Texas has no personal income tax, but it has a franchise tax with a filing requirement every single year. The 'no-tax-due' status is earned through a filing, not granted automatically; missing the May 15 deadline costs $50 minimum even when your tax liability is zero.
After formation
- EIN from the IRS. Free.
- Webfile account with the Texas Comptroller at comptroller.texas.gov. You will need this by May 15 of the year after formation to file the Public Information Report (PIR) and the franchise tax return; even if you owe $0.
- Operating agreement. Not filed with the state. Courts and lenders expect one; single-member LLCs should have one to defend the veil.
- Sales and use tax permit if selling taxable goods/services in TX.
- Local business license is rarely required at the state level, but some cities (Houston, San Antonio) impose business registrations.
The franchise tax, correctly understood
This is the single most misunderstood piece of Texas LLC compliance. Key facts:
- No tax is due until revenue exceeds $2.65M annualized (2026 threshold; indexed, so verify current figure at comptroller.texas.gov).
- A return is still required. Below the threshold you file a "No Tax Due" report plus the PIR. Skipping it causes the entity to forfeit its right to transact business and, eventually, administrative forfeiture.
- Above the threshold, the tax is calculated on margin (revenue minus the greater of: COGS, compensation, 30% of revenue, or $1M). This gives most mid-size entities an effective rate well below the headline 0.75%.
- The first report is due May 15 of the year following formation. An LLC formed December 28, 2026 files its first report May 15, 2027. Plan for this in year-one cash flow.
What Texas is good for
- Bootstrapped companies. $300 once, $0 annual, likely $0 tax for several years. Hard to beat.
- Real-estate holding companies. TX has a series LLC statute (rare nationally) that lets one filing hold legally-segregated asset "cells"; popular for rental portfolios.
- Operators relocating from CA/NY. The net annual savings usually pay for a registered agent, a CPA, and the formation costs several times over.
What Texas is not ideal for
- Venture-backed startups. Investors will still ask you to convert to a Delaware C-corp before a priced round. Keep TX operating entities, but plan for the flip.
- Passive out-of-state holding. If you don't operate in TX, you'll pay TX franchise-filing costs and your operating state's fees.
- Privacy-maximalists. The Public Information Report lists managers and members; it is public.
Bottom line
For the majority of founders forming a first entity in Texas; solo consultants, real-estate LLCs, local services, early e-commerce; TX combines a low-but-not-cheapest formation fee with genuinely zero recurring state tax. The franchise tax is the one landmine, and for almost every new LLC the threshold means there isn't actually a tax, only a form. File it on time and TX is one of the best LLC states in the country.
Thresholds and rates verified April 2026. The Texas Comptroller adjusts the no-tax-due threshold periodically; confirm the current year's number at comptroller.texas.gov before relying on it.
Post-formation: the first-year checklist
Formation is step one. The obligations that actually generate state and federal trouble if missed sit in the first twelve months after the Articles clear. Plan for:
- EIN. Apply at the IRS EIN portal. Free, instant if you have a US SSN or ITIN.
- Operating agreement. Not filed with the state, but every state presumes one exists for dispute resolution. A single-member LLC still benefits from a written one; banks routinely ask for it when opening a business account.
- Business bank account. Opens only after the state filing clears and the EIN is issued. Commingling personal and business funds is the fastest way to expose yourself to a piercing-the-corporate-veil argument; the SBA's guide to business structures covers the basics of why separation matters.
- BOI report. The FinCEN Beneficial Ownership Information reporting regime requires most new LLCs to report beneficial owners within 30 days of formation. Penalties are serious; the filing is free.
- State tax registration. Sales tax, withholding, unemployment insurance: each is a separate account in most states. Register early so you are not back-filing returns.
Additional primary sources
- Texas Secretary of State SOSDirect: https://direct.sos.state.tx.us/
- Texas Comptroller, franchise tax: https://comptroller.texas.gov/taxes/franchise/
- IRS EIN application: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online