How to Form an LLC in Texas 2026: Complete Guide

Forming an LLC in Texas is one of the most cost-effective ways to start a business. Texas has no state income tax and offers business-friendly regulations. This guide covers everything from choosing a name to maintaining compliance with Texas franchise tax requirements.

Why Form an LLC in Texas?

• No State Income Tax: Texas has no personal or corporate income tax
• Limited Liability Protection: Personal assets protected from business debts
• Pass-Through Taxation: Profits taxed only on personal returns
• Business-Friendly: Simple formation process and low costs
• Flexible Management: Member-managed or manager-managed options

Step-by-Step Formation Process

Step 1: Choose Your LLC Name

Your Texas LLC name must:

• Be distinguishable from existing business names in Texas
• Include "Limited Liability Company," "LLC," or "L.L.C."
• Not contain restricted words ("bank," "insurance") without proper licensing
• Not suggest government affiliation

Name Availability Search: Check the Texas Secretary of State SOSDirect website before filing.

Name Reservation (Optional): Reserve your name for 120 days for $40 if not ready to file immediately.

Step 2: Designate a Registered Agent

Every Texas LLC needs a registered agent who:

• Has a physical Texas street address (no P.O. boxes)
• Is available during normal business hours
• Is either a Texas resident or business entity authorized in Texas

You can serve as your own registered agent or hire a professional service ($100-$300/year).

Step 3: File Certificate of Formation

Submit Form 205 (Certificate of Formation - Limited Liability Company) to the Texas Secretary of State.

Filing Options:

• Online: SOSDirect (fastest, 1-3 business days) - $300
• By Mail: 5-7 business days - $300
• Expedited: 2-3 business days - $300 + $25 fee
• 24-Hour: $300 + $100 fee

Required Information:

• LLC name
• Registered agent name and address
• Registered office address (can be same as agent)
• Purpose of LLC (can be general)
• Management structure (member-managed or manager-managed)
• Organizer information

Step 4: Create an Operating Agreement

While not required by Texas law, an operating agreement is highly recommended. It should cover:

• Ownership percentages
• Member rights and responsibilities
• Profit and loss distribution
• Voting procedures
• Management structure details
• Buy-sell provisions
• Dissolution procedures

Step 5: Obtain an EIN

Get a free Employer Identification Number (EIN) from the IRS:

• Online: Immediate (recommended)
• By Fax: 4 business days
• By Mail: 4-6 weeks

You need an EIN to:

• Open a business bank account
• Hire employees
• File tax returns
• Apply for business licenses

Complete Cost Breakdown

Texas Franchise Tax

Texas levies a franchise tax (also called "margin tax") on most businesses, including LLCs:

Tax Threshold (2026)

• No Tax Owed: If annual revenue is under $2,470,000
• Tax Owed: If annual revenue exceeds $2,470,000

Tax Rates

• Retail/Wholesale: 0.375% of taxable margin
• Other Businesses: 0.75% of taxable margin

Filing Requirements

• Public Information Report (PIR): Required annually, no fee if filed on time
• Franchise Tax Report: Due May 15 each year
• First Report: Due in the year after formation

Ongoing Requirements

Annual Requirements

• Public Information Report: Due annually, $0 fee if filed on time ($50 late fee)
• Franchise Tax Report: Due May 15 (only if revenue exceeds threshold)

Other Obligations

• Maintain registered agent
• Keep financial records
• Update operating agreement as needed
• Obtain necessary business licenses and permits
• File federal tax returns (even if pass-through)

Business Licenses and Permits

Texas doesn't require a general state business license, but you may need:

Local Permits

• City business license or permit
• County permits (depending on location)
• Zoning clearance

Industry-Specific Licenses

• Professional licenses (contractors, realtors, etc.)
• Health permits (restaurants, salons)
• Alcohol licenses (bars, liquor stores)
• Sales tax permit (if selling goods)

Texas Series LLC (Optional)

Texas allows Series LLCs - one LLC with multiple "series," each with separate assets, liabilities, and members:

Benefits

• One filing fee covers multiple series
• Each series has liability protection from others
• Useful for real estate investors or multiple ventures

Requirements

• Must state in Certificate of Formation
• Each series operates independently
• More complex recordkeeping
• Higher complexity may require legal counsel

Frequently Asked Questions

How long does it take to form an LLC in Texas?

Online filings are typically processed in 1-3 business days. Mail filings take 5-7 business days. Expedited options available for additional fees (24-hour or 2-3 business days).

Do I need a business license in Texas?

Texas doesn't require a general state business license, but you'll likely need local city or county permits. Check with your city clerk's office for specific requirements.

Can I be my own registered agent?

Yes, if you have a physical Texas address and are available during business hours. Many LLC owners use professional registered agent services for privacy and reliability.

What's the difference between an LLC and a sole proprietorship in Texas?

LLCs offer liability protection (personal assets protected from business debts), while sole proprietorships do not. LLCs also appear more credible but cost more to establish and maintain.

Do single-member LLCs pay franchise tax?

Yes, single-member LLCs are subject to the same franchise tax rules as multi-member LLCs. However, if revenue is under $2.47 million, no tax is owed (though you still must file the report).