How to Form an LLC in Texas: Costs, Filing & Requirements (2026)

Updated

Texas is one of the best states for LLCs — no state income tax, no annual report fee, and no franchise tax for businesses under $2.47 million in revenue.

Quick answer: File a Certificate of Formation with the Texas Secretary of State for $300. No state income tax. No franchise tax for businesses with total revenue under $2.47 million. File an annual franchise tax report (free, even if you owe nothing). Processing takes 2–5 business days online.

Texas LLC at a Glance

Detail Info
Filing fee (Certificate of Formation) $300
Annual franchise tax $0 (under $2.47M revenue)
Annual report fee $0 (franchise tax report is free)
State income tax None
Processing time 2–5 business days (online)
Expedited filing $25 (24-hour)
Where to file SOSDirect (sos.state.tx.us)
Operating agreement Not required by law, but strongly recommended
Registered agent required Yes

Total Cost Breakdown

Item Cost Frequency
Certificate of Formation $300 One-time
Franchise tax (under $2.47M revenue) $0 Annual
Franchise tax report filing $0 Annual
Registered agent (optional service) $100–$300 Annual
Operating agreement (DIY) $0 One-time
EIN $0 One-time
Total first year (minimum) $300 —
Total first year (with agent) $400–$600 —

Texas Franchise Tax

Total Revenue Tax Rate Notes
Under $2.47 million 0% (no tax due) Must still file annual report
$2.47M+ (retail/wholesale) 0.375% Lower rate for qualifying businesses
$2.47M+ (other businesses) 0.75% Standard rate
E-Z Computation (under $20M) 0.331% Simplified calculation option

Important: Even if you owe $0, you must file the annual franchise tax report with the Texas Comptroller by May 15 each year. Failing to file can result in forfeiture of your LLC.

Step-by-Step Formation

Step 1: Choose Your LLC Name

Requirement Details
Must include “LLC,” “L.L.C.,” or “Limited Liability Company”
Must be unique Search at mycpa.cpa.state.tx.us/coa
Cannot include “Bank,” “Trust,” “Insurance” without approval
Name reservation $40 for 120 days (optional)

Step 2: Choose a Registered Agent

Requirement Details
Must be a Texas resident or registered entity Can be individual or company
Physical Texas address required No PO boxes
Must consent to serve Noted on formation document
Can be a member of the LLC You can serve as your own agent

Step 3: File Certificate of Formation (Form 205)

Field What to Enter
Entity name Full LLC name
Registered agent Name and Texas street address
Governing authority Names and addresses of managers or members
Purpose General purpose: “any lawful purpose”
Duration “Perpetual” (default)
Management Member-managed or manager-managed
Organizer Name, address, and signature

How to file online:

  1. Go to SOSDirect (sos.state.tx.us)
  2. Create an account or log in
  3. Select “Domestic Limited Liability Company”
  4. Fill out Form 205 details
  5. Pay $300 filing fee
  6. Receive filed document in 2–5 business days

Step 4: Create an Operating Agreement

Texas does not legally require an operating agreement, but having one:

  • Strengthens your liability protection
  • Defines member roles and profit distribution
  • Prevents disputes in multi-member LLCs
  • Is often required by banks for opening a business account

Step 5: Get an EIN

Detail Info
Apply at irs.gov/ein
Cost Free
Processing Instant (online)

Step 6: Open a Business Bank Account

Texas has many business-friendly banks. Bring your Certificate of Formation, EIN, operating agreement, and ID.

Step 7: File Franchise Tax Report

Detail Info
First report due May 15 of the year after formation
Annual due date May 15 every year
Where to file Texas Comptroller (comptroller.texas.gov)
Form 05-102 (No Tax Due) or 05-158 (Long Form)
Cost to file Free (you only pay if tax is owed)

Texas LLC Taxes

Tax Rate Notes
State income tax 0% Texas has no personal income tax
Franchise tax (under $2.47M) 0% File the report anyway
Franchise tax (over $2.47M) 0.375%–0.75% Based on taxable margin
Federal income tax Pass-through Taxed on member’s personal return
Self-employment tax 15.3% Federal, on active member income
Sales tax 6.25%–8.25% State + local rates
Factor Texas California Florida Wyoming
Filing fee $300 $70 $125 $100
Annual franchise tax $0 (<$2.47M) $800 $0 $0
Annual report fee $0 $20/2 years $138.75/year $60/year
State income tax 0% Up to 13.3% 0% 0%
First-year total $300 $870+ $263.75 $160
Annual cost (after year 1) $0 $820+ $138.75 $60

Ongoing Compliance

Requirement Due Date Cost
Annual franchise tax report May 15 $0 (unless tax owed)
Federal tax return March 15 (multi-member) or April 15 (single-member) N/A
Sales tax returns Monthly, quarterly, or annual (depends on volume) N/A
Registered agent maintenance Continuous $0 (self) or $100–$300/year

Advantages of a Texas LLC

Advantage Details
No state income tax Members keep more profit
No franchise tax (small business) $0 for under $2.47M revenue
No annual report fee Only the franchise tax report (free)
Strong asset protection TX has generous homestead/personal property exemptions
Business-friendly courts Efficient commercial dispute resolution
Low cost of living Lower overhead for many business types

Common Mistakes

Mistake Consequence
Not filing annual franchise tax report LLC forfeiture after missing report
Forgetting sales tax permit Penalties for collecting without a permit
Skipping operating agreement Weakens liability protection
Not updating registered agent Missed legal notices, potential default judgments
Mixing personal and business funds Can pierce corporate veil

Bottom Line

Texas is one of the most LLC-friendly states in the country. The $300 filing fee is higher than average, but the long-term savings are significant — no state income tax, no annual franchise tax for businesses under $2.47 million in revenue, and no annual report fees. The only ongoing requirement is filing the annual franchise tax report by May 15 (free, even if you owe nothing).

Related: How to Form an LLC | LLC Cost by State | Best State to Form an LLC | LLC vs. Sole Proprietorship