How to Start an LLC in Texas: Steps and Franchise Tax Reports

How do I start an LLC in Texas, and what does it cost?

File Form 205, the Certificate of Formation for a limited liability company, with the Texas Secretary of State (SOS). The filing fee is $300 (Form 205 instructions). File online through SOSPortal, which is replacing the older SOSDirect system (SOS), or by mail or in person with a check or money order. The organizer signs; no notary is needed. You do not need to be a US citizen or resident to form or own a Texas LLC (SOS FAQ).

1. Pick a name. It must contain "limited liability company", "limited company" or an abbreviation, and be distinguishable from names already on file. The SOS gives a preliminary name check by phone or email, but decides only when it processes the filing. To trade under another name, the LLC files an assumed name certificate, Form 503, with the SOS for $25 (Form 503 instructions).
2. Name a registered agent with a Texas street address who has agreed to serve.
3. Choose who runs it. Manager-managed or member-managed, with each initial manager's or member's name and address.
4. Give a mailing address for state franchise tax mail.
5. File and pay. Online filers get evidence of filing by email.
6. After approval: get an EIN, make any S corporation election on time, complete the Comptroller questionnaire, sign an operating agreement, open a bank account and, if you sell taxable items, get a sales tax permit.

What makes a case not simple: two or more members (a federal partnership return), an S corporation election, hiring employees, revenue near the franchise tax threshold, or an owner who lives outside Texas or the US.

What to gather: a name and a backup; the agent's consent and Texas street address; each initial manager's or member's name and address; a mailing address you check; the organizer's name and address. After filing, keep the SOS file number, the Comptroller taxpayer number, the formation date and the list of members together.

What must the Texas certificate of formation name?

Form 205 asks for the name, a registered agent and office, the governing authority, the purpose, an initial mailing address, the organizer and the effective date (Form 205; instructions).

Anyone can order copies of filed documents from the SOS (Filing Options), so treat the names and addresses on the certificate as public. An LLC that fails to keep a registered agent and office can be involuntarily terminated (instructions), and agent changes are filed with the SOS, not on a tax report (Comptroller). Choosing and changing agents is covered in the registered agent guide.

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

Online filing through SOSPortal is the fastest standard route (Filing Options). The SOS posts no standard turnaround, but for a fee on top of the $300 filing fee it reviews a filing within about 2 to 3 business days, by the next business day, or the same day (Texas Express):

Paying to expedite does not guarantee approval; each filing is still reviewed. Once the LLC exists, an EIN applied for online is issued at once if approved (IRS), and the Comptroller says to allow 2 to 3 weeks to receive a sales tax permit (Comptroller).

What do I do in the first weeks after my Texas LLC is approved?

Six steps, in this order; the second only if you want S corporation tax and the last only if you sell taxable items:

1. EIN. Apply free on the IRS site once the SOS has filed the certificate; the IRS says to form the LLC first or the EIN may be delayed (IRS). The online tool needs the responsible party's SSN or ITIN; without either, see EIN without an SSN. When a one-member LLC needs its own EIN is covered in EIN for a single-member LLC.
2. S corporation election. For S corporation tax from the first year, Form 2553 is due no more than 2 months and 15 days after that tax year begins. Every member signs a consent, and so does a member's spouse who has a community interest in the member's share (IRS Form 2553 instructions); see S corporation from day one.
3. Franchise Tax Accountability Questionnaire. The Comptroller opens a franchise tax account from SOS records and mails a letter to the initial mailing address. A newly formed Texas LLC must complete the questionnaire online with the taxpayer number and Webfile number in that letter (Comptroller).
4. Operating agreement. Texas calls it a company agreement. The SOS cannot accept it for filing; the LLC keeps it at its principal office (SOS FAQ). The tax terms worth writing in are in operating agreement tax terms.
5. Bank account. Open one in the LLC's name and run all business money through it. Clean records from day one make the yearly revenue figure, the franchise tax test and the federal return easier (setting up books for a new LLC).
6. Sales tax permit. Needed if the LLC is engaged in business in Texas and sells or leases tangible personal property or sells taxable services. Apply online with the SOS file number and a NAICS code (the federal industry code for the business); if a sole owner, partner, officer or director has no SSN, apply on Form AP-201 instead (Comptroller). Sales tax collected is held in trust for the state; a person who controls collecting or paying it and willfully fails to pay it is personally liable for it (Tax Code 111.016). See when you must collect sales tax.

Texas has no general business license, but a specific activity may need a state, local or federal license or permit (Office of the Governor). Under FinCEN's final rule, companies formed in the US no longer file beneficial ownership reports (FinCEN); see who still files a BOI report. Moving an existing sole proprietorship into the LLC is covered in sole proprietor to LLC.

Does my Texas LLC owe franchise tax?

Almost every Texas LLC is subject to franchise tax, but it owes tax only when its annualized total revenue is above $2,650,000 for the 2026 and 2027 report years (Comptroller). Below that line, it pays no franchise tax.

• An LLC owned entirely by honorably discharged veterans can be certified as a new veteran-owned business: it pays no Form 205 filing fee (Business Organizations Code 12.005) and, for its first five years or until it stops qualifying, is not subject to franchise tax and files no Public Information Report. Each owner gets a verification letter from the Texas Veterans Commission, and the LLC files those letters and Form 05-904 with the SOS, on SOSPortal or by mail, together with Form 205 if it is not yet formed (SOS; Comptroller).
• A single-member LLC counts even though the IRS disregards it. Legal formation, not federal tax treatment, decides who files (Comptroller FAQ).
• A first report usually covers less than 12 months, so revenue is annualized: divide it by the days in the period, then multiply by 365 (Comptroller FAQ). A business that starts late in the year with strong sales can cross the threshold on paper.
• Above the threshold, an LLC whose computed tax is under $1,000 still files a franchise tax report but pays nothing.

Rates, which revenue counts, extensions and penalties are in the Texas franchise tax guide.

If no tax is due, what must my Texas LLC file every year?

A Public Information Report (PIR), Form 05-102, due May 15, or the next business day if it falls on a weekend or holiday (Comptroller). Since the 2024 report year, an LLC at or below the threshold no longer files a No Tax Due Report, but the PIR is still required (Comptroller). "No tax due" does not mean "nothing to file".

• Who signs: an officer, director or other authorized person. File it on Webfile, the Comptroller's online system, or by mail.
• What it shows: the names and addresses of the LLC's officers, directors, managers or members, as applicable; any company that owns 10% or more of the LLC, or that the LLC owns 10% or more of; the registered agent; and the principal office (Tax Code 171.203). The SOS updates its public management records from it (SOS FAQ), and the Comptroller shows the officer and director information in its public entity search (Comptroller).
• If it is missed: the LLC can forfeit its right to transact business, and each officer, director, member or owner can become personally liable for LLC debts incurred in Texas from the report's due date until the right is revived (Comptroller; Tax Code 171.255). Penalties and the fix are in the Texas franchise tax guide.
• Who skips it: a certified new veteran-owned business, during its first five years (Comptroller).

When are my Texas LLC's first reports due?

May 15 of the year after the year the LLC became subject to franchise tax: the PIR, plus a franchise tax report if annualized revenue is above $2,650,000 (Comptroller FAQ; Comptroller). For an LLC formed in Texas, it became subject in the year its certificate of formation took effect.

The first period, used to annualize revenue, is short: from the day the LLC became subject to the tax to its federal accounting year end in that same calendar year. An LLC formed in March with a December year end covers March through December. If the LLC uses a fiscal year that ended before its formation date, the first report covers a single day and is a zero report. A delayed effective date on Form 205 that falls in the next calendar year shifts which year that first report falls in.

Does Texas have an LLC annual report or annual fee?

No. The SOS does not take an annual report from LLCs; their yearly filing is with the Comptroller as part of franchise tax, and the PIR is that filing (SOS FAQ). The SOS charges no annual fee, and an LLC at or below the threshold pays no franchise tax; sales tax, unemployment tax after hiring and local property taxes are separate (Office of the Governor). How Texas compares with other states is in LLC annual fees and reports by state.

How is a Texas LLC's profit taxed if Texas has no income tax?

Federal rules decide it. Texas has no state income tax (Comptroller). For an owner who lives in Texas and an LLC that works only in Texas, the income tax on LLC profit is federal; franchise tax is a separate state tax measured on revenue.

The defaults are on the IRS pages for single-member LLCs and LLCs filing as a corporation or partnership; S corporation limits are on the IRS page for S corporations. Texas is a community property state (IRS Publication 555), so an LLC owned only by a married couple as community property may be treated either as a disregarded entity or as a partnership (IRS). Electing S corporation tax from the start is covered in S corporation from day one. What else a Texas owner still pays is in states with no income tax.

What if my Texas LLC hires employees?

Register with the Texas Workforce Commission (TWC) for unemployment tax within 10 days of becoming a liable employer (TWC). A business becomes liable once it meets any one of TWC's tests, including:

• it is liable for federal unemployment tax and has paid wages to Texas employees;
• it pays $1,500 or more in gross wages in a calendar quarter; or
• it has at least one employee during 20 different weeks of a calendar year, part time or full time.

Payments to true independent contractors do not count, so classify workers correctly (cost of an employee vs a contractor). A one-member LLC uses its own EIN, not the owner's number, for employment taxes (IRS). Income tax and the employee's share of Social Security and Medicare withheld from pay must be paid over; a member, manager or employee responsible for paying them who willfully does not can be personally liable for the unpaid amount (IRS).

What does a Texas LLC cost in its first year?

The state charges $300 to form, no annual fee or franchise tax for an LLC under the threshold, and optional fees for speed.

Card payments on SOSPortal add a small convenience fee. State-by-state totals are in LLC cost by state.

Example

These examples are illustrative; figures are in US dollars.

An Austin consultant, one member

She forms a member-managed LLC in March, paying $300 online, and gets an EIN the same day. Revenue for the year is $90,000. Her first period runs March through December, and even annualized her revenue is far below the threshold, so by May 15 of the next year she files only the PIR and pays no franchise tax. Her profit goes on Schedule C with self-employment tax.

Two friends with a Houston food truck

They form a two-member LLC for $300, get an EIN, and apply for a sales tax permit about three weeks before opening because they sell taxable items. Each year the LLC files federal Form 1065 and gives each member a K-1, and files the PIR by May 15. When they pay a part-time cook $2,000 in one quarter, they register with TWC within 10 days.

An LLC that grows past the threshold

• Year 1: revenue is $1,200,000 over a full 12 months. The next May 15, the LLC files the PIR only.
• Year 2: revenue is $3,000,000, above the threshold the Comptroller sets for that report year. The next May 15, it files a franchise tax report and the PIR, and pays the tax if it is $1,000 or more.

How that tax is computed is in the Texas franchise tax guide.

Different for you?

• Two or more members, or an S corporation election from the start: the LLC files its own federal return each year; see S corporation from day one and CPA for a multi-member LLC, and get business formation help for the setup or business tax help for the yearly return.
• Revenue nearing $2,650,000, a missed PIR or a forfeiture notice: see the Texas franchise tax guide and get business tax help.
• You are hiring your first employee: register with TWC and set up payroll; get business formation help.
• You live outside Texas or outside the US: see Texas LLC for nonresidents and get business formation help.
• You are in the US on a work or student visa: see starting an LLC on a visa and get business formation help.
• The LLC will hold a rental property: the same Texas filings apply; what changes for tax is in rental property in an LLC.
• Your LLC was formed in another state and does business in Texas: see registering in another state.
• You already run the business as a sole proprietor: see sole proprietor to LLC.
• You want books set up right from the first transaction: see setting up books for a new LLC and bookkeeping.