How to Form an LLC in Texas

What is different about forming an LLC in Texas

A Texas limited liability company files no annual or periodic report with the Texas Secretary of State, which accepts such reports only from limited liability partnerships, nonprofit corporations and certain limited partnerships not subject to franchise tax. LLCs subject to state franchise tax law file annually with the Texas Comptroller of Public Accounts, so the recurring obligation is a franchise tax report and a Public Information Report due to the Comptroller by May 15.

The Texas Constitution, article VIII, section 24-a, bars the legislature from imposing a tax on the net incomes of individuals, including an individual's share of partnership and unincorporated association income. The franchise tax is a privilege tax on each taxable entity formed or organized in Texas or doing business in Texas.

Forfeiture for missing that filing denies the entity the right to sue or defend in a Texas court, and each officer, director, partner, member or owner becomes personally liable for certain debts of the entity created or incurred in Texas after the report, tax or penalty was due and before the privileges are revived. Reinstatement has no effect on that liability (BOC § 11.254(b)).

Filing the certificate of formation

A Texas LLC exists once a Certificate of Formation is filed with the Secretary of State, Corporations Section. BOC § 3.001(a) requires a certificate complying with §§ 3.003, 3.004 and 3.005; the state form is Form 205 (Revised 12/21). The fee is $300 by every method: BOC § 4.154 applies the for-profit corporation fees of § 4.152 to limited liability companies, and § 4.152(1) sets $300 for a certificate of formation. Credit card payments carry a statutory convenience fee of 2.7 percent of the amount charged. One organizer is enough, and there is no residency requirement for an organizer.

What Form 205 must state

BOC § 3.005(a) requires the entity name, the entity type, the purpose, the period of duration if it is not perpetual, the street address of the initial registered office and the name of the initial registered agent, the initial mailing address, and the name and address of each organizer. The initial mailing address, required since January 1, 2022, is the address the Comptroller uses for tax correspondence. BOC § 3.010 adds whether the company initially has managers, with the name and address of each initial manager, or of each initial member if it has none. Under BOC § 3.003 the company exists perpetually unless its governing documents provide otherwise.

Filing methods and expedited service

Certificates of formation can be filed through SOSDirect 24 hours a day, 7 days a week, and the SOSUpload System accepts a PDF of a completed document from a SOSDirect account holder. Paper filings go to P.O. Box 13697, Austin, Texas 78711-3697, or 400 W. 15th St., Austin, TX 78701.

Three expedite tiers are published under the name Texas Express, each priced per document on top of the document filing fee. Standard Expedited is $50 per document, processed before regular submissions, typically within 2 to 3 business days, and is available by mail or in-person delivery. Next-Day Service at $500 and Same-Day Service at $750 per document are processed by close of business the next business day or the same business day for filings received by 12:00 p.m.

Naming a Texas LLC

BOC § 5.056(a) requires the name to contain "limited liability company" or "limited company," or an abbreviation of one of those phrases. Under BOC § 5.053(a) it must also be distinguishable in the records of the Secretary of State from existing filing entities, registered foreign filing entities and their fictitious names, reserved names, registered names and existing registered series; 1 Texas Administrative Code, Part 4, Chapter 79, Subchapter C sets the test. The office gives preliminary name determinations by phone and email, but a final determination cannot be made until the document is received and processed.

BOC § 5.061 prohibits "lotto" and "lottery" outright, and BOC § 5.062(a) restricts words such as "veteran," "legion," "Spanish" and "disabled" where the name reasonably implies the entity is created by or for the benefit of war veterans.

Reserving, changing and assuming a name

Form 501 reserves a name for $40 and may be filed through SOSDirect. Under BOC § 5.104 the reservation runs until the 121st day after the application is accepted or until the applicant withdraws it. A later name change takes a Certificate of Amendment, Form 424, at $150.

An LLC operating under a name other than its legal name files an assumed name certificate, Form 503, with the Secretary of State for $25. House Bill 3609, effective September 1, 2019, amended Chapter 71 of the Business and Commerce Code to eliminate the county-level filing requirement for entities that file with the Secretary of State. The stated term cannot exceed 10 years from the date of filing, and a material change requires a new certificate within 60 days.

Registered agent and registered office

BOC § 5.201(a) requires every filing entity to designate and continuously maintain both a registered agent and a registered office in Texas. Under § 5.201(b)(2) the agent is an individual who is a resident of Texas, or an organization other than the represented entity that is registered or authorized to do business in the state. The LLC cannot act as its own registered agent, and the Secretary of State cannot serve as one.

An agent designated on or after January 1, 2010 must have consented on Form 401-A; under BOC § 5.2011(a) the designation is itself an affirmation that the agent consented, so the consent is not submitted with the certificate of formation. The registered office must be a physical Texas address where the agent can be personally served during business hours, and it cannot be solely the address of a mailbox service or telephone answering service. Changing the agent or office takes Form 401 at $15. Under BOC § 11.251(b)(1)(B) the Secretary of State may terminate the entity if it has not corrected a failure to maintain an agent or office before the 91st day after notice was mailed. The Texas registered agent guide has more.

Franchise tax and the Public Information Report

The annual franchise tax report is due May 15, moving to the next business day when May 15 falls on a weekend or holiday; Tax Code § 171.152(c) sets the same date for payment. Every taxable entity formed as an LLC in Texas or with nexus in Texas must also file Form 05-102, the Texas Franchise Tax Public Information Report annually. The report carries no filing fee and is submitted by Webfile or mailed to the Comptroller at P.O. Box 149348, Austin, TX 78714-9348.

The No Tax Due Threshold and what is filed below it

For report years 2026 and 2027 the No Tax Due Threshold is $2,650,000 in annualized total revenue. Senate Bill 3, passed in July 2023, increased the threshold and eliminated reporting requirements for certain entities: for report year 2024 and later, a taxable entity whose annualized total revenue is less than or equal to the threshold is not required to file a No Tax Due Report. The Comptroller discontinued that report for report year 2024 and later, and the form is not available for any new reporting periods. The Comptroller states that the PIR or OIR is due even if the entity does not have to file a franchise tax report because its annualized total revenue is at or below the no tax due threshold, and Tax Code § 171.203(a) requires the report regardless of whether the entity is required to pay any tax.

Above the threshold, the rate for report years 2026 and 2027 is 0.375 percent of taxable margin for retail or wholesale and 0.75 percent for all others. An entity or combined group with annualized total revenue of $20 million or less may use the EZ Computation at 0.331 percent, but an EZ filer cannot take any margin deductions, including cost of goods sold or compensation, or any franchise tax credits; the compensation deduction limit is $480,000. The Texas LLC tax guide covers the rest.

Late reports, extensions and forfeiture

A $50 penalty is assessed on each required franchise tax report filed after the due date, whether or not any taxes or fees are due for the late-filed report period (Tax Code § 171.362(f)). On unpaid tax, § 171.362(a) and (b) add 5 percent of the tax due, and another 5 percent if the tax is not paid or the report not filed within 30 days after the due date. Interest runs at the prime rate plus one percent as published in The Wall Street Journal on the first day of the calendar year that is not a weekend or legal holiday, beginning 60 days after the due date (Tax Code § 111.060). An extension is requested through franchise tax Webfile or on Form 05-164 with the appropriate payment on or before the original due date, and November 15 is the extended due date for an entity not required to pay by electronic funds transfer.

If the report is not filed within 45 days after the notice of intent to forfeit is mailed or sent electronically, the Comptroller may forfeit the entity's right to transact business in Texas (Tax Code §§ 171.251, 171.2515). Setting a tax forfeiture aside takes Form 801 at $75, once every delinquent report is filed and the tax, penalty and interest paid (Tax Code § 171.313(b)).

New veteran-owned businesses

A qualifying new veteran-owned business is not subject to franchise tax and is not required to file a Public Information Report or Ownership Information Report for its initial five-year period. The entity must have been formed or organized in Texas on or after January 1, 2016 and before January 1, 2020, or on or after January 1, 2022; it must be 100 percent owned by honorably discharged veterans; and each owner needs a Letter of Verification of Veteran's Honorable Discharge from the Texas Veterans Commission.

Sales tax, permits and professional entities

A general business license is not required in Texas, according to the Office of the Governor's Texas Economic Development and Tourism division. Texas imposes a 6.25 percent state sales and use tax on most retail sales, leases and rentals of goods and on taxable services, and local taxing jurisdictions can add up to 2 percent for a maximum combined rate of 8.25 percent. A business that sells or leases tangible personal property in Texas, or sells taxable services in Texas, applies for a permit through eSystems. An LLC that will perform professional services may be required to form as a professional entity, using Form 206 instead of Form 205.

Company agreement

Texas calls the operating agreement a company agreement, and BOC § 101.052 gives it wide reach: it binds a member, manager or assignee whether or not that person signed it, it is enforceable by or against the LLC whether or not the LLC signed or adopted it, and under BOC § 101.053 it may be amended only if each member consents. The Secretary of State cannot accept it for filing, because no statute permits it. General background is in the operating agreement guide.

EIN

The Secretary of State does not issue federal employer identification numbers, which come from the IRS. The EIN guide covers the application steps.

Frequently asked questions

Does a Texas LLC file an annual report with the Secretary of State?

No. The Texas Secretary of State takes annual or periodic reports only from limited liability partnerships, nonprofit corporations and certain limited partnerships not subject to franchise tax. A Texas LLC subject to franchise tax law files annually with the Texas Comptroller of Public Accounts instead, by May 15.

What does it cost to form a Texas LLC?

The Certificate of Formation, Form 205, costs $300 by every filing method. Paying by credit card adds a statutory convenience fee of 2.7 percent of the amount charged.

Does a Texas LLC below the No Tax Due Threshold still file something?

Yes. For report years 2026 and 2027 the No Tax Due Threshold is $2,650,000 in annualized total revenue. An entity at or below it is not required to file a No Tax Due Report, which the Comptroller discontinued for report year 2024 and later, but it must still file Form 05-102, the Public Information Report.

What happens if a Texas LLC misses the May 15 report?

The Comptroller assesses a $50 penalty on each required franchise tax report filed after the due date, whether or not tax is owed, plus 5 percent of any unpaid tax and another 5 percent if the tax is still unpaid after 30 days. If the report is not filed within 45 days after the notice of intent to forfeit is mailed or sent electronically, the Comptroller may forfeit the LLC's right to transact business in Texas.

Can a Texas LLC act as its own registered agent?

No. The Form 205 instructions state that the limited liability company cannot act as its own registered agent, and the Secretary of State cannot serve either. The agent must be a Texas resident individual or an organization other than the LLC that is registered or authorized to do business in Texas, and it must have consented to serve.