Texas is the second-largest LLC market in the country for a reason beyond its economy: the ongoing costs are among the lowest of any large state. No personal income tax, no annual report fee, and a franchise tax that most small companies file at $0. The trade-off is a higher-than-average formation fee ($300) and a franchise reporting system that confuses founders who expect a simple annual report.
This guide walks the entire Texas process: the pre-filing decisions, the Certificate of Formation itself, what happens after approval, and the franchise tax system that governs every year thereafter. For the state-agnostic fundamentals (what an LLC is, how the liability shield works), start with the national formation cornerstone and What Is an LLC?.
Before You File: Name, Agent, Management
Name. Your name must be distinguishable from every entity registered with the Texas Secretary of State and include "LLC," "L.L.C.," "Limited Liability Company," or "Limited Company." Search the record through SOSDirect ($1 per search) or the Comptroller's free taxable entity search; our Texas business search checks it in seconds. Names implying banking, insurance, or a university need regulatory consent, and "lottery" is prohibited outright. A name can be reserved for 120 days for $40 if you are not ready to file.
Registered agent. Texas requires an agent with a physical street address in Texas (no PO boxes), available during business hours. The agent must consent in writing on Form 401-A, which you keep with company records rather than filing. Serving as your own agent is legal and puts your address on the permanent public record; the trade-offs are covered in Should You Be Your Own Registered Agent? A commercial service runs $100 to $300 per year; File.Business charges $149, first year included with formation.
Management structure. Form 205 asks whether the LLC is member-managed or manager-managed, and requires the names and addresses of the initial governing persons. Single-owner companies almost always choose member-managed. Note the privacy implication: Texas puts governing persons on the public record, and the annual Public Information Report refreshes it every year.
Filing the Certificate of Formation (Form 205)
The Certificate of Formation is Texas's version of Articles of Organization (the difference is naming only; see the comparison). Form 205 asks for: the LLC name, registered agent name and address, governing authority (member-managed or manager-managed, with names), a purpose clause (a general "any lawful purpose" statement is standard), the organizer's name and signature, and an optional delayed effective date up to 90 days out.
File online through SOSDirect or SOSUpload with the $300 fee (credit card payments add a 2.7% convenience charge). Standard processing runs roughly 10 to 15 business days; $25 per document buys expedited handling, typically cutting approval to a few business days. The state returns a stamped certificate and a file number. That stamped certificate plus your EIN is what banks want.
Form your LLC
If you would rather not do this yourself, we prepare the articles, check name availability with the state, and file it for you. Or keep reading and file it on your own. This guide covers everything you need either way.
After Approval: the Texas Checklist
Company agreement. Texas calls the operating agreement a company agreement and does not require one, but you want one for the bank, for co-owner protection, and as veil evidence. State-specific template guidance: Texas operating agreement guide.
EIN. Free and instant from the IRS online for applicants with an SSN or ITIN; non-US founders use Form SS-4 by fax. Never pay a standalone "EIN service" for a free government number. Details: the EIN guide; included with File.Business formations.
Sales tax permit. Selling taxable goods or services in Texas requires a free sales tax permit from the Comptroller. Texas sales tax is 6.25% state plus up to 2% local.
Licenses. Texas has no statewide general business license; requirements are industry and city specific. Check both via the license lookup.
Bank account. Open a dedicated account with the stamped certificate, EIN letter, and company agreement, and route every business dollar through it. Commingling is the number one veil-piercing fact pattern.
The Franchise Tax System: Texas's One Recurring Obligation
Texas skips the annual report fee that most states charge and instead requires an annual franchise tax filing with the Comptroller, due May 15 each year (the first one arrives the year after formation). Three facts cover most small LLCs:
First, if annualized revenue is at or below the no-tax-due threshold (about $2.47 million), you owe nothing. Since 2024 you no longer file a No Tax Due Report either, but you still must file the Public Information Report (PIR) listing officers and addresses. Second, above the threshold, tax applies at 0.375% of taxable margin for retail and wholesale businesses and 0.75% for others, with multiple margin calculation methods worth a CPA conversation. Third, skipping the filing entirely is how Texas LLCs die: the Comptroller forfeits the entity's right to transact business, and eventually its charter, after which reinstatement means back reports, penalties, and a tax clearance letter. The concept is explained in franchise tax requirements, and compliance monitoring tracks the deadline automatically.
Texas-Specific Mistakes
Why it happensTexas genuinely has no annual report fee, and founders stop listening there.
ConsequenceMissed May 15 franchise/PIR filing, forfeiture of the right to do business, then charter forfeiture.
PreventionCalendar May 15 the day the LLC is approved, every year, $0 owed or not.
Why it happensThe consent is not filed with the state, so it feels optional.
ConsequenceAn agent who never consented can disclaim the role; service-of-process failures follow.
PreventionGet the signed consent at formation and keep it with the company agreement.
Why it happensThe state approved the name, so it must be safe.
ConsequenceA USPTO or common-law trademark claim forces a rebrand after you have built the name.
PreventionRun the USPTO search too; see trademarking your name.
Why it happensStartup-forum defaults applied to a Texas-based business.
ConsequenceForeign registration in Texas ($750, more than forming here) plus two states of paperwork forever.
PreventionOperate in Texas, form in Texas, unless institutional investors dictate otherwise.
Three Texas Formations in Practice
Example 1: Single-member consultancy, Dallas
Files Form 205 through SOSDirect on a Tuesday with the $25 expedite, is approved Friday, gets the EIN the same afternoon, and opens the bank account Monday with the stamped certificate and company agreement.
Outcome: The expedite was worth it for a contract start date; standard speed would have added a week.
Example 2: Two-member retail LLC with officers on the PIR, Houston
Files Form 205, registers for a sales tax permit with the Comptroller before opening, and adopts a company agreement with a buyout formula. First franchise report the following May files at $0 owed with the PIR.
Outcome: Registering for sales tax before the first sale avoided the Comptroller penalty letters that surprise retail founders. They skipped the $25 expedite and waited out the standard 10 to 15 business day queue, using the time to finish the buyout formula, then listed both members on the first Public Information Report the following May 15.
Example 3: Multi-state agency unwinding a Delaware filing, Austin
An Austin agency formed in Delaware years ago pays $400 Delaware tax plus Texas foreign registration and two agents. It converts to a Texas LLC, keeping its EIN and contracts.
Outcome: The dual-state structure had bought nothing since day one. Conversion ended the surcharge without disrupting the business. The Texas filing cleared in the same 10 to 15 business day standard window, the EIN and contracts carried across untouched, and the only recurring obligation left is the Franchise Tax Report and Public Information Report each May 15.
Two Agencies, Two Sets of Documents
Texas splits an LLC's life between two offices, and owners who file perfectly with one while ignoring the other are the ones who lose their entity. Formation belongs to the Texas Secretary of State: the Certificate of Formation (Form 205) goes through SOSDirect and comes back stamped with a file number. Everything that follows belongs to the Texas Comptroller, which runs the Franchise Tax Report and Public Information Report, holds the tax clearance that reinstatement depends on, and issues the Certificate of Fact - Status only to entities that are current on franchise filings.
Knowing what each document is called saves hours when a bank, a lender, or another state asks for something by name. These are the filings a Texas LLC actually meets after formation:
| Document | What it does | Fee | Turnaround |
|---|---|---|---|
| Franchise Tax Report + PIR | Annual filing with the Comptroller, due May 15 | $0 report fee | Filed online |
| Certificate of Amendment | Changes the name, term, or governing structure on the record | $150 | 5 to 10 business days, or 1 to 2 with the $25 expedite |
| Statement of Change of Registered Agent or Office | Updates the agent or the agent address | $15 | Same queue as other changes |
| Assumed Name Certificate (DBA) | Registers a trade name at state and county level | $25 state, $15 to $25 county | Valid 10 years |
| Certificate of Fact - Status | Proof of standing for banks, lenders, and other states | $15 | Accepted for 60 to 90 days |
| Certificate of Termination | Closes the entity voluntarily | $40 | Requires tax clearance first |
Two more names are worth memorising before you need them. Expanding into another state means an Application for Registration of Foreign LLC/Corporation there, usually attached to a Texas Certificate of Fact - Status dated within the last 90 days, which is walked through in the Texas foreign qualification guide. Coming back from forfeiture means an Application for Reinstatement, covered in the Texas reinstatement guide. Registered agent duties sit in Tex. Bus. Org. Code section 5.201: the agent must be reachable during normal business hours, and an agent who quits gives 30 days notice, after which the obligation to name a replacement is yours alone. The state specifics are in the Texas registered agent guide.
What Happens When Texas Forfeits Your LLC
Texas charges no annual report fee, which is exactly why the failure mode here is silence rather than an invoice. Nothing arrives in the post demanding money, so a founder who is not watching May 15 finds out about the problem a year or two later, usually when a lender asks for proof of standing.
The sequence starts with money. A late Franchise Tax Report draws a $50 penalty, plus 5% per month on any tax actually owed. Most small Texas LLCs owe no tax, so the first year of neglect costs $50 and a mark on the record. What follows is not measured in dollars. The Comptroller forfeits the entity's right to transact business, and a forfeited LLC cannot get the Certificate of Fact - Status that closings, loan files, and out-of-state registrations depend on, no matter how many times you offer to pay the $15. Roughly 24 months into the sequence the charter itself goes, and the liability shield stops being a reliable answer for anything the business took on while it was forfeited.
Recovery is an Application for Reinstatement, and Texas is unusual in not slamming a short window shut on it. The price is cumulative rather than time limited: every missed Franchise Tax Report and Public Information Report, the $50 per late report, 5% per month on outstanding tax, and a tax clearance letter from the Comptroller before the Secretary of State will restore the file. Three quiet years is a stack of back reports and a clearance request that takes weeks to work through, at a moment when someone is waiting on your certificate. Compliance monitoring and the state deadline table both exist to keep May 15 from becoming that problem.
One risk has nothing to do with the state calendar. Texas does not require a company agreement, so an LLC without one is governed by the defaults in Chapter 101 of the Texas Business Organizations Code: member-managed, per-capita voting, and distributions weighted to capital. Two owners who each believed they had control discover the statute decides instead, and the fix, a $150 Certificate of Amendment plus whatever the lawyers charge to unwind it, costs many times the price of writing the agreement at formation. The drafting points are in the Texas operating agreement guide.
Five Mistakes That Cost Texas Owners Money
Mistake 1: Letting the registered agent seat go empty
The agent moves, resigns, or stops answering, and nobody files the replacement. Why it happens. The resignation notice under Tex. Bus. Org. Code section 5.201 runs 30 days and lands in an inbox that founders treat as administrative noise. What it costs. Service of process delivered to an empty seat is still good service, and the first sign of a lawsuit becomes a default judgment. Prevention. File the Statement of Change of Registered Agent or Office, $15, inside the 30 day window, and treat the agent address as a record to review every time the business moves.
Mistake 2: Ordering the Certificate of Fact - Status the week it is needed
A buyer, bank, or licensing board asks for proof of standing on a Monday and expects it by Friday. Why it happens. The certificate is only $15, so it reads like a form rather than an audit. What it costs. The Comptroller will not issue it while franchise filings are outstanding, so the real cost is the delay: back reports first, clearance second, certificate third, with a closing date sitting on the other side. The certificate is also treated as stale after 60 to 90 days, so ordering it far too early fails in the opposite direction. Prevention. Confirm the franchise account is current before you promise a date, and order inside that 60 to 90 day usable window. Background in the Texas certificate guide.
Mistake 3: Treating the Assumed Name Certificate as a second company
A new brand gets a DBA and the owner starts signing contracts in that name. Why it happens. Texas files assumed names at both state and county level, so the paperwork feels like a formation. What it costs. A DBA carries no liability shield of its own, and the certificate expires after 10 years, which means contracts signed in a lapsed trade name invite an argument about who exactly was on the other side. Refiling at $25 state plus $15 to $25 county is trivial; the dispute is not. Prevention. File at both levels, sign as the LLC doing business as the brand, and calendar the 10 year renewal. Detail in the Texas DBA guide.
Mistake 4: Changing the business without changing the record
The name on the website, the invoices, and the bank account drifts away from the name on file. Why it happens. A Certificate of Amendment costs $150 and takes 5 to 10 business days, so it gets postponed past the point anyone remembers it. What it costs. Payment processors and lenders match your record to the state file. A mismatch stalls underwriting, and fixing it under deadline means paying the $25 expedite for 1 to 2 day handling on top of the $150. Prevention. Amend when the change happens, not when someone catches it, and keep the Public Information Report accurate at the same time.
Mistake 5: Assuming a $0 franchise bill means nothing is due
Revenue sits under the no tax due threshold, so the owner concludes there is nothing to file. Why it happens. Texas removed the separate No Tax Due Report, and that change was widely read as removing the obligation. What it costs. The Public Information Report is still due every May 15. Skipping it starts the forfeiture sequence described above: $50 per late report, loss of the right to transact business, then charter forfeiture at around the 24 month mark, then an Application for Reinstatement with tax clearance. Prevention. Calendar May 15 on the day the Certificate of Formation is approved and file even in years the bill is zero. The mechanics are in the Texas annual report guide and franchise tax by state.
$300 once, May 15 forever
Texas front-loads the cost: a $300 formation fee, then no annual report fee and no state income tax. The entire ongoing game is the May 15 franchise filing, which most small LLCs complete at $0 owed. File it every year and a Texas LLC is one of the cheapest entities in the country to keep alive.
Frequently asked questions
How much does it cost to start an LLC in Texas?
The Certificate of Formation costs $300, filed with the Texas Secretary of State. Texas then charges no annual report fee: the recurring obligation is the franchise tax report due each May 15, which most small LLCs file at $0 owed. Add $100 to $300 per year if you use a commercial registered agent.
How long does it take to form an LLC in Texas?
Online filings through SOSDirect or SOSUpload are typically processed in about 10 to 15 business days at standard speed. Texas sells expedited processing for $25 per document, which moves approval to the front of the queue, usually within a few business days. Mail filings take several weeks.
Does Texas have an annual report for LLCs?
Not a traditional one. Instead, every Texas LLC files an annual franchise tax report with the Comptroller by May 15, including a Public Information Report. LLCs under the no-tax-due revenue threshold (about $2.47 million) owe nothing but must still file. Missing it leads to forfeiture of the entity's charter.
Does Texas have a state income tax on LLCs?
No. Texas has no personal income tax, so pass-through LLC profits face only federal tax at the owner level. The franchise tax applies at the entity level but only above the no-tax-due threshold, making Texas one of the most tax-friendly states to run an LLC that actually operates there.
Can I be my own registered agent in Texas?
Yes, if you are a Texas resident with a physical street address in the state and available during business hours. The agent must consent in writing (Form 401-A, kept with your records, not filed). Your address becomes part of the public record; weigh that against the cost of a commercial service.
What is the difference between Form 205 and Articles of Organization?
Same document, Texas name. Most states call the LLC formation document Articles of Organization; Texas calls it the Certificate of Formation, and Form 205 is the version for LLCs. It asks for the company name, registered agent, governing structure, purpose, organizer, and effective date.
Do I need an operating agreement in Texas?
Texas law does not require one, but every Texas LLC should have one: banks ask for it, it fixes ownership percentages and exit rules, and it is your strongest evidence of entity separateness in a dispute. Texas calls it a company agreement. See the Texas operating agreement guide.
Form your Texas LLC with the state fee at cost.
Name check against the Texas record, Certificate of Formation prepared and filed, operating agreement, EIN, and a year of registered agent service. The $300 state fee is passed through with no markup.
Doing this in Texas specifically: Texas LLC formation and what a Texas LLC costs cover the detail for this state, including the current fee and the exact form the agency expects.
This guide is written from the official sources below. Fees, forms, and deadlines change; confirm the current requirement with the agency before you file.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
