Texas has one of the most small-business-friendly tax setups in the U.S.: no personal income tax, and the franchise tax only applies to LLCs with annualized total revenue above $2.47 million (the "no-tax-due" threshold for 2024–2025). So most solo founders and small businesses pay $0 in Texas state-level income or franchise tax — just the annual report. Filing the Certificate of Formation (Form 205) with the Texas Secretary of State costs $300, with online approval through SOSDirect in 13–15 business days. Pay $25 to expedite to about 2 business days. The annual Public Information Report (PIR) and Franchise Tax Report are both due May 15 each year — even if no franchise tax is owed. Texas's economy is anchored by energy and oil/gas, tech (Austin is the third-largest U.S. tech hub after the Bay Area and Seattle), aerospace (SpaceX in Boca Chica, Lockheed in Fort Worth), and a massive consumer market (Texas is the second-largest state economy in the U.S. behind California).
Why form your LLC in Texas
Energy, tech (Austin), aerospace (SpaceX, Lockheed), and a massive consumer market. The combination of no income tax + a $2.47M no-tax-due threshold is one of the most small-business-friendly tax setups in the country.
- No personal income tax
- Franchise tax only applies above $2.47M annualized revenue (no-tax-due threshold)
- Austin is the 3rd-largest U.S. tech hub
- SpaceX, Tesla's Gigafactory Texas, Apple Austin — major tech investments
- 2nd-largest state economy in the U.S.
- Strong oil & gas, aerospace, and ag economies
Best fit for: Energy & oil · Tech (Austin) · Aerospace & defense · Real estate
Don’t want to file yourself? Northwest Registered Agent files your Texas LLC for $39 + state fee and acts as your registered agent the first year free.
How to form a Texas LLC in 7 steps
- 1Search the Texas business name database
Use the TX SOSDirect business search to confirm name availability. The name must include "Limited Liability Company", "Limited Company", "L.L.C.", "L.C.", "LLC", or "LC". Reserve a name for $40 (held 120 days) if needed.
- 2Appoint a Texas registered agent
Required to have a physical Texas street address. Can be the LLC owner if they're a Texas resident, or a commercial registered agent service. The agent must sign a written consent.
- 3File the Certificate of Formation (Form 205)
File online through Texas SOSDirect for $300. Standard processing is 13–15 business days. Expedited 2-day processing is available for $25 extra ($325 total). The Certificate includes LLC name, registered agent, governing authority (members or managers), purpose, and effective date.
- 4Draft a Company Agreement (Operating Agreement)
Texas calls the Operating Agreement a "Company Agreement." Not required by Texas law to be filed but strongly recommended to have. Defines membership interests, voting, profit/loss splits, and dissolution. Banks routinely ask for it.
- 5Apply for an EIN with the IRS
Free at irs.gov, takes 10 minutes online. Required for opening a business bank account, registering with the Texas Comptroller, and filing federal taxes.
- 6Register with the Texas Comptroller
Register through the Texas Comptroller's website for sales and use tax (if you sell taxable goods/services), the Texas Franchise Tax (mandatory annual filing even if no tax is owed), and any industry-specific accounts.
- 7Calendar the May 15 PIR + Franchise Tax Report
Texas LLCs must file both the Public Information Report (PIR) and the Franchise Tax Report (Form 05-102) every May 15 — even if no franchise tax is owed. The "no-tax-due" report applies if your annualized total revenue is under $2.47M. Late filings incur penalties.
File directly with Texas Secretary of State →
Texas LLC taxes & compliance
No personal income tax. The franchise tax kicks in only above $2.47M in annualized total revenue — meaning most solo and small LLCs pay $0 in TX state-level income/franchise tax (just the annual report).
Ongoing compliance checklist
- Public Information Report (PIR) — due May 15 every year
- Franchise Tax Report — due May 15 every year (no-tax-due if revenue under $2.47M)
- No personal income tax
- Sales and use tax filings (Texas Comptroller)
- Federal income tax (Form 1065 multi-member, Schedule C SMLLC)
Registered agent rules
Required — TX street address.
Hidden costs new Texas LLC owners forget
- $300 filing fee — higher than most states
- Standard processing of 13–15 business days — pay $25 for 2-day expedited
- Public Information Report (PIR) + Franchise Tax Report — both due May 15 every year
- Combined sales tax averages 8.2% (6.25% state + local)
- Foreign LLC qualification: $750
- Property taxes among the highest in the U.S.
Should you use a formation service in Texas?
You can absolutely file directly with the Texas Secretary of State for the $300 state fee. The reasons most Texas owners use a service anyway are (1) registered-agent privacy — keeping their home address off public filings — and (2) calendar reminders for ongoing compliance.
Have Northwest form your Texas LLC for $39 + state fee
Free registered agent for the first year. Real human support. Privacy-by-default — your home address stays off public filings.
Texas LLC: frequently asked questions
How much does it cost to start an LLC in Texas?
Texas SOS charges $300 to file the Certificate of Formation. There's no annual report fee, but the Public Information Report (PIR) is mandatory each May 15. Realistic year-one cost: $300. Ongoing yearly cost: $0 in state filing fees if your LLC stays under the $2.47M franchise tax no-tax-due threshold.
How long does it take to form an LLC in Texas?
Standard online filings through Texas SOSDirect take 13–15 business days — among the slower in the country. Expedited 2-day processing is $25 extra ($325 total). Mail filings can take 4–6 weeks.
Does Texas really have no income tax?
Yes — Texas has no personal income tax. LLC pass-through income flows to owners' personal returns at $0 state tax. The Texas franchise tax only applies above the $2.47M annualized revenue threshold (for 2024–2025), so most small LLCs pay $0 in state-level entity tax. This is one of the most small-business-friendly tax setups in the U.S.
What is the Texas Franchise Tax?
Texas charges a franchise tax on entities with annualized total revenue above $2.47 million. The rate is 0.375% for retail/wholesale and 0.75% for other businesses. Below $2.47M, the LLC files a "no-tax-due report" and owes nothing. The annual filing is still required regardless. Above $2.47M, several calculation methods are available (EZ method, COGS, compensation deduction).
Does Texas have an LLC annual report?
Yes, but it's called the Public Information Report (PIR), not an annual report. It's due May 15 every year and is filed with the Franchise Tax Report. The PIR confirms ownership, registered agent, and other basic LLC info. There's no separate annual report fee.
Can a non-resident form an LLC in Texas?
Yes. Texas has no residency requirement for LLC members or managers. You only need a Texas-based registered agent. Out-of-state owners commonly use a commercial registered agent service.
Is Texas a good state to form an LLC?
Yes — particularly for Texas residents and businesses tied to energy, tech (Austin), aerospace (SpaceX, Lockheed), or the Texas consumer market. The combination of no personal income tax + $2.47M franchise tax no-tax-due threshold + huge market makes Texas one of the best states in the U.S. for solo founders and small businesses. The $300 filing fee is the main upfront cost.
What's the Texas LLC sales tax rate?
Texas state sales tax is 6.25%, with local add-ons up to 2% (combined averaging 8.2%). If you sell taxable goods or services, register with the Texas Comptroller. Texas has many industry-specific exemptions worth researching.