How to Form a Texas LLC: Steps, Costs, and Benefits
Learn how to form a Texas LLC in a few steps. Bizee helps entrepreneurs file their Certificate of Formation for $0 + the state fee, with a free first year of registered agent service.
Bizee Editorial Staff
Editorial Team
Texas LLC at a glance
Filing fee: $300 (online via SOSDirect) or $308 (by mail)
Processing time: Typically 3–5 business days online; 5–7 business days by mail
State agency: Texas Secretary of State
Annual report due: Texas LLCs do not file an annual report, but most LLCs owe the Texas franchise tax annually (due May 15). LLCs with annualized total revenue at or below the no-tax-due threshold ($2.47 million for 2024) still file a No Tax Due report.
State tax rate: No state income tax. Texas imposes a franchise tax: 0.375% for retail and wholesale businesses; 0.75% for all other businesses. Most small LLCs fall below the no-tax-due threshold.
Forming a Texas LLC
Forming a Texas LLC means filing a Certificate of Formation (Form 205) with the Texas Secretary of State, paying the $300 state fee, and appointing a registered agent with a Texas street address. Texas has no state income tax, and most small LLCs fall below the franchise tax threshold — making it one of the more business-friendly states to form in.
What is a Texas LLC?
A Texas LLC is a limited liability company formed under Texas state law. It separates your personal finances from your business finances — so if the business is sued or can't pay a debt, your personal assets generally aren't on the hook. At the same time, the LLC's profits pass through to your personal tax return, so you avoid the double taxation that C Corporations face.
Texas doesn't impose a state income tax, which means LLC members keep more of what the business earns. The franchise tax applies to most LLCs, but businesses with annualized total revenue at or below $2.47 million (2024 threshold) owe no tax — they still need to file a No Tax Due report with the Texas Comptroller.
Steps to form a Texas LLC
Forming a Texas LLC takes 5 core steps. The state processes most online filings in 3–5 business days, and one customer in Texas reported getting fully registered — including an EIN — in under 2 business days.
- Choose a name: Your LLC name must be distinguishable from existing Texas business names and include "Limited Liability Company," "LLC," or "L.L.C." You can reserve a name for 120 days by filing Form 501 with the Texas Secretary of State.
- Appoint a registered agent: Every Texas LLC needs a registered agent with a physical Texas street address — not a P.O. box — to receive legal and state documents on the business's behalf.
- File your Certificate of Formation: Submit Form 205 to the Texas Secretary of State online via SOSDirect or by mail. The filing fee is $300 online or $308 by mail.
- Create an operating agreement: Texas doesn't legally require an operating agreement, but having one in writing protects your liability shield and clarifies how the business is managed and how profits are split.
- Get an Employer Identification Number (EIN): Apply for an EIN through the IRS at no cost. The online application typically assigns your EIN immediately. You'll need it to open a business bank account, hire employees, and file taxes.
Cost of forming a Texas LLC
The required cost to form a Texas LLC is the $300 state filing fee (or $308 by mail). That's the only mandatory upfront expense. Everything else — registered agent service, an operating agreement, an EIN — can be handled at low or no cost depending on how you file.
Ongoing costs to keep in mind: Texas LLCs don't file an annual report, but most owe the franchise tax annually (due May 15). LLCs below the $2.47 million revenue threshold still need to file a No Tax Due report with the Texas Comptroller each year.
Benefits of a Texas LLC
Texas is one of the better states to form an LLC in — no state income tax, a relatively straightforward formation process, and a franchise tax structure that leaves most small businesses owing nothing. The liability protection alone makes it worth it for most business owners.
- Personal liability protection: Your personal assets — home, car, savings — are generally protected from business debts and lawsuits. Without an LLC, a sole proprietor's personal finances are fair game if the business is sued.
- Pass-through taxation: LLC profits pass through to your personal tax return. You pay income tax once, not twice the way C Corporation shareholders do.
- No state income tax: Texas has no personal or corporate income tax, which means more of what your business earns stays with you.
- Flexible management: Texas LLCs can be member-managed or manager-managed. You choose the structure that fits how you want to run the business.
- Credibility: An LLC signals to customers, vendors, and lenders that you're running a real business — not a side project.
Texas LLC vs. other business structures
The right structure depends on your goals, how many people are involved, and how you want to handle taxes. Most solo entrepreneurs and small teams choose an LLC because it gives liability protection without the administrative overhead of a corporation.
- Sole proprietorship vs. LLC: A sole proprietorship has no formation cost and no paperwork, but your personal finances are fair game if the business is sued. An LLC adds a liability shield for $300.
- LLC vs. S Corporation: An S Corp can reduce self-employment taxes once the business earns enough to justify paying yourself a salary, but it adds payroll requirements and more IRS scrutiny. Most new businesses start as an LLC and elect S Corp status later if it makes sense. A tax professional can help you figure out when that threshold makes sense for your situation.
- LLC vs. C Corporation: A C Corp is better suited for businesses seeking outside investment or planning to go public. It comes with double taxation and more compliance requirements. For most small businesses in Texas, an LLC is the simpler and more tax-efficient choice.
Cheapest way to form a Texas LLC
The cheapest way to form a Texas LLC is to file Form 205 yourself through SOSDirect, the Texas Secretary of State's online filing system. You'll pay the $300 state fee and nothing else. The EIN is free through the IRS website. If you want to skip the paperwork, Bizee files for $0 + the $300 state fee and includes a free first year of registered agent service.
One thing worth knowing: the registered agent requirement adds an ongoing cost if you use a third-party service after the first year. Factor that into your total cost of ownership, not just the formation fee.
FAQ
To form an LLC in Texas, choose a business name, appoint a registered agent with a Texas street address, and file Form 205 (Certificate of Formation) with the Texas Secretary of State. The state filing fee is $300 online. After approval, get an EIN from the IRS at no cost and open a business bank account.
The state filing fee is $300 if you file online through SOSDirect, or $308 by mail. That's the only required upfront cost. An EIN from the IRS is free. Registered agent service, if you use a third party, typically runs $100–$300 per year after any free first-year promotion.
Yes, for most business owners. A Texas LLC gives you personal liability protection — your home, car, and savings generally aren't on the hook if the business is sued or can't pay a debt. Texas also has no state income tax, and most small LLCs fall below the franchise tax threshold. The $300 formation fee is a low price for that protection.
The cheapest way is to file Form 205 yourself through SOSDirect and pay the $300 state fee. Get your EIN directly from the IRS website at no cost. If you'd rather not handle the filing yourself, Bizee files for $0 + the $300 state fee and includes a free first year of registered agent service — so your total out-of-pocket is the state fee alone.
No. Texas doesn't require LLCs to file an annual report. However, most LLCs need to file a franchise tax report with the Texas Comptroller each year by May 15. LLCs with annualized total revenue at or below $2.47 million (2024 threshold) owe no tax but still need to file a No Tax Due report to stay in good standing.
Yes. Every Texas LLC is required to have a registered agent with a physical street address in Texas — a P.O. box doesn't qualify. The registered agent receives legal documents and official state correspondence on behalf of your business. You can serve as your own registered agent, or use a registered agent service.
The mistakes that come up most often: skipping the operating agreement (Texas doesn't require one, but without it you're relying on default state rules that may not fit your situation), mixing personal and business finances (which can put your liability shield at risk), and missing the annual franchise tax filing deadline. Even if you owe nothing, not filing the No Tax Due report can put your LLC out of good standing with the state.
It depends on your situation. For most small business owners, the main trade-off is self-employment tax — LLC members pay it on their share of profits, which can add up. An S Corporation election can reduce that burden once the business earns enough to justify a reasonable salary, but it adds payroll complexity. A tax professional can help you figure out whether the switch makes sense for your numbers.
Online filings through SOSDirect typically process in 3–5 business days. Mail filings generally take 5–7 business days. Texas does offer expedited processing for an additional fee if you need faster turnaround. Once the state approves your Certificate of Formation, you can apply for an EIN immediately — the IRS online application assigns it the same day.
Not entirely — the Texas state filing fee is $300 and there's no way around it. What you can do is keep everything else free: file Form 205 yourself through SOSDirect, get your EIN from the IRS at no cost, and draft your own operating agreement. If you use a formation platform, Bizee charges $0 for the filing service itself — you only pay the $300 state fee.
