If you want to start a limited liability company (LLC) in Texas, you must file a certificate of formation with the Texas secretary of state, appoint a registered agent with a Texas street address, and pay a US$300 filing fee. Texas pairs this process with no personal state income tax, which is a big draw for new business formations from owners who would face double taxation on pass-through income elsewhere.

Below, we'll discuss how an LLC in Texas protects you, how Texas structures its formation process, and the steps to take, from choosing a name to opening a business account.

Key takeaways

• Texas LLCs get personal liability protection and pass-through taxation with no state income tax on profits that reach individual owners

• Forming an LLC requires a compliant name, a Texas-based registered agent, and a US$300 certificate of formation filing with the secretary of state

• Every Texas LLC must submit an annual franchise tax report and public information report (PIR), which are due together

What is an LLC in Texas?

An LLC in Texas, as in other states, separates your personal assets from your business's debts and legal exposure. If your business gets sued or can't pay what it owes, creditors typically can't touch your house, car, or personal bank account.

Why is Texas a good state to form an LLC in?

Texas doesn't levy a personal state income tax, so LLC profits that pass through to you as an individual owner face no state-level income tax bill. The certificate of formation costs US$300, and the Texas secretary of state lets you pay for expedited service.

Texas also runs a dedicated business court, established in 2024, that specialises in large commercial disputes. This gives businesses a predictable venue if litigation arises. Pair that with a large, diverse economy spanning energy, tech, and logistics, and it becomes clear why Texas consistently ranks near the top for business.

What do you need before filing an LLC in Texas?

Before you submit paperwork to the state, you need a compliant name, a registered agent, and a decision about how the business will be managed.

Here are important details to note:

• Name availability: Your LLC's name must contain "Limited Liability Company," "LLC," or "L.L.C.," and it must be distinguishable from every other entity registered with the Texas secretary of state. Check the availability of your proposed LLC name through the SOSDirect database.

• Restricted words: Certain terms, such as "bank" or "insurance," prompt extra regulatory approval. Scan your proposed name against restricted terms before filing.

• Registered agent address: Texas requires a physical street address in the state; a PO Box doesn't qualify, and the agent must be reachable there during normal business hours to accept service of process

• Registered agent eligibility: This can be an individual Texas resident who's 18 or older, a member of the LLC, or a business entity authorised to do business in Texas, including third-party registered agent services

• Management structure: Decide whether the LLC will be member-managed, in which owners run daily operations directly, or manager-managed, in which owners appoint one or more managers who might or might not also be members. Many small LLCs with active owners choose member-managed; manager-managed setups tend to suit passive investors or a larger ownership group.

How do you start an LLC in Texas step-by-step?

Once you’ve settled on a name and a registered agent, it takes five steps to form an LLC in Texas. Each step builds on the last.

1. Choose your Texas LLC name

Search the SOSDirect database to confirm your name isn’t taken and doesn’t conflict with an existing entity. Texas lets you reserve the name for 120 days by filing Form 501 before you submit your full formation paperwork.

2. Appoint a Texas registered agent

You can serve as your own registered agent if you have a Texas street address and can be present during business hours, or you can name another member. Many owners hire a third-party registered agent service instead to keep their home address out of the public record and to avoid missing a document while travelling.

3. File the certificate of formation, Form 205

Form 205 is the document that creates your LLC. You’ll list the business name, registered agent name and address, managers, and other details. File online through SOSDirect or by mail, though online filings typically process faster.

4. Draft an operating agreement

Texas doesn’t legally require an operating agreement, but LLCs with more than one member will want to use it to outline ownership percentages, how profits and losses will be split, voting rights, and what happens if a member leaves or the business dissolves. Without one, Texas default LLC statutes govern those questions, and they might not match what you and your co-owners intended.

5. Use your Employer Identification Number (EIN) to open a business bank account

The IRS issues EINs for free through its online application, and you’ll typically need one to open a business bank account, hire employees, or file federal taxes. A dedicated business account, kept separate from your personal current account, helps keep your liability protection intact. Commingling funds might prompt a court to disregard the LLC protection in a lawsuit.

How much does it cost to start an LLC in Texas?

Beyond the US$300 certificate of formation filing fee or the additional fee to expedite, initial costs depend on how much you delegate. A third-party registered agent service typically charges an annual fee, as does a formation service if you use one to handle the paperwork. These add costs to what the state charges. Getting your EIN from the IRS, by contrast, is free no matter which route you take.

What ongoing compliance is required for a Texas LLC?

Every Texas LLC is required to file a franchise tax report and a PIR together with the Texas comptroller each year. However, not every LLC owes franchise tax because Texas sets a no tax due threshold. The threshold for 2026 and 2027 is US$2,650,000. The comptroller adjusts the threshold periodically, so confirm the threshold with the comptroller's office each filing year rather than relying on a number from a previous cycle. Missing the franchise tax report or the PIR could lead to forfeiture of your LLC's right to do business in Texas.

How is a Texas LLC taxed?

At the federal level, a Texas LLC defaults to pass-through taxation. A single-member LLC is treated as a disregarded entity, so profits and losses typically get reported on the owner's personal Form 1040 through a Schedule C. Multimember LLCs file Form 1065 as a partnership, and each member gets a Schedule K-1 reflecting their share of income to report on their own return. Owners can also elect S corporation or C corporation tax treatment with the IRS if that structure fits their financial picture better, though that election carries trade-offs worth discussing with a tax preparer.

At the state level, because Texas has no personal income tax, profits that pass through to you as an individual owner face no additional state income tax bill. As mentioned, the state imposes a franchise tax on LLCs above the no tax due threshold. Federal self-employment tax still applies to active owners regardless of where the business is formed because that's a Social Security and Medicare tax assessed independently of state.

How Stripe Atlas can help

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