Texas LLC: Complete Guide for 2026

Texas has no state income tax, a booming economy, and one of the most business-friendly reputations in the country. It is the second-largest state by population and GDP, and LLC formations here have surged over the past decade. Here is what you need to know about forming and running a Texas LLC in 2026.

Why Texas for Your LLC?

• No state income tax. Texas is one of nine states with no personal income tax. LLC profits pass through to your personal return, and Texas will not tax them at the state level.
• Strong liability protection. Texas has robust charging order protection for multi-member LLCs, meaning creditors cannot easily seize LLC assets to satisfy a member's personal debts.
• Large domestic market. With 30+ million residents, Texas alone would be the 8th largest economy in the world.
• No annual report. Texas does not require annual reports for LLCs, reducing ongoing compliance burden.

Step-by-Step Formation

1. Choose your LLC name. Must include "Limited Liability Company," "LLC," or "L.L.C." Check availability via the Texas Secretary of State SOSDirect portal.
2. File a Certificate of Formation (Form 205). File online through SOSDirect. The filing fee is $300. Texas is one of the more expensive states to file in.
3. Appoint a registered agent. Must be a Texas resident or a company authorized to do business in Texas with a physical address (no PO boxes).
4. Get your EIN. Free from the IRS. Takes about 10 minutes online.
5. Create an operating agreement. Not legally required in Texas but essential for defining member rights, profit distribution, and management structure.

The Texas Franchise Tax (Margin Tax)

While Texas has no income tax, it does have a franchise tax (also called the margin tax) that applies to most businesses including LLCs. However, the threshold is generous:

• LLCs with total revenue under $2.47 million (2026 threshold) owe no franchise tax but must still file a No Tax Due Report.
• Above the threshold, the tax rate is 0.375% for retail and wholesale businesses, and 0.75% for all others.
• You can calculate your taxable margin using whichever method gives you the lowest amount: total revenue minus cost of goods sold, total revenue minus compensation, 70% of total revenue, or total revenue minus $1 million.

For most small businesses, the franchise tax is zero. But you must file the report annually — failure to do so can result in your LLC being forfeited by the state.

Ongoing Compliance

• Franchise tax report: Due May 15 annually. Even no-tax-due entities must file.
• No annual report: Texas does not require a separate annual report.
• Registered agent: Must be maintained continuously.
• Business licenses: Vary by city and county. Check with your local government.

Texas LLC Cost Summary

Texas vs. Other Popular States

If you live in Texas and operate your business here, forming in Texas is almost always the right choice. Forming in Wyoming or Delaware to "save money" does not work — you would still need to register as a foreign LLC in Texas (another $750 fee) and maintain compliance in both states.

The only exception: if your business has no physical presence in Texas and all customers are out of state, you might consider forming in a state with lower filing fees like Colorado ($50) or New Mexico ($50).

Start Your Texas LLC

Texas is an excellent state for LLCs. No income tax, minimal ongoing reporting, strong asset protection, and a massive market. The $300 filing fee is higher than average, but you are getting a lot in return.

Sedes handles the entire Texas LLC formation — filing, EIN, operating agreement, and registered agent — for $29 plus the $300 state fee. No hidden costs, no upsells.