The Texas LLC, explained honestly

A Texas LLC is a limited liability company formed under the Texas Business Organizations Code — Chapter 3 for formation, Chapter 101 for how it works. You file with the Secretary of State, and from that moment the company also exists in a second state system: the Comptroller of Public Accounts, which administers the franchise tax.

One framing point before the detail, because it is the thing that makes Texas genuinely unusual. On what the public record shows, Texas discloses more than any state we have written about. On how well the statute shelters your membership interest from your own creditors, Texas is at the top of the same set. Those two are marketed interchangeably — as though privacy and protection were one axis — and in Texas they point in opposite directions.

The filing fee is $300 — the highest of the five states we have written about. It is also, over ten years, close to the cheapest, and both of those are true for the same reason.

The $300 is not stated as a dollar figure in the LLC fee provision. §4.154 says only that for a filing by or for an LLC the Secretary “shall impose the same fee as the filing fee for a similar instrument under Section 4.152” — and §4.152(1) is where the $300 lives. A good deal of published Texas material cites this wrongly, and the card surcharge is omitted almost everywhere.

Over ten years the ranking reverses

Below the no-tax-due threshold, Texas never charges the LLC again. It crosses below Delaware in year two, Florida in year three, Wyoming in year five, and never crosses New Mexico. So the state with the highest entry price is the second cheapest to keep.

One more line that most models get wrong by assuming you are stuck with your first registered agent. You are not: changing agent is a $15 filing, resignation and rejection are free by statute, and Texas has no commercial agent registration, so there is no agent-side annual fee passed through to you. On published prices, staying on a $299 renewal costs around $3,240 over ten years while switching after year one costs about $879 — which makes the $15 form worth roughly $1,900. The constraint is the incoming agent’s consent and lead time, not the money.

People search for this constantly in Texas, more than in any state we have written about, and the honest answer is not the one being looked for. The $300 goes to the Secretary of State. No service, ours included, can reduce it, and nobody files a Texas LLC for free.

• What you can avoid: the 2.7% card surcharge, by paying another way — that is $8.10.
• What you can avoid: expedite fees, which are optional. Standard expedite is $50, next-day $500, same-day $750. Take-up is under 1% of filings, and unexpedited filings are commonly processed the same day they arrive.
• What you can avoid: a commercial registered agent, but only if you are an individual resident of Texas with a street address and are willing to have it published. Your own LLC cannot serve as its own agent.
• What you cannot avoid: the $300, the annual Public Information Report, and a registered agent of some kind.
• And the IRS charges nothing for an EIN. Anyone charging you is charging for form-filling.

The name

The name must be distinguishable on the Secretary’s records under §5.053. The Secretary publishes worked examples in its administrative rules, and two of them kill workarounds people reach for. “ABC, LLC” is treated as the same name as “ABC Limited Liability Company” — so changing the designator does not distinguish you. And because those are the same rather than merely similar, consent from the existing holder cannot cure it either.

The certificate of formation, field by field

§3.005 sets the general contents and §3.010 adds the LLC-specific ones. Two fields were added with effect from the start of 2022, so material written before then is incomplete: the initial mailing address, which exists expressly so the Comptroller can send tax information, and the organizer’s name and address.

Filing, timing and rejection

File through SOSDirect or on paper. The Secretary publishes no processing-queue figures, but across nine unexpedited certificates examined, every one was filed on the same calendar day it was received — which is consistent with expedite take-up running below 1%. If your filing is rejected you are not charged, and you re-file.

Be careful with rejection statistics you find elsewhere. Texas publishes accepted filings under the type “Certificate of Formation” and rejected ones under a generic “Legal entity filing document”, so the denominator for a formation rejection rate does not exist in the public data. Any Texas rejection percentage in circulation came from somewhere else or was invented.

After filing

• A company agreement — Texas’s term. Not filed with anyone, and not public.
• An EIN from the IRS, free.
• A franchise tax account with the Comptroller. Your first report is not due until the year after the one in which the entity became subject to tax, so year one carries none.
• A sales tax permit if you sell taxable goods or services.
• Diarise 15 May, every year, whether or not you owe anything.

This is where Texas differs from every state marketed as a formation destination, and the difference is not marginal. Wyoming, Delaware and New Mexico name nobody on the formation document. Florida names one managing person, but only a year later on its annual report. Texas names somebody on day one, by statute, and there is no way to file without doing so.

Read limbs (2) and (3) together. They are an exhaustive either/or: managers are named, or — if there are none — members are. The verb is “must state”. The Secretary’s own instructions close the gap in plain terms: a minimum of one person is required, and an address is always required for each governing person. There is no opt-out and no version of the form that leaves the field empty.

Two further things about how open the Texas register is. Complete filed certificates — the submitted instrument, with names and addresses — are retrievable free through the Secretary’s filing tracker, without an account, bypassing SOSDirect’s search fee. And Texas sells the register in bulk: a full extract runs to $1,750, with daily and weekly subscriptions from $20.

One mechanism does still work. A third party may act as organizer — §3.004 permits contracting for another, with no residency requirement — and filed certificates show commercial organizers in use, so the signer’s name need not be yours. But it does nothing about §3.010. The governing person is still named.

Texas has no annual report at the Secretary of State. What it has is a franchise tax report and a Public Information Report, both filed with the Comptroller, both due 15 May. People search for the “Texas LLC annual report” constantly; it is not a thing under that name, and looking for it at the wrong agency is how the deadline gets missed.

The franchise tax is levied on taxable margin. Most small LLCs owe nothing, because annualised total revenue at or below $2,650,000 produces no tax — a threshold that is indexed under §171.006(b) and moves every two years, most recently at the start of 2026. Above it, the rate is 0.375% for retail and wholesale and 0.75% for everything else, with an E-Z Computation alternative at 0.331%.

There are two different ways to owe nothing and they have opposite filing consequences, which almost every guide conflates. At or below the threshold, you file the Public Information Report. Above the threshold but with computed tax under $1,000, you owe no tax but must file the tax report and the Public Information Report. Whether you qualify for the threshold is a determination the Comptroller makes, not one you make — and an entity that crosses $2,650,000 mid-life acquires filings it never had.

Every figure here is a rate or a threshold, not your answer, and the margin calculation has four permitted methods that change the result materially. Take it to a qualified accountant before relying on any of it.

Miss the filing and the Comptroller forfeits your right to transact business in Texas. The immediate consequences are that the entity cannot sue or defend in a Texas court, and reinstatement costs $75 at the Secretary of State on top of whatever the Comptroller requires. That much is ordinary. What follows is not.

No other state we have written about has anything like this. It is triggered by a missed filing rather than by any misconduct, and it produces the exact outcome an LLC is bought to avoid. Texas courts have applied it to the people running an LLC, including to a sole manager. There is a textual argument that it should not reach them — the section says “director or officer”, an LLC has managers or members, and Chapter 171 defines “charter” and “shareholder” for LLCs but never defines “director” — and that argument has not prevailed. Do not plan around it.

The route from the corporate wording to your LLC runs through the Tax Code rather than the entity code. An LLC is a “taxable entity” by name under §171.0002(a). §171.2515 lets the Comptroller forfeit a taxable entity’s right to transact business, and subsection (b) applies the subchapter — “including Section 171.255” — to that forfeiture. §171.252 then states the consequence in terms.

The exposure is also narrower than the words suggest. The provision reaches debts “created or incurred” after the delinquency, and Texas courts read that generously to the individual: a contract debt is created when the contract is executed, not when it is breached, so obligations predating forfeiture stay outside it even if they are quantified afterwards. In tort there is generally no debt until judgment. If you are reading older material, note that Chapter 171’s statutory definition of “debt” was repealed with effect from the start of 2008.

Some providers claim Texas offers asset protection, and the phrase is quoted here so it can be tested. On this one the statute is unusually strong, and it is stronger than the states normally marketed for it.

§101.112 answers all three questions the marketing raises, in three separate subsections rather than one compound sentence. Subsection (d) makes the charging order the exclusive remedy by which a judgment creditor may satisfy a judgment out of a membership interest. Subsection (c) provides that the charging order lien “may not be foreclosed on under this code or any other law”. Subsection (g) states that the section applies to both single-member and multiple-member LLCs. And (f) bars a creditor reaching the company’s own property.

Texas also has something Wyoming and New Mexico do not: a reported appellate decision applying the exclusivity subsection to defeat an actual enforcement order. A strong statute is a strong starting point in a dispute. It is not an outcome.

None of this touches the ordinary limits. A personal guarantee defeats the shield and is by far the most common way it happens. So do your own acts, unpaid payroll and trust-fund taxes, and fraudulent transfer. And whether a Texas statute binds a court in the state where you live and were sued is not settled — which is the point that undercuts most of what the category sells about choosing a state for creditor reasons.

On veil-piercing, Texas is comparatively hard: §21.223 requires actual fraud for direct personal benefit before a contractual obligation can be laid at a member’s door. That is a genuine point in Texas’s favour and it is rarely stated.

There is no Texas personal income tax, and the constitutional position is firmer than most sources describe — but not the way they describe it.

And the correction that matters most: forming in Texas does not change where you are taxed. State income tax follows residence and where the business actually operates. A Texas LLC run from California by a California resident is taxed by California, and California’s $800 minimum franchise tax generally applies to it as well. “No state income tax” does nothing for someone who does not live in Texas. Speak to a qualified accountant about your own position before relying on any of this.

Every Texas LLC must continuously maintain a registered agent with a Texas street address, and the agent must have consented in writing. Texas charges no separate designation fee at formation, unlike Florida’s $25, and changing agent later is $15.

If you do serve yourself, your street address is on the public record, you must be reachable there for personal service, and you carry the notice risk personally. It saves the annual service fee and nothing else — it does not affect the principal office, the initial mailing address or the governing person address.

On price, the market runs from roughly $35 to $299 a year for the identical statutory service, and the number that matters is the renewal rather than the first year. Three shapes exist: an explicit step-up, no published step-up — which is not the same as flat, and is the weaker evidence — and renewal at the purchase rate with the rate expressly reserved. One thing worth knowing when comparing: a provider charging $200 a year with the annual Comptroller filing bundled can work out cheaper over ten years than one charging $125 plus a separate filing fee.

Texas has had series LLCs far longer than most states, and the regime is mature where Florida’s is weeks old. A series is established through the company agreement and a notice in the certificate of formation, and §101.622 provides that a series is not a separate domestic entity, though §101.605 allows it to sue and be sued.

On creditor remedies, the ordinary rules carry across — the charging-order provisions apply to a series interest as they do to a membership interest.

We have set out the filing and cost layer and stopped there. What a series is for — how the liability separation performs, when it fails, whether it suits a portfolio — is governed by provisions with very little Texas case law behind them, and answering it for your situation would be legal advice. The one recent Texas decision touching series was a probate matter that expressly did not test the liability separation. Take it to a lawyer.

The honest answer to “which state is best” depends on facts a page cannot know. What a page can do is set out what each option offers on each factor, at the same depth.

Texas runs two public business searches and they answer different questions. Almost no published guidance explains that both exist, which is why people check one, see what they expect, and miss the thing that matters.

An entity can look perfectly healthy on one and be forfeited on the other, because forfeiture is the Comptroller’s act and not the Secretary’s. If you are checking a counterparty, check both. If you are checking your own company, the Comptroller is the one that can take your right to transact business away.

Banks and counterparties ask for evidence of standing, and Texas has two different documents for it: a certificate of account status from the Comptroller, and a certificate of fact from the Secretary of State at $15. They answer different questions, which follows from there being two registers in the first place.