Texas LLC: no income tax, but read about the franchise tax first
Texas charges $300 to form an LLC — one of the highest filing fees in the country — and then almost nothing ever again. There is no annual report to the Secretary of State and no personal income tax. What there is instead is a franchise tax you almost certainly don't owe, attached to a report you absolutely must file, free, every 15 May. Miss it and Texas takes your right to do business. This page is about that report.
Two Texas agencies have a claim on your LLC and they do not talk to you in the same way. The Secretary of State takes $300 to file the Certificate of Formation — $308.1 if you pay by card, because there is a 2.7% convenience fee — and then charges nothing, ever. No annual report, no renewal, no periodic filing. Over five years a Texas LLC costs $300 in state fees, all of it on day one.
The Comptroller of Public Accounts is the one to pay attention to. Every Texas LLC is subject to the franchise tax, which sounds alarming and mostly isn't: nothing is owed below $2,650,000 of annualised revenue for the 2026 report year, and since the 2024 report year an entity under the threshold doesn't even file a return. But it does still file an information report — the Public Information Report, Form 05-102 — by 15 May every year. It costs nothing. Forgetting it is how Texas LLCs die.
The franchise tax you probably don't owe
The threshold is the whole story for most readers. For the 2026 report year, an entity with annualised total revenue at or below $2,650,000 owes no franchise tax. That is a very large number for a business that has just formed, and if you are anywhere near it you already have an accountant.
Above it, the tax is not on revenue. It is on taxable margin, which is the lowest of four calculations: 70% of total revenue, revenue minus cost of goods sold, revenue minus compensation, or revenue minus $1 million. Whichever is smallest is what gets taxed, at 0.375% for retailers and wholesalers and 0.75% for everyone else. There is also an EZ computation — 0.331% of total revenue, no deductions — available under $20 million for anyone who would rather not do the arithmetic.
| Annualised revenue | Franchise tax | What you file |
|---|---|---|
| $40,000 | $0 | Public Information Report only |
| $250,000 | $0 | Public Information Report only |
| $900,000 | $0 | Public Information Report only |
| $2,650,000 | $0 | Public Information Report only |
| $3,000,000 (services) | about $15,750 | Full report + PIR |
| $3,000,000 (retail) | about $7,875 | Full report + PIR |
The two figures above the threshold assume the 70%-of-revenue margin, which is the worst case; deducting cost of goods sold or compensation usually produces a lower number. They are there to show the shape, not to be relied on — past $2.65 million this is an accountant's job.
The change worth knowing about: the No Tax Due Report used to be a form you filed to say you owed nothing. It was discontinued from the 2024 report year. Under the threshold you now file no franchise tax return at all — which is exactly why people conclude, wrongly, that they have nothing to do in May.
15 May, and what forgetting it actually costs
The Public Information Report lists your LLC's managers or members and its registered agent. It takes about five minutes in Webfile and it is free. Your first one is due on 15 May of the year after the year you formed — an LLC created in August 2026 files its first report by 15 May 2027, with nothing due in 2026 at all. That nine-month silence is where the habit fails to form.
16 May — $50, immediately
A flat $50 late filing penalty attaches to a franchise tax report filed after the due date, whether or not any tax is owed. If tax is owed there is a further 5% penalty in the first 30 days and 10% after that, with statutory interest from day 61.
Some weeks later — Form 05-211 arrives
The Comptroller mails a Notice of Intent to Forfeit Right to Transact Business to your registered agent's address. It gives you 45 days from the date it was mailed to file and pay. This is why the agent address must be one where post is actually opened — if it goes to an address you have moved away from, the clock still runs.
45 days later — Form 05-212, forfeiture
The right to transact business in Texas is forfeited. The LLC still exists on paper, but it cannot bring or defend a lawsuit in a Texas court — so a customer who doesn't pay you becomes very difficult to chase.
Worse: Texas Tax Code §171.255 makes each officer or director personally liable for debts the entity incurs after the forfeiture date. For an LLC that means whoever is running it. The liability protection you paid $300 for stops applying to new debts.
Then — Form 05-213, forfeiture of registration
The Secretary of State forfeits the entity's charter. The name is released and someone else can take it. Reinstatement means filing every missed report, paying everything owed, getting a tax clearance letter from the Comptroller and then filing Form 801 with the Secretary of State — considerably more work than the five minutes it would have taken.
What 'no income tax' does and doesn't mean
It means what it says: Texas levies no personal income tax, so the profit that passes through your LLC onto your federal return is not taxed again by the state. On $80,000 of profit that is a genuine saving of several thousand dollars a year against California or New York, and it is the main reason people move businesses here.
It does not mean the state doesn't collect. Texas funds itself from sales tax and property tax instead, and both land on a small business in ways an income tax doesn't.
- Federal tax is unchanged
- Self-employment tax at 15.3% on the first $184,500 of net earnings in 2026, and federal income tax on all of it. Nothing about a Texas LLC touches either. The state saving is the state portion only.
- Sales tax, 6.25% + up to 2%
- A maximum combined rate of 8.25%. Texas taxes some services other states don't — data processing, information services, security, some repair work — so check the Comptroller's taxable services list rather than assuming a service business is exempt.
- Property tax
- Among the highest effective rates in the country, and it applies to business personal property too: an annual rendition of your equipment and inventory to the county appraisal district, usually due 15 April.
- No franchise tax under $2.65m
- The bit that genuinely is free. Most small Texas LLCs pay the state nothing at all after the $300, forever.
If your LLC already exists somewhere else
Texas charges $750 to register a foreign LLC — Form 304, an Application for Registration — which is two and a half times what a domestic Texas LLC costs to form. That is the highest foreign qualification fee in the country and it surprises people who assumed the two would be similar.
It gets sharper if you were late. If the LLC transacted business in Texas for more than 90 days before registering, the Secretary of State assesses a late filing fee equal to the registration fee for each year or part-year of delinquency. Three calendar years of unregistered trading is $750 in registration plus $2,250 in late fees, and a partial year counts as a full one.
So if you moved to Texas with a Delaware or Wyoming LLC, or you formed elsewhere and started working here, deal with it now rather than at the end of the year. The two real options are registering the existing LLC as a foreign entity, or converting it into a Texas LLC — Texas allows conversion, which keeps the entity's history and EIN, and is often the cheaper long-run answer than paying two states forever. The Delaware page has the five-year comparison if that's the state you're carrying.
Common questions
Does a Texas LLC file an annual report?
Not with the Secretary of State — Texas has no annual report and no renewal fee there. It files an annual franchise tax report with the Comptroller by 15 May. Below the revenue threshold there is no tax and no franchise tax return, but the Public Information Report (Form 05-102) or Ownership Information Report (Form 05-167) is still required.
When is my first franchise tax report due?
15 May of the year after the year the LLC became subject to the tax — that is, the year after you formed. An LLC formed at any point in 2026 files its first report by 15 May 2027. Nothing is due in the formation year.
Why is my $300 filing $308.10?
The Secretary of State adds a 2.7% convenience fee to credit card payments. Filing by cheque through the post avoids it but takes much longer. SOSDirect and SOSUpload both take cards.
Do I need a registered agent service in Texas?
No, if you have a Texas street address and can receive documents there in business hours — you can be your own agent. But the Comptroller's forfeiture notices go to the agent's address on file, so an address you actually check matters more in Texas than in states that email you. An entity cannot serve as its own registered agent.
What is the difference between the Public Information Report and the Ownership Information Report?
The PIR (Form 05-102) is filed by corporations, LLCs and limited partnerships, and lists officers, directors or managing members and the registered agent. The OIR (Form 05-167) is for entities that don't file a PIR, mainly general partnerships and trusts. Most LLCs file the PIR.
How long does a Texas LLC take to be approved?
SOSDirect filings are typically processed within a few business days, and the Secretary of State publishes current processing times. SOSUpload, where you send a completed PDF, runs to a similar schedule. Postal filings take weeks.
Is a Texas LLC good if I live somewhere else?
Rarely. If the business is actually run from another state, that state will require you to register there as a foreign LLC and will tax the profit as your income anyway, so you end up with two sets of fees and two registered agents. The no-income-tax advantage belongs to people who live in Texas.
What does forfeiting the right to transact business mean in practice?
The LLC cannot sue or defend a suit in a Texas court, which makes debts hard to collect, and under Tax Code §171.255 whoever runs it becomes personally liable for debts the entity takes on after the forfeiture date. It is curable — file the missing reports, pay what is owed, get a tax clearance letter and file Form 801 — but it is much more work than the report was.
15 May, on a dashboard you already look at.
Describe your business and Velofound lays out Texas's sequence — Form 205, the agent consent, the Comptroller, the May deadline — next to a live website taking real card payments. Free to start.
Start free →