Starting a Business in Texas: LLC Formation, Permits, and Taxes

Texas draws its business rules from three levels at once. The Business Organizations Code and the Secretary of State govern whether an entity exists. The Comptroller governs sales tax and franchise tax. Cities, counties, and the state agencies that license particular occupations govern whether a given activity is allowed at a given address. This page explains how those layers fit together, defines the vocabulary the rest of the small-business articles assume, and points to the procedures that have their own step-by-step guides.

Which structures require a state filing

Texas recognizes several ways to do business, and only some of them involve the Secretary of State at all.

A sole proprietorship is the default. One person doing business alone is a sole proprietor whether or not they intend to be, and no formation document is filed with the state. The same is true of a general partnership formed by two or more people carrying on a business for profit. Neither structure separates the owner’s personal assets from business liabilities.

The structures that do require a filing are called filing entities: limited liability companies, for-profit corporations, professional corporations, professional associations, limited partnerships, and their nonprofit counterparts. A filing entity legally comes into existence when the Secretary of State accepts its certificate of formation, not when the owners agree to form it.

Fees differ sharply by entity type. Under the Secretary of State’s business filings fee schedule, the certificate of formation for a Texas LLC, for-profit corporation, professional corporation, or professional LLC is $300 as of 2026. A professional association or limited partnership pays $750. A nonprofit corporation pays $25. An out-of-state entity registering to transact business in Texas pays $750, and a foreign entity that has transacted business in Texas for more than ninety days without registering owes a late fee equal to the registration fee for each full or partial calendar year it went unregistered.

Each entity type has its own numbered form. The Secretary of State’s business forms index lists Form 201 for a for-profit corporation, Form 205 for an LLC, Form 206 for a professional LLC, and Form 207 for a limited partnership. Filings go through the SOSDirect online system or by mail.

Registered agents and the registered office

Every filing entity has to be reachable by legal process at a Texas address. The Secretary of State’s registered agent guidance explains that the Business Organizations Code requires each domestic or foreign filing entity to maintain a registered agent and a registered office in Texas.

The registered agent is the person or entity authorized to receive service of process, notices, and demands on the entity’s behalf. Registered agents designated on or after January 1, 2010 must have consented to serve, in writing or electronically, on a form the Secretary of State developed, Form 401-A. Consent is not assumed from listing someone on the certificate of formation.

The registered office is a physical Texas street address where the agent can be served during business hours. It can be the same as the business’s own address. It cannot be a post office box at a commercial mail service unless that service is itself the registered agent. The registered office is also where the Secretary of State mails correspondence, which is why a stale address is one of the more common reasons an owner never learns their entity has fallen out of good standing.

Changing the agent or office later is a $15 filing on Form 401 for a for-profit entity and $5 for a nonprofit, per the fee schedule. An agent who no longer wants the role files a resignation on Form 402 at no charge.

Business names, DBAs, and assumed name certificates

Texas treats entity names and trade names as two separate systems, and the difference trips up a lot of new owners.

The Secretary of State screens the legal name on a certificate of formation for distinguishability against existing entity names on file. That screening is administrative. It prevents a confusingly similar name from being filed; it does not grant trademark rights. The Secretary of State’s formation FAQs state plainly that Texas law does not provide for registration of a business’s trade name, whether or not the business is incorporated.

Operating under a name other than the legal name requires an assumed name certificate, the filing most people call a DBA. Where it gets filed depends on what kind of business is filing it. Individuals and unincorporated businesses file with the county clerk in each county where business premises are maintained. A corporation, LLC, or limited partnership doing business under a name other than the one in its certificate of formation files assumed name certificates with the Secretary of State and with the appropriate county clerk, according to the same formation FAQs.

The state-level assumed name certificate is Form 503 and costs $25; abandoning one later on Form 504 costs $10, and a 120-day name reservation on Form 501 costs $40 (fee schedule). County clerk fees are set locally and vary.

Federal and state tax registrations

Three registrations cover most new Texas businesses. None of them is a business license, and getting them does not substitute for the permits described in the next section.

The federal EIN. An employer identification number is the business’s federal tax ID. The IRS issues it at no cost through its online application, and the IRS EIN application page warns that no one ever has to pay a fee for one. The application has to be completed in a single session, it expires after 15 minutes of inactivity, and the IRS limits applicants to one EIN per responsible party per day. An EIN is generally required to hire employees, to operate a partnership or corporation, and to pay sales and excise taxes.

The Texas sales and use tax permit. A business selling taxable goods or services in Texas registers with the Comptroller before it starts collecting. Texas imposes a 6.25 percent state sales and use tax on retail sales, leases, and rentals of most goods and on taxable services, and local jurisdictions can add up to 2 percent for a maximum combined rate of 8.25 percent, according to the Comptroller’s sales and use tax overview. The sales tax permit application asks for the entity’s Social Security or federal ID number, information on officers or directors, and a NAICS code.

The franchise tax account. Texas has no personal income tax, but taxable entities formed in or doing business in Texas fall under the franchise tax, a tax on margin rather than on profit. For report years 2026 and 2027, the Comptroller’s franchise tax page sets the no-tax-due threshold at $2,650,000 in annualized total revenue, the tax rate at 0.375 percent for retail and wholesale businesses and 0.75 percent for everyone else, the compensation deduction limit at $480,000, and the EZ computation revenue threshold at $20 million.

Licenses, permits, and who issues them

Texas does not issue a general statewide business license. What exists instead is a patchwork, and the practical question is not “do I need a license” but “which agency regulates what I am about to do.”

State occupational and facility licensing is spread across many agencies. The Texas Department of Licensing and Regulation alone licenses and regulates occupations, businesses, facilities, and equipment across 39 industries, from air conditioning contractors and electricians to barbering and cosmetology, massage therapy, tow trucks, and used auto parts recyclers. Health professions, insurance, banking, alcohol, and motor vehicle sales each sit with their own boards or departments.

Local requirements run in parallel and are easy to miss. Cities and counties control zoning and land use, certificates of occupancy, building and sign permits, and fire inspections. Food service establishments are permitted and inspected by a city or county health department, or by the state where no local program exists. A home-based business is still subject to municipal zoning and, frequently, to deed restrictions that the city does not enforce but a neighbor can.

The sequence matters more than the paperwork. Zoning and certificate-of-occupancy problems are discovered after a lease is signed far more often than before, and a lease signed for a use the property is not zoned for is still a lease.

Hiring employees

An employer picks up a second set of registrations the moment it has employees rather than contractors.

State unemployment tax comes first. The Texas Workforce Commission’s unemployment tax program requires employers to register for a tax account within ten days of becoming a liable employer, and it collects quarterly wage reports and taxes that are due by the last day of the month following the end of each calendar quarter. The wage information reported also determines the benefit amounts former employees may receive.

Federal obligations attach at the same time: income tax withholding, Social Security and Medicare, federal unemployment tax, and new-hire reporting. Workers’ compensation coverage is the unusual one. Texas does not require most private employers to carry workers’ compensation insurance. An employer that goes without it becomes a nonsubscriber, gives up common-law defenses in an employee injury suit, and has to notify its employees and the state of that status.

Worker classification is the recurring dispute. Calling someone a contractor does not make them one. The state and federal tests look at control over how the work is done, whether the worker offers services to the public, who supplies tools and materials, and how the relationship can be ended. A misclassification finding reaches back over past quarters, not just forward.

Staying in good standing

A Texas entity does not have an annual report with the Secretary of State the way entities in many states do. Its recurring state obligation runs through the Comptroller instead, which is why owners who are watching only the Secretary of State’s records can be surprised.

For the 2024 report year and later, a taxable entity whose annualized total revenue is at or below the no-tax-due threshold no longer files a No Tax Due Report, but it still has to file either Form 05-102, the Public Information Report, or Form 05-167, the Ownership Information Report, according to the Comptroller’s franchise tax filing requirements. Entities above the threshold choose between the EZ Computation Report, available at $20 million or less in annualized total revenue, and the Long Form.

Letting the franchise tax obligation lapse leads to forfeiture of the right to transact business and, eventually, to involuntary termination of the entity. Coming back is a filing rather than a re-formation: an application for reinstatement and request to set aside tax forfeiture on Form 801 costs $75 for a for-profit entity (fee schedule).

Two other filings come up often enough to name. A certificate of fact, which includes the certificate of existence or status that lenders and landlords ask for, costs $15, and a long-form certificate of existence costs $25. Closing an entity voluntarily takes a certificate of termination on Form 651 at $40, and the Comptroller’s clearance has to be in hand before the Secretary of State will accept it. All three fees are listed on the same fee schedule.

Specific procedures and topics