Texas is one of the more founder-friendly states to start a business in: no personal income tax, a straightforward filing process, and a franchise tax that most small businesses never actually pay. Here's what it takes to start a business in Texas in 2026.
1. Which business structure fits you?
Before you file anything, it helps to know what you're actually choosing between.
- Sole proprietorship. No filing required to start, and you and the business are legally the same entity. Simple, but you're personally liable for whatever the business owes.
- Partnership. Two or more people running a business together, with the same liability exposure as a sole proprietorship, just split across partners.
- LLC. The most common structure for small businesses in Texas. It separates your personal assets from the business's debts and lawsuits.
- Corporation, either S-corp or C-corp. More paperwork and more formality, usually worth it once you're bringing on investors or multiple shareholders.
For a deeper comparison, see our guide on choosing a business structure.
LLCs and corporations register with the Texas Secretary of State, the state agency responsible for business filings. Sole proprietorships and general partnerships don't file there, since neither has a formation document.
2. Register your business
Forming an LLC
You form an LLC in Texas by filing a Certificate of Formation (Form 205) with the Secretary of State. The filing fee is $300, and standard processing runs about 5 to 7 business days online through SOSDirect, with same or next-day expedited service available for an extra $25.
Every LLC needs a registered agent with a physical Texas address, available during business hours to accept legal documents. You can serve as your own agent if you live in the state, or hire a commercial service.
Texas doesn't require an operating agreement by law, but it's still worth writing one, particularly if you have more than one member, since it's what governs how decisions and profits get split.
Sole proprietorships and DBAs
Sole proprietorships don't file with the state. If you're operating under an assumed name, you'll file an Assumed Name Certificate, a DBA, with the county clerk in the county where your business operates, not with the Secretary of State.
3. Get an EIN
An Employer Identification Number is free straight from the IRS and takes about 15 minutes online. You'll need one to open a business bank account, hire anyone, or file most business tax forms, even if you're a single-member LLC with no employees.
4. Check licenses and permits
Texas doesn't issue a single general business license either. What you need depends on your industry and city: professional licensing for regulated fields, a local permit or certificate from your city or county, and a sales tax permit from the Comptroller if you sell taxable goods or services. Our guides on professional licensing by industry and zoning laws for home businesses go deeper on both.
5. Understand Texas taxes
Texas has no personal state income tax, which is the single biggest reason people form businesses there. Instead, the state collects a franchise tax, technically a tax on your business's taxable margin, but most small businesses never pay it. For 2026 and 2027 reports, businesses with annualized total revenue at or below $2.65 million owe no franchise tax at all. Above that threshold, the rate is 0.375% for qualifying retail and wholesale businesses and 0.75% for most others.
Even at $0 owed, every LLC still has to file a Public Information Report each year by May 15, so don't skip it just because you're under the threshold.
Sales tax runs 6.25% at the state level, with local jurisdictions able to add up to 2% more, for a combined maximum of 8.25%, which is what most major Texas cities charge.
6. Stay compliant
Because Texas doesn't have a separate annual report, your ongoing state obligation is really the Franchise Tax Report and Public Information Report, both due May 15 each year with the Comptroller's office, not the Secretary of State. File them even when you owe nothing. Falling behind can eventually lead to forfeiture of your LLC's right to do business in the state.
Texas business costs at a glance
| Item | Cost |
|---|---|
| Certificate of Formation (LLC) | $300 |
| Franchise tax (revenue at or below $2.65M) | $0 |
| Franchise tax (above threshold) | 0.375% to 0.75% of margin |
| Public Information Report (every year) | Free |
| Registered agent service (optional) | $100 to $250/year |
| EIN | Free (IRS) |
| State income tax | None |
| State sales tax | 6.25% + up to 2% local (8.25% max) |
Frequently asked questions
Does Texas have personal income tax?
No, Texas has no personal state income tax, the single biggest reason people form businesses there.
Do most small businesses pay the Texas franchise tax?
No, for 2026 and 2027 reports, businesses with annualized total revenue at or below $2.65 million owe no franchise tax at all.
How much does it cost to form an LLC in Texas?
$300 for a Certificate of Formation, with same or next-day expedited service available for an extra $25.
Do I still need to file anything in Texas if I owe zero franchise tax?
Yes, every LLC must still file a Public Information Report each year by May 15, even at $0 owed.
How high is sales tax in Texas?
6.25% at the state level, with local jurisdictions adding up to 2% more for a combined maximum of 8.25%.
Fees and rates above come from the Texas Secretary of State and Texas Comptroller as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a Texas-licensed attorney or CPA about your specific situation.