Key Takeaways

  • A Texas single member LLC provides liability protection while allowing pass-through taxation by default.
  • You must file a Certificate of Formation (Form 205) with the Secretary of State and pay the $300 filing fee.
  • Although not required, having an Operating Agreement strengthens liability protection and business credibility.
  • You must appoint a registered agent with a physical Texas address to receive legal documents.
  • Even single-member LLCs may need an EIN for banking, hiring, and tax elections.
  • Texas single-member LLCs may choose to be taxed as a disregarded entity, S corp, or C corp, depending on tax goals.
  • Annual reporting is not required, but a Franchise Tax Report and Public Information Report must be filed each year.

A Texas single-member LLC is a special business structure that provides you with limited liability protections in certain legal and financial situations. There are a number of advantages and disadvantages to consider when forming a company of this type, so it's important to understand exactly what a single-member LLC can do for you and what requirements the state of Texas imposes on this structure.

How to Form a Single-Member LLC in Texas

The name of a single-member limited liability company, or SMLLC, has certain special requirements and must contain one of the following:  

  • Limited Liability Company
  • Limited Company or Ltd. Co
  • LLC or L.L.C.
  • LC or L.C.

Your company name must also be easily distinguishable from any other names already on file in the Secretary of State's database. You'll want to ensure your intended name is available for use by running a business name search. This can be done by utilizing tools available on the Texas Secretary of State website, as well as the Comptroller of Public Accounts website. 

Once you have determined your intended company name is available, you can reserve the name with the state for up to 120 days. This is a simple matter of filing an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) and paying a $40 processing fee.

File a Certification of Formation

One of the first steps in establishing an LLC in Texas is to file a Certificate of Formation with the office of the Secretary of State. The following information must be included in this document:  

  • Your company's official name
  • The address and name of your registered agent
  • Whether your new company will be manager or member managed
  • The address and name of every member of the organization
  • The address and name of the company's organizer

A blank copy of Form 205, or Certificate of Formation, can be obtained from the Secretary of State's official website. It is also possible to file your certification online, 24/7. No matter which method you choose, there will be a $300 filing fee to submit this document to the state.

Prepare and Operating Agreement

The state of Texas doesn't require single-member LLCs to maintain an operating agreement, but it is still a good idea to do so. However, it's not necessary to file this operating agreement with the Secretary of State. This agreement will typically be made between you and the company and covers things such as the following:  

  • Your rights as the sole member
  • Your duties, obligations, etc. to the company  
  • Specific company management structure

By putting an operating agreement into play, you'll be taking steps toward ensuring liability protection and establishing yourself as a separate entity from your company. This can also be beneficial when conducting business transactions with other companies. 

As with most other states, in Texas, if you don't specify that your company will be manager-managed, it will be considered member-managed by default. This can be an important difference, so you'll want to ensure you seriously consider these options before deciding on the structure that best fits your specific business needs.

Tax Treatment Options for Texas Single Member LLCs

By default, the IRS treats a Texas single member LLC as a disregarded entity, meaning profits and losses pass through to the owner’s personal tax return (Schedule C). However, you can elect for your LLC to be taxed as an S corporation or C corporation if this better fits your business goals.

Default (Disregarded Entity):

  • Income reported on the owner’s individual tax return.
  • Simplified filing with no separate federal return for the business.

S Corporation Election:

  • May reduce self-employment taxes by allowing the owner to pay themselves a “reasonable salary” and receive remaining profits as dividends.
  • Requires filing IRS Form 2553 and maintaining payroll compliance.

C Corporation Election:

  • Profits taxed at the corporate level, and dividends taxed again at the personal level (“double taxation”).
  • May offer greater opportunities for retained earnings or fringe benefits.

In Texas, state taxes apply regardless of IRS classification. All LLCs must file an annual Franchise Tax Report and may owe franchise tax depending on total revenue. Most small LLCs qualify for a “no tax due” filing if annual revenues are below the state’s threshold (around $2.47 million for 2025).

Before choosing a tax status, consult a CPA or business attorney to determine which structure aligns with your income and growth plans.

Registered Agent and Compliance Requirements in Texas

Every Texas single member LLC must designate a registered agent to receive service of process, legal notices, and tax correspondence on behalf of the business. The registered agent must have a physical address in Texas—P.O. boxes are not acceptable. You can serve as your own registered agent if you reside in Texas or appoint a professional registered agent service.

Choosing a reliable registered agent is crucial, as failure to maintain one can lead to administrative dissolution or missed legal deadlines. When filing Form 205, you’ll need to provide the registered agent’s full name and address.

After forming your LLC, Texas requires ongoing compliance:

  • Franchise Tax Report and Public Information Report: Due annually by May 15 through the Texas Comptroller’s website.
  • Business Licenses or Permits: Depending on your business activity, you may need local or state licenses (for example, food handling, construction, or professional services).
  • Business Bank Account: Open a separate bank account to maintain separation between personal and business finances.

Maintaining good standing with the state through timely filings and fee payments helps ensure your limited liability protections remain intact.

Obtain an Employer Identification Number

If your company keeps its tax status as a "disregarded entity" and doesn't have any employees other than yourself, you shouldn't have to worry about obtaining a Federal Employer Identification Number, or EIN. As an alternative, you can use your personal Social Security Number when reporting your company's losses and gains on your personal tax return. However, if your company does have employees, or you elect to have your single-member LLC taxed the same way as a corporation, you'll be required to obtain an EIN. 

Although some single-member LLCs aren't expected to obtain an EIN, many business owners still choose to do so because there are some advantages when you do. Some banks may not allow you to open a business account with your personal tax identification number, requiring you to have an EIN even when the state doesn't expect you to. Even some other companies may expect you to have an EIN to process financial transactions.

Advantages and Disadvantages of a Texas Single Member LLC

Advantages:

  • Limited Liability: Protects your personal assets from most business debts or lawsuits.
  • Ease of Formation: Texas allows online filing with straightforward requirements.
  • Flexible Taxation: You can choose among disregarded entity, S corp, or C corp tax treatment.
  • No Annual Report Fee: Texas doesn’t require a traditional annual report, only a franchise tax filing.
  • Business Credibility: Having an LLC boosts professionalism and trust with customers and vendors.

Disadvantages:

  • Self-Employment Taxes: By default, owners pay self-employment taxes on all profits.
  • Franchise Tax: Even if no tax is due, the annual report must still be filed.
  • Limited Growth Options: A single-member LLC can’t issue shares or attract investors easily.
  • Piercing the Corporate Veil Risks: Commingling personal and business finances can eliminate liability protection if not managed correctly.

Forming a Texas single member LLC is ideal for small business owners seeking simplicity with legal protection, but it’s important to maintain proper records, separate accounts, and compliance to preserve these benefits.

Frequently Asked Questions

  1. Do I need an operating agreement for a Texas single member LLC?
    No, it’s not legally required, but having one provides clear documentation of ownership, management, and financial practices, helping reinforce liability protection.
  2. How much does it cost to start a Texas single member LLC?
    The filing fee for the Certificate of Formation (Form 205) is $300, plus optional fees for name reservation ($40) and registered agent services.
  3. Does a Texas single member LLC pay franchise tax?
    Yes. All LLCs must file an annual Franchise Tax Report and Public Information Report with the Texas Comptroller, even if they owe no tax.
  4. Can a Texas single member LLC have employees?
    Yes. Once you hire workers, you must obtain an EIN and comply with state and federal payroll laws.
  5. How is income from a Texas single member LLC taxed?
    By default, profits are reported on your personal income tax return as a disregarded entity, but you can elect S corporation or C corporation status for different tax outcomes.

If you need help with starting a texas single member llc, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.