Starting a business in Texas costs as little as $300 for an LLC filing fee. Texas has no personal income tax, making it especially attractive for pass-through entities like LLCs and S-Corps. Below we compare LLC vs. S-Corp vs. Sole Proprietorship costs, walk through the 6 steps to form your business, and provide calculators pre-filled for Texas. Texas ranks #5 nationally for business friendliness.
LLC vs. S-Corp vs. Sole Proprietorship — 2026 estimated costs
| Entity Type | Filing Fee | Annual Fee | Franchise Tax | 1st Year Total | Ongoing/Yr |
|---|---|---|---|---|---|
| LLC | $300 | -- | -- | $450 | $150/yr |
| S-Corp | $300 | $200 | -- | $650 | $350/yr |
| Sole Proprietorship | $75 | -- | -- | $75 | -- |
No personal or corporate income tax. Franchise (margin) tax of 0.375%-0.75% on gross revenue. No tax on entities under $2.47M revenue.
Your LLC name must be unique in Texas and include"LLC" or"Limited Liability Company." Search the Texas Secretary of State database to verify availability. Consider reserving the name (typically $10-25 for 60-120 days) while you prepare your filing.
File your Articles of Organization (or Certificate of Formation) with the Texas Secretary of State. The filing fee is $300. You can file online in most states for faster processing. Include your registered agent information, member names, and business purpose.
Apply for a free Employer Identification Number (EIN) from the IRS at irs.gov. You need this for opening a bank account, hiring employees, and filing taxes. The online application takes about 5 minutes and you receive your EIN immediately.
Texas has no state income tax. However, you may want to register for sales tax collection if you sell taxable goods or services. The Texas sales tax rate is 6.3%. Check for any applicable local taxes or business license requirements.
Check Texas and local requirements for business licenses, professional licenses, and permits. Requirements vary by industry and location. Common needs include a general business license, zoning permit, and industry-specific permits (food service, construction, healthcare, etc.).
Open a dedicated business bank account to maintain your LLC's liability protection. You may need your Articles of Organization, EIN, and operating agreement. Keep personal and business finances strictly separate — commingling funds can pierce the corporate veil and expose personal assets.
Total estimated first-year cost: $450 (filing fee + registered agent + annual fees). Ongoing annual cost is approximately $150/yr after the first year.
Texas COL index of 94 means your dollar goes about 6% further than the national average.
Austin has the highest COL in Texas (~105), while smaller cities like Lubbock and Amarillo are 15-20% below the state average.
No state income tax is the single biggest COL advantage — effectively adds 4-6% to your purchasing power.
Texas has no state income tax — self-employed, W-2, and retirees all benefit from keeping 100% of state-level income.
Texas sales tax is 6.25% plus local additions (up to 2%), for a combined max of 8.25%.
No state income tax means no state-level deduction for mortgage interest — but federal deductions still apply.
Texas franchise tax (margin tax) applies to businesses with revenue over $2.47M — most small businesses are exempt.
National averages based on mean of all 50 states + DC. "pp" = percentage points.
The Texas LLC filing fee is $300. Including a registered agent ($150/yr), the first-year total cost is approximately $450. This is $168 above the national average filing fee.
An LLC is simpler and cheaper to maintain in Texas ($450 first-year cost vs. $650 for an S-Corp). An S-Corp can save self-employment taxes if you earn over ~$50K in profit by splitting income into salary and distributions. Most Texas businesses start as an LLC and elect S-Corp taxation later when profits justify the additional complexity and payroll costs.
Texas has no personal income tax, which benefits pass-through entities (LLCs, S-Corps, sole proprietors). There is no corporate income tax either. A franchise/margin tax may apply based on gross revenue. Sales tax is 6.3% at the state level (plus local additions).
Requirements vary by business type and location. Most Texas businesses need: (1) a state business license or registration, (2) a local business license from your city/county, (3) industry-specific permits or professional licenses, and (4) a sales tax permit if selling taxable goods. Check with the Texas Secretary of State and your local city clerk for specific requirements.
Business formation costs are estimates based on Texas Secretary of State fees as of 2026. Tax rates use 2026 data. Registered agent fees based on market averages. Actual costs may vary. Consult a CPA or business attorney for personalized advice. Last updated: April 2026.