How to Form an LLC in Texas as a Consultant (2026): Zero Income Tax, One Key Deadline

Texas has built a well-earned reputation as one of the most business-friendly states in the country. For consultants specifically, the appeal is hard to argue with: no state income tax, no minimum annual LLC fee, and a franchise tax threshold so high that most solo consulting practices will never owe a dollar of it.

What Makes Texas One of the Best States for Consultant LLCs?

The no-income-tax advantage. Because Texas has no state income tax, a Texas consultant LLC's earnings are only taxed at the federal level. A single-member LLC pays federal income tax plus federal SE tax — both owed in any state. Texas savings relative to California or New York can easily reach $10,000–$20,000/year at $150,000 income.

The franchise tax threshold. Texas does impose a franchise tax ("margin tax"), but for 2026 the no-tax-due threshold is estimated at approximately $2.47 million in annualized total revenue — verify at comptroller.texas.gov. Below that, your franchise tax liability is $0. You still need to file an annual report.

How Do You Form an LLC in Texas as a Consultant?

Step 1: Choose your LLC name. Must include "Limited Liability Company," "LLC," "L.L.C.," "LC," "L.C.," or "Ltd. Co." Search the Texas SOS database at sos.state.tx.us. Licensed professionals may need to form a PLLC.

Step 2: File Certificate of Formation (Form 205). Filing fee estimated at $300 (verify at sos.state.tx.us). File online via SOSDirect, by mail, or fax. Requires: LLC name, purpose, registered agent name and address, member-managed or manager-managed, organizer name and address.

Step 3: Designate a registered agent. Physical Texas street address. You can be your own or hire a service ($50–$150/year).

Step 4: Get your EIN from the IRS. Free at irs.gov. Required to open a business bank account.

Step 5: Draft an operating agreement. Not legally required in Texas, but strongly recommended.

Step 6: Open a dedicated business bank account. Essential for maintaining liability protection.

For a deeper walkthrough, see our complete Texas LLC formation guide.

What Is the Texas Franchise Tax and Does It Apply?

The no-tax-due threshold. For 2026, approximately $2.47 million in annualized total revenue. Below that, you owe $0 in franchise tax. You still need to file an annual report — check the "no tax due" box and submit. Verify the current threshold at comptroller.texas.gov.

If your LLC exceeds the threshold:

• EZ Computation Method: Simplified flat-rate calculation available to businesses with $20M or less in total revenue. 2026 EZ rate: 0.331% of total revenue.
• COGS Method: Subtract cost of goods sold before applying the rate. Typically advantageous for product-based businesses, less so for consultants.
• Compensation Deduction Method: Deduct compensation paid to employees and officers.

Most solo consultants use the EZ Computation method if they exceed the threshold.

The May 15 deadline. Texas franchise tax reports are due by May 15 each year. The report covers the prior calendar year's financial activity.

Public Information Report. Filed with the franchise tax report. Discloses the LLC's officers, directors, or members — public record. Use a professional registered agent's address if you have privacy concerns.

What Business Licenses Does a Texas Consultant Need?

Texas has no general statewide business license requirement. However:

Licensed professions. The Texas Department of Licensing and Regulation oversees dozens of professions. Other licensed professions are regulated by their own boards: State Bar of Texas (attorneys), Texas State Board of Public Accountancy (CPAs), Texas Board of Architectural Examiners (architects), Texas Medical Board (medical professionals). Your LLC does not replace these individual licensing requirements.

City and county permits. Austin, Houston, Dallas, San Antonio all have their own permit requirements. Check your city's business licensing office.

Sales tax permit. Most consulting services aren't subject to Texas sales tax. Certain data processing, information, and internet access services are taxable. Review the Comptroller's guidance at comptroller.texas.gov or consult a Texas CPA.

Texas vs. Wyoming for a Consulting LLC

If you live and work in Texas, a Wyoming LLC operating in Texas must register as a foreign LLC with the Texas SOS — estimated foreign registration fee around $750. You'd owe Wyoming's annual fees plus Texas franchise tax obligations. Cost advantage gone.

Wyoming does offer some structural advantages — stronger charging order protections, greater member anonymity. If you have specific asset protection concerns beyond standard LLC liability protection, Wyoming may be worth the additional cost. For most consultants running a straightforward client-services business, Texas's own protections are sufficient.

See our Delaware vs Wyoming comparison.

Frequently Asked Questions

Does a Texas LLC need to file an annual report with the Secretary of State? No. Texas does not require periodic LLC reports to the SOS. Your primary annual obligation is the franchise tax report and Public Information Report filed with the Comptroller by May 15.

Can a Texas consultant LLC elect S corporation status? Yes. By filing Form 2553 with the IRS. S corp election can reduce SE tax for consultants earning above $50K–$80K in net profit, though the breakeven depends on your situation. Consult a CPA — it adds payroll and compliance complexity.

What happens if I miss the May 15 franchise tax deadline? 5% penalty within 30 days, 10% penalty after 30 days. Interest accrues on unpaid taxes from the due date.

Do I need a separate EIN for my Texas LLC? Strongly recommended even for single-member LLCs. Most banks require an EIN to open a business bank account. Free at irs.gov.

Is a Texas LLC a good structure for a consultant who occasionally hires subcontractors? Yes. File 1099-NEC for any subcontractor paid $600+/year. Collect a W-9 before paying.

The Bottom Line for Texas Consultants

Texas is genuinely one of the best states in the country to operate a consulting LLC. No state income tax, a franchise tax threshold that most solo practitioners will never approach, and a straightforward formation process.

Formation: file Certificate of Formation Form 205, designate a registered agent, get your EIN, create an operating agreement. Your main ongoing obligation is the May 15 annual franchise tax report.

For the complete walkthrough, visit our Texas LLC guide. For the decision framework on whether to form, see freelancer LLC vs. sole proprietor.

Sources: Texas Secretary of State | Texas Comptroller of Public Accounts

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