Disregarded Entity LLC For Texas owners
Texas treats your LLC as its own company for franchise tax, even when the IRS disregards it. Here's what that means for you, from a Dallas practice that meets by video.
Your Texas certificate and the federal treatment
Your Texas LLC was created by a Certificate of Formation filed with the Secretary of State. The IRS calling it disregarded only changes where the federal income tax is reported. The Texas company stays on the state record.
You can look up your LLC on the Secretary of State's public search by its name or file number. Active means it is in good standing. Forfeited means the state pulled that standing, often after a missed franchise tax report. Disregarded has nothing to do with either.
The Certificate of Formation filing fee is $300. One organizer can sign it. The LLC needs a registered agent with a real Texas street address who can accept legal papers during business hours. Switching to a new agent later takes a separate Secretary of State filing.
The Texas franchise tax report in May
Texas taxes the LLC itself for franchise tax, even when the IRS disregards it. The report is due May 15 each year.
For report years 2026 and 2027, an LLC with yearly revenue at or below $2,650,000 owes no franchise tax. It still files a Public Information Report or an Ownership Information Report by May 15, so the state keeps it in good standing.
Above that revenue, the tax depends on the margin, and retailers and wholesalers pay a lower rate than other businesses. We use the Comptroller's current instructions for every figure we give you.
The two numbers, and a first hire
Your federal income tax return uses your own number. Payroll and certain excise taxes use the LLC's EIN. Your Texas Comptroller account uses the LLC's own taxpayer number.
Before your first employee is paid, we set payroll up: the EIN, the Texas Workforce Commission account once the LLC needs one, the payroll provider you pick and the deposit schedule. You run each payday with that provider.
If your profit is growing, ask about an S corp election. For the current year, Form 2553 is due by March 15, and late election relief is often available after that. We look at your numbers before you file.
Spouses and series LLCs in Texas
Texas is a community property state. If you and your spouse own the LLC as community property, you can choose to treat it as disregarded or as a partnership for federal tax. We check the names on the certificate with you first.
If only one spouse is on the certificate, the LLC is usually a one-owner LLC and disregarded by default.
Texas allows series LLCs. Each series can raise its own tax questions, and we can help with which return each one files. How the series are set up and protected is a question for your lawyer.
What we do for Texas owners: monthly books matched to the bank, payroll setup before a first hire, the franchise tax report, and your federal return. Steven Palmieri does this work as a Tax CFO.
Meet by video from anywhere in Texas
The practice is in Dallas, and calls are on video, so there's no drive. Calls last 30 minutes and are free. That's enough time to see how your LLC is taxed and whether the May report is on track.
Have your certificate and last year's return nearby. If a Comptroller letter is what brought you here, say so, and we'll start with it.
After the call, you'll know how the LLC is taxed, what's due and when, and what we'd do next. You decide whether to go ahead.
Forming a new Texas LLC, step by step
1. Pick a name and check that it's available on the Secretary of State's search.
2. Name a registered agent who has a physical Texas address and is there in business hours.
3. File the Certificate of Formation (Form 205) with the Secretary of State, online through SOSDirect or by mail. The fee is $300.
4. Get an EIN from the IRS. It's free online.
5. Open a bank account in the LLC's name.
6. If you'll sell taxable items, get a sales tax permit from the Comptroller before your first sale.
7. Have an operating agreement written. A lawyer can help with this.
8. Decide whether staying disregarded fits, or whether an S corp election makes sense once profit grows. We help you with that choice.
A yearly checklist for a Texas one-owner LLC
Each month: keep the books current and matched to the bank statement, so you always know the profit you'll report.
Each quarter: pay federal estimated tax on April 15, June 15, September 15 and January 15. If you have employees, the LLC files Form 941 for each quarter and a quarterly wage report with the Texas Workforce Commission.
By January 31: send W-2s to employees and 1099-NEC forms to contractors you paid, if the LLC has them.
By April 15: file your Form 1040 with the LLC on Schedule C, E or F, plus Schedule SE if the LLC runs a business. An employer LLC also files Form 940 for federal unemployment tax by January 31.
By May 15: file the Texas franchise tax report, or the Public Information Report or Ownership Information Report if revenue is at or under the threshold.
Any time: keep the registered agent current with the Secretary of State, and tell the IRS if the LLC's address or responsible party changes.
If you sell taxable goods or services
Texas sales tax is separate from both the franchise tax and your federal return. If the LLC sells taxable items, it needs a sales tax permit from the Comptroller before it starts selling. The permit is free.
The state rate is 6.25%, and cities, counties and special districts can add up to 2% more, so the total can reach 8.25%. The rate depends on where the sale happens. We set up your books so the tax you collect stays apart from your income.
A Texas worked example
Here's a made-up example. Alex owns a one-member Texas LLC that does consulting. In a year it brings in $150,000 of revenue and earns $90,000 of profit. Your numbers will differ.
Texas: the revenue is far under the $2,650,000 threshold, so no franchise tax is due. Alex's only Texas filing is the Public Information Report, due May 15. Texas has no state personal income tax, so there's no Texas return for the profit itself.
Federal: Alex reports the $90,000 on Schedule C. Self-employment tax is about $12,717 ($90,000 times 92.35%, times 15.3%), and about half of that is deducted when figuring income. Alex pays quarterly estimates on the four federal dates.
If Alex hires an employee, the LLC gets its own payroll accounts and files Form 941 each quarter under its EIN. If profit keeps growing, Alex can ask us whether an S corp election would lower the self-employment tax.
If a Comptroller letter has arrived
A notice of intent to forfeit gives you 45 days from the mailing date to file the missing reports and pay what's due. Act on it quickly. If the right to do business is forfeited, the LLC can lose the right to sue or defend in a Texas court, and owners can become liable for some of its debts.
If revenue was at or under the threshold, filing the missing Public Information Report or Ownership Information Report usually resolves the notice. Bring the letter to the call, and we'll help you file what's missing and get the LLC back in good standing.
Questions Texas owners ask
Does disregarded mean my Texas LLC was dissolved?
No. Dissolved and forfeited are Texas terms about the company's standing. Disregarded is only the federal income tax treatment. Your certificate can be active.
Do I still file the May report if the profit goes on my personal return?
Yes. Texas looks at the LLC itself. File the report by May 15, even in a year with no tax due. If you got a Comptroller notice, bring it to the call.
Is the call in person in Dallas?
No. The call is on video. Bring your certificate, the Comptroller letter, or both, and put the company name in the form.
Does my Texas LLC need its own Texas taxpayer number?
Yes. The Comptroller assigns the LLC its own taxpayer number for franchise tax, and for sales tax if it holds a permit. That number is separate from both your Social Security number and the LLC's federal EIN.
Can my Texas LLC be taxed as an S corp?
Yes, by sending Form 2553 to the IRS. Texas still treats it as an LLC for franchise tax, so the May report stays the same. We compare the payroll cost with the tax saved before you file.
Does Texas tax the profit that goes on my personal return?
Texas has no personal income tax, so the profit itself is taxed only on your federal return. Texas taxes the LLC through the franchise tax instead, and most small LLCs owe none, but they still file the May report.
Get help with your Texas LLC
Tell us the company name and whether you have a Comptroller letter.
You will be talking to the Steven Palmieri practice.