top of page

What You Need to Know About Texas Compliance Rules with an LLC

Starting a business can be tricky, especially when it comes to all the paperwork. While this is far from the exciting work that you’ll be doing and not quite the revenue-producing activities you want to focus on, making sure you’re in compliance with Texas laws will save you time and money down the road. Here are some of the things you need to understand when operating an LLC in Texas. This article will help you get started, but if you have any additional questions, please feel free to contact an attorney at the SDLG to schedule a strategy session for more information.

Annual Report or the Franchise Tax Report

Texas’ annual reports are somewhat different from the rest of the country, so if you have previous experience in running an LLC, this is important. In most states, LLCs are considered “pass-through” tax entities, meaning that the responsibility for paying federal income tax falls on the individual LLC members and not on the LLC itself. In Texas, we have a state franchise tax, meaning that the tax is payable to the Texas Comptroller of Public Accounts, and the tax is based on the “net surplus” (net assets of LLC minus its members contributions).

Figuring out this calculation can be a bit complicated. If no franchise tax is due, you can file Form 05-163 (No Tax Due Information Report). If your LLC does owe a tax, you may have to file several different reports such as the E-Z Computation or Long Form. You can check the CPA website for more information on this matter.

Texas State Employer Taxes

If your LLC has employees, you will need to file paperwork and pay employer taxes. A portion of these taxes will also be paid to the federal government (IRS), so keep that in mind. As an LLC in Texas, you will likely have to pay state unemployment insurance (UI) taxes.

These taxes are paid through the Texas Workforce Commission (TWC). You will need to file form TWC C-1 (Status Report) or you can pay these taxes online. It is also necessary to fill out forms each fiscal quarter by using TWC Forms C-3 and C-4 to report wages and pay the UI taxes. You can learn more about how to pay these taxes and start filling out the forms at the TWC website. If you have any questions, please schedule a strategy session with SDLG.

Texas Sales & Use Taxes

Sales & Use taxes are going to be applied if your LLC sells any type of goods to customers in Texas, and thus, will need to collect a sales tax on each sale. For these taxes, you will need to register for this purpose with the Comptroller of Public Accounts and make sales tax payments for goods sold throughout the year.

You can register your LLC for these tax purposes on their website or by mailing them Form AP-201 (Texas Applications for Sales Tax Permit), or at a CPA field office near you. Most Texas LLCs will pay these taxes once per fiscal quarter to stay organized and up to date.

Is There More?

While these are the basic taxes and filings you’ll need to do, it is best to check with the CPA website or schedule a consultation with S. Davis Law Group, PLLC to make sure all the aspects of your LLC are in compliance. Not being in compliance can lead to fees and restrictions down the line that can make it harder to run your LLC.

©2022 by The S. Davis Law Group


bottom of page