Do LLC Pay Taxes in Texas? Texas LLC Taxation Overview

LLC Taxation in Texas

Texas LLCs operate as pass-through entities where the business itself doesn’t pay income taxes. Instead:

  • Profits and losses pass through to LLC members.
  • Members report income on personal tax returns.
  • Members pay a 15.3% self-employment tax (12.4% for social security, 2.9% for Medicare).

Franchise Tax and Other Texas Tax Rules

Texas franchise tax applies under the following conditions:

  • No state income tax for individuals or corporations.
  • Most LLCs are exempt from the annual franchise tax.
  • LLCs that do pay owe state franchise tax based on "net surplus" (assets minus member contributions).
  • The franchise tax rate is 0.375% for retail or wholesale businesses, and 0.75% for other types.
  • Receipts between $1.18 million and $10 million result in a 0.375% franchise tax. Receipts under $1.18 million are untaxed, and the maximum tax is 0.75%.

LLC Registrations and Real Estate

To buy real estate with an LLC:

  • Complete paperwork to authorize the LLC to purchase real property.

Texas LLC registration:

  • Lasts one year and can be renewed annually.

Additional Considerations for Texas LLC Owners

Other tax-related information for LLC members includes:

  • Reporting income and expenses on a Form 1040 Schedule C, similar to a sole proprietorship.
  • No annual registration fees for LLCs in Texas.
  • Texas sales tax is 6.25%, with credit for taxes paid to other states.
  • Services in Texas are subject to sales tax.

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