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.