A single member LLC in Texas is an LLC with one owner, and it costs $300 to form with the Texas Secretary of State. You get personal liability protection, while your taxes stay about as simple as a sole proprietor’s: by default the IRS ignores the LLC and you report the profit on Schedule C. Texas has no personal income tax, and most small LLCs owe nothing in franchise tax.
The owner can be an individual or another entity. Even with just one member, the LLC is legally separate from you, and that separation is the whole point. It’s also the part you have to protect.
Single member LLC or sole proprietorship?
If you’re doing business in Texas without forming an entity, you’re already a sole proprietor, whether you meant to be or not.
| Feature | Sole proprietorship | Single member LLC |
|---|---|---|
| Personal liability | Unlimited | Limited |
| Formation required | No | Yes |
| State filing fee | $0 | $300 |
| Tax filing | Schedule C | Schedule C |
| Asset protection | None | Yes |
| Business name | DBA optional | LLC required |
| Credibility | Lower | Higher |
| Bank account | Personal or business | Business |
The tax filing is the same. What you’re paying $300 for is the liability line.
A sole proprietorship can be enough for very low-risk work like freelance writing or tutoring, when you don’t have much to protect, or while you’re testing an idea. Once your business could get sued, you have a house or savings worth protecting, you’re signing contracts or leases, you’re hiring, or the work involves physical risk, form the LLC. If any one of those applies, we’d file.
How do you form a single member LLC in Texas?
- Pick a name. It must include “LLC” or “Limited Liability Company,” be distinguishable from existing Texas business names, and avoid restricted words you aren’t licensed to use. Search the Texas Secretary of State database first.
- Appoint a registered agent. You can be your own for free, but your address becomes public and you have to be available during business hours. A professional service costs $50-$300 a year and keeps your address private.
- File the Certificate of Formation (Form 205). It’s $300 online (2-3 business days) or by mail (5-7 business days), plus $25 if you want 24-hour expedited processing. Choose member-managed and list yourself as the sole governing member.
- Write an operating agreement. Texas doesn’t require it, but you need one. More on why below.
- Get an EIN. It’s free from the IRS. You need it to hire employees, most banks require it, and it keeps your SSN off contracts and forms.
- Open a business bank account. Bring your Certificate of Formation, EIN, operating agreement and ID.
You don’t have to live in Texas to form a Texas LLC. You just need a registered agent with a Texas address.
How is a single member LLC taxed in Texas?
State income tax: none. Texas has no personal income tax, so your LLC’s profits aren’t taxed at the state level.
Federal income tax: disregarded entity. By default, the IRS treats a single member LLC as a “disregarded entity.” The LLC doesn’t file its own return. Income and expenses go on Schedule C of your Form 1040, exactly as a sole proprietor’s would.
Self-employment tax. You pay Social Security and Medicare on your net profit: 15.3% on the first $168,600 (2024) and 2.9% above that.
Texas franchise tax. If your total revenue is under $2.47 million, you owe nothing. You must still file the No Tax Due Report by May 15 every year. Skip it and you face penalties and, eventually, forfeiture of the LLC.
Should a single member LLC elect S-Corp status?
Once you’re making real money, it can save self-employment tax. You file Form 2553 with the IRS, pay yourself a “reasonable salary” through payroll, and take the remaining profit as distributions, which aren’t subject to self-employment tax.
| Without S-Corp | With S-Corp |
|---|---|
| $100,000 profit | $100,000 profit |
| $15,300 SE tax (15.3%) | $50,000 salary, $7,650 SE tax |
| – | $50,000 distribution, $0 SE tax |
| Total SE tax: $15,300 | Total SE tax: $7,650 |
It generally makes sense when profits exceed $40,000-$50,000 after paying yourself a reasonable salary. The catch is that you have to run payroll, which adds cost and extra filings, and the IRS expects your salary to be reasonable for the work you do. Talk to a tax professional before you elect, and run the numbers with your actual payroll costs.
What does the LLC actually protect?
Your home, personal bank accounts, vehicles and retirement accounts are generally out of reach of the LLC’s creditors and anyone who sues the business. If someone sues, they sue the LLC, and only LLC assets are at risk, assuming you’ve kept the two properly separate.
That protection has limits. A personal guarantee on a loan makes you personally liable for it. Harm you cause directly through your own negligence can create personal liability. Using the LLC for fraud removes the protection. And two habits weaken it over time: commingling personal and business money, and undercapitalization, meaning you never put enough money into the LLC to run it.
Courts look harder at single member LLCs than multi-member ones, because it’s easier to argue one person and their company are the same thing. To keep the line clear:
- Have a signed operating agreement.
- Run every business transaction through the business account.
- Sign as “Your Name, Member of XYZ LLC,” never just your name.
- Keep records of decisions, even if the “meeting” is you writing a note to file.
- Carry liability insurance. An LLC doesn’t replace it.
- Fund the LLC adequately for what it does.
What do you need to keep up each year?
| Requirement | Due date | Cost |
|---|---|---|
| Franchise Tax Report | May 15 | $0 under $2.47M revenue |
| Public Information Report | May 15 | $0 |
| Registered agent | Ongoing | $0-$300 |
| Federal income tax | April 15 | Varies |
Keep your operating agreement, financial statements, tax returns, contracts and a record of major decisions together. You make every decision and sign every contract yourself, so a written trail is your best evidence the LLC is acting as an LLC.
What does a single member LLC cost?
Formation runs $300-$1,100: the $300 Certificate of Formation, $0-$300 for a registered agent and $0-$500 for an operating agreement. The EIN is free. After that, expect $0-$300 a year, which is mostly the registered agent if you use a service, since franchise tax is $0 for LLCs under $2.47 million in revenue.
Frequently asked questions
Can I hire employees?
Yes. Get an EIN if you don’t have one, register with the Texas Workforce Commission for unemployment insurance, and set up payroll and withholding. Texas doesn’t require most private employers to carry workers’ compensation insurance, but decide deliberately whether to, because opting out has its own consequences if an employee is injured.
Can I add members later?
Yes. You can bring in a partner, add investors or sell part of your membership interest. You’ll need to update your operating agreement and may need to amend your Certificate of Formation.
Do I need a DBA?
Only if you want to operate under a name other than your LLC’s legal name. If your LLC is “John Smith Holdings LLC” and you want to trade as “Austin Web Design,” you’d file a DBA, which Texas calls an Assumed Name Certificate.
When is a single member LLC the wrong choice?
When you have partners (form a multi-member LLC), when you’re raising investor capital (a corporation may fit better), when your business carries no real liability risk (a sole proprietorship may be fine), or when you might go public someday, which takes a corporation.
Form your single member LLC with IncCraft
IncCraft handles your Texas single member LLC from start to finish. We file your Certificate of Formation, provide registered agent service, prepare your operating agreement and get your EIN.
Form your Texas single member LLC with IncCraft today.