How Do I Set Up a Texas LLC for Rental Properties?

Setting up a Texas LLC for your rental properties is straightforward and affordable. Here's the complete process for Houston landlords.

• Step 1 — Choose a name: Your LLC name must be unique in Texas and end with "LLC" or "L.L.C." Search the Texas Secretary of State's SOSDirect database to verify availability.
• Step 2 — File Certificate of Formation: File Form 205 with the Texas Secretary of State online at SOSDirect. The filing fee is $300. Processing takes 2–5 business days online.
• Step 3 — Create an Operating Agreement: Though not required by Texas law, this document outlines ownership percentages, profit distribution, and management structure. Essential if you have partners.
• Step 4 — Get an EIN: Apply for a free Employer Identification Number from the IRS at irs.gov. You need this for banking, taxes, and hiring contractors.
• Step 5 — Open a business bank account: Keep LLC finances completely separate from personal accounts. This is critical for maintaining liability protection (piercing the corporate veil).
• Ongoing compliance: Texas requires no annual report, and most small landlords (under $2.47M revenue) owe no franchise tax. File the annual No Tax Due Report by May 15.

Bottom Line

A Texas LLC costs just $300 to form and has minimal ongoing requirements. It's one of the simplest and most effective ways to protect your personal assets from rental property liability. Consider a separate LLC for each property or group of properties.