Texas LLC Glossary — Key Terms and Definitions

This glossary defines the most important terms related to forming and operating an LLC in Texas. Terms are defined in the context of Texas law (Business Organizations Code) where applicable. For formation guidance, see our Texas LLC guide.

A-C

Agent for Service of Process — See "Registered Agent." Some states use this term instead; Texas uses "registered agent."

Annual Report — Texas does not have a traditional annual report. Instead, LLCs file a Franchise Tax Report and Public Information Report with the Comptroller by May 15 each year.

Assumed Name Certificate — A filing (county clerk or SOS) that registers a "doing business as" (DBA) name. Required when your LLC operates under a name different from its Certificate of Formation name.

BOC — Texas Business Organizations Code. The comprehensive state statute governing all business entities in Texas, including LLCs (Title 3, Chapter 101).

Certificate of Amendment (Form 424) — The document filed with the SOS to change any provision of your Certificate of Formation. Fee: $150.

Certificate of Fact — Status — Texas's version of a Certificate of Good Standing. Confirms your LLC is active and in compliance. Fee: $15 via SOSDirect.

Certificate of Formation (Form 205) — The official document that creates a Texas LLC. Filed with the Secretary of State. Fee: $300. Other states call this "Articles of Organization."

Certificate of Termination (Form 651) — The document that formally dissolves and terminates a Texas LLC. Filed after winding up is complete. Fee: $40.

Charging Order — A court order directing that distributions from an LLC to a debtor-member be paid to the creditor instead. Under the Texas Business Organizations Code, this is the exclusive remedy for judgment creditors against a member's LLC interest — they cannot seize the LLC's assets directly.

Company Agreement — Texas's statutory name for an operating agreement . The internal governance document of an LLC.

Comptroller — Texas Comptroller of Public Accounts. The state agency that handles franchise tax, sales tax, and other tax matters. NOT the Secretary of State.

D-F

Disregarded Entity — IRS classification for a single-member LLC. The LLC is "disregarded" for tax purposes and all income is reported on the owner's personal Schedule C.

Domestic LLC — An LLC formed in Texas under Texas law. Contrast with "Foreign LLC."

EIN (Employer Identification Number) — A nine-digit federal tax ID number issued by the IRS. Used for bank accounts, tax filing, and hiring employees.

Foreign LLC — An LLC formed in another state that registers to do business in Texas. Filed via Form 304 ($750 fee).

Forfeiture — The loss of an LLC's right to transact business in Texas, imposed by the Secretary of State at the direction of the Comptroller for failure to file franchise tax reports.

Franchise Tax — Texas's margin tax on business entities with revenue exceeding $2.47 million (no-tax-due threshold). Not a traditional franchise fee — it is a tax on revenue-based margin. Rate: 0.75% standard, 0.375% retail/wholesale.

G-M

Good Standing — Status indicating an LLC is active, in compliance with state filings, and authorized to transact business. Verified via Certificate of Fact — Status ($15).

Manager-Managed — An LLC governance structure where designated managers (who may or may not be members) handle daily operations. Non-manager members are passive.

Margin Tax — Another name for the Texas Franchise Tax. Refers to the fact that the tax is calculated on the LLC's "taxable margin" (not gross revenue or net income directly).

Member — An owner of an LLC. Members hold membership interests (analogous to shareholders in a corporation).

Member-Managed — The default LLC governance structure in Texas. All members have authority to manage the business and bind the LLC in ordinary course dealings.

Membership Interest — The ownership stake in an LLC. Can represent voting rights, economic rights (profit sharing), or both.

N-R

No-Tax-Due Threshold — The revenue level below which a Texas LLC owes $0 in franchise tax. Currently $2.47 million in annualized total revenue. LLCs below this file Form 05-169.

Operating Agreement — See "Company Agreement." The internal document governing LLC management, profit sharing, voting, and other operations. Not filed with any state agency.

Organizer — The person who signs and files the Certificate of Formation with the SOS. Does not need to be a member — can be an attorney, formation service, or any individual.

Piercing the Veil — A legal doctrine allowing courts to disregard the LLC's liability protection and hold members personally liable. Occurs when members treat the LLC as their personal alter ego (commingling funds, undercapitalization, fraud).

PLLC (Professional Limited Liability Company) — A special LLC type required for licensed professionals (attorneys, CPAs, physicians, etc.) in Texas. Governed by the Texas Business Organizations Code.

Public Information Report (PIR) — Form 05-102 filed annually with the Comptroller alongside the franchise tax report. Lists officers/managers, registered agent, and ownership information. Required even if LLC owes $0 in tax.

Registered Agent — A person or entity designated to receive legal documents (service of process, state notices) on behalf of the LLC. Must have a physical Texas address. Required by the Texas Business Organizations Code.

Registered Office — The physical Texas street address where the registered agent can be found during business hours. Appears on public SOS records.

Reinstatement — The process of restoring a forfeited LLC to active status by filing all delinquent reports and paying all owed taxes/penalties.

S-W

Secretary of State (SOS) — The Texas state agency that handles entity formation filings, name reservations, amendments, and entity status records.

Series LLC — An LLC with internal "series" that each have separate assets and liabilities . Must be designated in the Certificate of Formation.

SOSDirect — The Texas Secretary of State's online filing portal (direct.sos.state.tx.us). Used for formation filings, name searches, amendments, and document retrieval.

Taxable Margin — The base on which Texas franchise tax is calculated. The lowest of: 70% of total revenue, total revenue minus COGS, total revenue minus compensation, or $1 million.

WebFile — The Texas Comptroller's online tax filing system (comptroller.texas.gov). Used for franchise tax reports, sales tax returns, and other Comptroller filings.

Winding Up — The process of settling an LLC's affairs before dissolution: collecting receivables, paying debts, distributing remaining assets to members.