The Texas single-member LLC is by far the most popular entity choice for entrepreneurs and real estate investors, thanks to its liability protection, tax flexibility, and simplicity.

This guide covers everything you should know about the SMLLC: advantages, disadvantages, costs, taxation, annual maintenance, and more.

A single-member LLC is a limited liability company (LLC) with one member (i.e., one owner).

The benefits of a single-member LLC are as follows:

1. The owner is shielded from the liabilities of the business. The primary benefit of conducting business through an entity like an LLC is to protect the owner’s personal assets from the liabilities of the business. If you are operating as a sole proprietor, you are personally responsible for the liabilities of the business. Whereas if you operate through an LLC, the liability for the business stays with the LLC, and the most the owner can lose is his investment in the LLC.
2. The LLC's assets are shielded from the owner’s creditors. An LLC can also protect the business assets from the owner's personal liabilities.
3. Continuity of Ownership. Conducting business through an LLC provides more flexibility and continuity of management and ownership. If a member dies, the LLC can continue on seamlessly. If a sole proprietor dies, the business will come to a standstill until someone is appointed with authority to run the business on behalf of the deceased owner.
4. Added Credibility & Professionalism. Using an LLC can enhance your credibility and professionalism, and it gives vendors, banks, and clients greater confidence that they’re working with a reputable, established company
5. Low set-up costs. The Texas Secretary of State charges a one-time filing fee of $300 (+$8.10 if you pay with a credit card) to register the LLC.
6. No annual maintenance costs. There are no annual fees to keep an LLC active. The LLC does have to pay a franchise tax if it has substantial revenue (more than $2.47MM in revenue in 2025).
7. Perpetual existence. The LLC has a perpetual existence. It does not disappear if the owner dies, which can be comforting for clients, vendors, and family members.
8. Tax flexibility. The owner of an LLC can choose how the LLC's income is taxed federally. Unless a tax election form is sent to the IRS, a single-member LLC is taxed just like a sole proprietorship (or what the IRS calls a "disregarded entity"). If desired, the SMLLC can elect corporate taxation (S-Corp or C-Corp).
9. Transferability of ownership. The LLC member (owner) can relatively easily transfer his/her membership interest in the LLC.

The disadvantages of using an LLC (when compared to a sole proprietorship) are the formation costs and annual maintenance. A sole proprietorship only has to pay a county filing fee of $25 for the assumed name certificate (aka DBA), whereas an LLC pays a $300 filing fee to to the state.

The single-member LLC is the most popular type of business entity in Texas for a reason. The benefits of an LLC are substantial, and the costs and administrative burdens are minimal. When compared to a sole proprietorship or a corporation, the single-member LLC is a no-brainer.

A sole proprietorship is what you have when one person does business without a state-registered business entity (i.e., LLC, Corp, LP, etc). Sole proprietorships don't require any state filings or state filing fees and are generally thought of as cheap and easy to set up.

A sole proprietorship, however, does not provide limited liability for the business owner like an LLC would and, conversely, does not protect the business assets from the owner's personal liabilities.

In addition to limited liability, an LLC has numerous other advantages that far outweigh the small cost of a Texas SMLLC.

A single-member LLC is what we call an LLC with just one member (i.e., owner). One is not better, or worse, than the other.

Yes, an LLC can have one owner (a single-member LLC) or more than one owner (a multi-member LLC).

Yes, you can convert your an existing sole proprietorship into a Texas LLC by (1) creating the LLC and (2) transferring applicable sole proprietorship assets to the new LLC.

Read more about converting a sole proprietorship into a Texas LLC.

A single-member LLC costs as much to form as a regular LLC. The state filing fee is the same ($300 + $8.10 if you pay with a credit card).

Read more about the costs to create a Texas LLC.

A single-member LLC is formed by filing a Certificate of Formation with the Texas Secretary of State. The member can then file IRS Form SS-4 (the EIN Application) with the IRS to apply for and obtain an EIN for the LLC when an EIN is required.

When we create a single-member LLC, we handle the aforementioned items and also provide (1) a Company Agreement (the governing document for the LLC) with protective clauses; (2) a Unanimous Consent in Lieu Organization Meeting; (3) the required Membership Transfer Ledger; (4) any requested tax elections; and (5) an 8 page letter on how to use your new LLC.

For federal tax purposes, a single-member LLC is considered a “disregarded entity” by the IRS and does not file a federal tax return. Instead, the owner of the LLC will report the LLC’s profits (or losses) on the owner’s tax return and will generally pay federal income tax on the LLC's net earnings. If the owner is an individual, he or she would report profits or losses on a Schedule within his or her federal tax return, just like a sole proprietor.

A single-member LLC can, however, elect to be taxed as an S-Corp or a C-Corp. Read more about LLC Taxation.

For tax purposes, a multi-member LLC is taxed like a partnership. Unlike a single-member LLC, a multi-member LLC (or what the IRS refers to as a partnership) must file an annual federal tax return (IRS Form 1065) each year and issue K-1s to each member. The K-1 will inform each member/partner what portion of the LLC's profit to report on their federal tax return.

A multi-member LLC can, however, elect to be taxed as an S-Corp or a C-Corp. Read more about LLC Taxation and other tax consequences.

LLCs with more than one owner are generally taxed like a partnership. If, however, the LLC (a) has only two members, (b) these two members are married to each other, (c) they live in a community property state (like Texas), and (d) file taxes jointly...then the husband and wife owned LLC has the option to be taxed like a single-member LLC (what the IRS calls a "disregarded entity").

An LLC doing business in Texas will owe state franchise taxes if the LLC’s annualized total revenue exceeds the threshold set by the State ($2,470,000 for 2024). For reports filed after January 1, 2024, an LLC that is under the franchise tax threshold no longer has to file a franchise report (aka no tax due franchise report). However, all LLCs are still required to file a Public Information Report (PIR) no later than May 15th each year.

All Texas LLCs must file an annual report with the Texas Comptroller each year no later than May 15th (starting the year after formation). Unlike most states, there is no filing fee for the annual report. Failure to file the annual report timely will result in a $50 late fee and can eventually result in forfeiture of the LLC. Forfeiture of the LLC will result in the loss of the liability barrier between the LLC and its members. An LLC that has been forfeited can be reinstated for a fee.

A SMLLC will require an EIN if it (1) has employees; (2) is required to file certain excise tax forms; or (3) needs a bank account. For these reasons, virtually every LLC will require an EIN.

Yes. SMLLCs can have both employees and independent contractors.

The member of a single-member LLC cannot be an employee of the LLC unless the LLC is taxed like a corporation. The member can, however, receive distributions of profit.

Your employer can contract with your LLC for services. The LLC would not be considered an employee (w-2), but rather an independent contractor (1099).

A member of an LLC can be an individual, an entity, or a trust.

Ideally, you would operate the business through an LLC from inception. If, however, the cost of forming a Texas LLC is too much in the beginning, you can start as a sole proprietorship and convert to an LLC in the future. For a business engaged in high-risk activities, forming an LLC will be a greater priority.

Texas law does not mandate that a single-member LLC have an operating agreement (also known as a company agreement), but having one is strongly recommended.

A company agreement is the governing document for the LLC. The company agreement can and should include clauses designed for maximum protection of the member from the LLC's liabilities and vice versa. If an LLC does not have a company agreement, the Business Organization Code will govern the LLC.

In Texas, a charging order is the only legal remedy a personal creditor of a Texas LLC member can use to get at a member/debtor's LLC ownership interest in the LLC. Creditors with a charging order in Texas only obtain the owner-debtor's financial rights and cannot participate in the LLC's management. Since a creditor with a charging order cannot participate in the LLC's management, it cannot order the LLC to make a distribution or that the LLC be sold to pay off the debt. The rationale behind the exclusivity of the charging order remedy is to avoid undue disruption to the operation of the entity's business. The creditor involved has a judgment against a member, not the entity itself, so the entity should not (at least in theory) be adversely affected. This ensures that a person's business is not interrupted to satisfy a debt unrelated to the business, and a person does not lose their livelihood and business assets they have worked hard to build.

Recent Texas cases had arguably eroded this protection for single-member LLCs. See, e.g., Heckert v. Heckert, No. 02-16-00213-CV, 2017 WL 5184840 (Tex. App.—Fort Worth Nov. 9, 2017, no pet. h.).

S.B. 2314 amended Section 101.112 of the Texas Business Organizations Code to ensure that a charging order remains the sole and exclusive remedy against a person who is the sole member of a single-member LLC, just like it protects a member of a multi-member LLC.