How to set up an LLC for your rental property in Texas

If you’re a landlord or real estate investor in Texas, you’ve probably heard about the benefits of owning rental property through an LLC. But how exactly do you set up an LLC for a rental property in Texas? What are the costs, timelines, and legal hoops to jump through? And is an LLC really the best choice for your rental business?

In this article, we’ll walk you through everything you may want to know about forming an LLC in Texas specifically for your rental property. We’ll cover the basics of what an LLC generally does (and doesn’t) protect you from, common steps involved in creating one, how much it may cost, filing details, and tips on ongoing compliance. Plus, we’ll touch on related topics like the difference between an LLC and an S corp, and whether you might still want umbrella insurance alongside your LLC.

If you want a more in-depth overview, check out our detailed guide on LLCs for rental properties and landlords.

What an LLC is and what it can protect you from as a Texas landlord

An LLC, or limited liability company, is a popular business structure for rental property owners in Texas. It creates a separate legal entity that owns your rental property, which can help protect your personal assets (like your home or personal savings) from lawsuits or debts related to the property.

An LLC generally limits personal liability, meaning that in many cases, claims may be limited to the LLC’s assets rather than your personal assets. For example, if a tenant sues your rental property for injury or property damage, they may typically only be able to go after the LLC’s assets—not your personal bank accounts or other properties you own outside the LLC.

However, keep in mind that an LLC isn’t a magic shield. It won’t protect you from everything. If you personally guarantee a loan, commit fraud, or fail to maintain proper separation between your personal and business finances, your personal assets could still be at risk.

For more about what an LLC can and can’t protect you from, you might want to read our guide on LLC vs umbrella insurance to understand how an LLC fits into a broader risk management strategy.

Step-by-step: how to set up an LLC for a rental property in Texas

Setting up an LLC for your Texas rental property is a process that involves several key steps. Consider the following steps when forming an LLC:

1. Choose a name for your LLC

Your LLC’s name must be unique and include “Limited Liability Company” or an abbreviation like “LLC” or “L.L.C.” Texas requires that your LLC name is distinguishable from other registered businesses. You can check name availability on the Texas Secretary of State’s website.

2. Appoint a registered agent

Texas requires every LLC to have a registered agent — a person or business with a physical Texas address who can receive official legal and tax documents on your LLC’s behalf.

3. File the articles of organization

The articles of organization officially create your LLC with the state. This document includes basic info like your LLC’s name, registered agent, and the purpose of the business. We’ll dive deeper into what articles of organization are and how to file them later.

4. Prepare an operating agreement (optional but recommended)

While Texas doesn’t require an operating agreement, it’s a good idea to create one. This internal document outlines how your LLC will be managed, ownership percentages, and decision-making processes.

5. Get an EIN from the IRS

An EIN (Employer Identification Number) is like a Social Security number for your LLC. You’ll typically need it to open a business bank account, file taxes, and hire employees if you have any. We’ll explain more about how to get an EIN for an LLC below.

6. File for any necessary permits or licenses

Depending on your rental property’s location or type, there may be local permits or licenses required to operate legally.

7. Open a separate bank account for your LLC

Keeping your business finances separate from personal accounts helps maintain your LLC’s liability protection.

For official guidance, you can visit the Texas Secretary of State business services page.

What are articles of organization and how to file articles of organization in Texas

Articles of organization are the foundational documents that officially create your LLC with the state of Texas. They include basic details like:

• Your LLC’s name  
• Registered agent’s name and address  
• Name and address of the organizer (the person filing the paperwork)  
• Whether your LLC will be managed by members or managers  

To file your articles of organization in Texas, you submit Form 205 to the Secretary of State either online, by mail, or in person. You can find the form and instructions on the Texas Secretary of State website.

Filing online is often the fastest method. Once accepted, your LLC is officially created.

How much does it cost to set up an LLC in Texas?

In Texas, the primary cost to set up an LLC is the LLC filing fee for submitting your articles of organization. As of mid-2025, the fee is $300. This one-time fee goes directly to the Secretary of State.

Beyond that, you might encounter other costs like:

• Registered agent fees if you hire a professional service (typically $100–$300 per year)  
• Operating agreement drafting fees if using an attorney (optional)  
• Business license or permit fees depending on your property’s location  
• Annual franchise tax and public information report fees (more on this below)  

In terms of ongoing costs, Texas requires LLCs to file an annual public information report and pay a franchise tax if your LLC’s revenue exceeds a certain threshold. The annual report itself has no filing fee, but the franchise tax varies based on your revenue.

So, while the initial cost to form your LLC is $300 plus any optional services, ongoing costs can vary depending on your business size.

How long does it take to set up an LLC in Texas?

The timeline for how long it takes to set up an LLC in Texas depends largely on how you file:

• Online filing: Typically processed within 2 to 5 business days.  
• Mail filing: Usually takes 7 to 10 business days, sometimes longer.  
• In-person filing: Same-day processing if you visit the Secretary of State office.

Filing online is often faster, but consider your options based on your needs.

Do I need a lawyer to start an LLC in Texas?

While you can start an LLC without a lawyer, consulting one may be beneficial depending on your circumstances. Many landlords and real estate investors successfully form LLCs on their own using online filing tools and resources.

That said, consulting a lawyer can be helpful if your rental business is complex, you want help drafting an operating agreement, or you want advice on tax implications. But for a straightforward rental property LLC, many people find the DIY route sufficient.

If you do decide to handle it yourself, make sure to carefully follow all filing instructions from the Texas Secretary of State to avoid delays.

How to get an EIN for an LLC that owns rental property in Texas

An EIN, or Employer Identification Number, is a unique number assigned by the IRS to identify your LLC for tax purposes.

Getting an EIN is free and easy. You can apply directly on the IRS website, and in many cases, you’ll receive your EIN immediately after completing the online application.

An EIN is typically required to open a business bank account, file taxes, and hire employees.

For more details and to apply, visit the official IRS EIN application page.

Do LLCs need annual reports and other ongoing compliance in Texas?

Texas LLCs have ongoing compliance responsibilities to keep their good standing:

• Annual public information report: Texas requires LLCs to file a public information report every year with the Texas Comptroller’s office. This report updates the state on your LLC’s contact info and management. There is no filing fee for this report.  
• Franchise tax: Most LLCs in Texas must pay a yearly franchise tax to the state. If your LLC’s revenue is below a certain threshold (currently around $1.23 million), you may qualify for a no-tax-due report.  

Not filing required reports or paying taxes may lead to penalties or administrative actions.

S corp vs LLC for landlords: what’s the difference?

You might hear about landlords choosing between an LLC and an S corporation. Here’s a quick, high-level look without diving into tax advice:

• LLC: Offers flexibility and simplicity. It provides liability protection and isn’t required to follow strict corporate formalities. Income passes through to members, who report it on their personal taxes.  
• S corp: Is a tax election you can make if your LLC qualifies. It can potentially reduce self-employment taxes on rental income (depending on your situation) but comes with more rules and formalities, like paying yourself a reasonable salary and holding shareholder meetings.  

Some landlords consider starting with an LLC and later consulting a tax professional about S corp election.

Should landlords use an LLC or rely on umbrella insurance?

LLCs and umbrella insurance serve different but complementary roles.

An LLC primarily protects your personal assets from liabilities related to your rental property by separating your business from personal finances.

Umbrella insurance provides an extra layer of liability coverage beyond your landlord insurance policy limits. It can protect you from large claims that exceed your landlord insurance.

Many landlords find that combining an LLC with adequate landlord insurance in Texas and an umbrella policy may help manage risk.

When does it make sense for landlords in Texas to set up an LLC?

An LLC can be a smart move if you want:

• To protect your personal assets from liability tied to your rental property  
• To keep business finances separate for easier accounting and tax filing  
• To add credibility and professionalism to your rental business  

But an LLC might not be necessary if you own only one rental property and your risk is low, or if your insurance coverage already provides strong protection.

Ultimately, deciding if you should set up an LLC depends on your personal goals, property portfolio size, and risk tolerance.

Final thoughts: next steps for Texas landlords

If you’re considering setting up an LLC for your Texas rental property, here are some basics to understand:

• How to pick a name and file articles of organization  
• What the LLC filing fee is and what ongoing costs to expect  
• How long it takes to form your LLC  
• Whether you can DIY or should get legal help  
• How to get your EIN and stay compliant with annual filings  

Don’t forget to review your insurance coverage too. Combining your LLC with the right landlord insurance and umbrella policies can give you the best protection for your Texas rental business.

Remember, this article is for general information only and not legal or tax advice. Always talk to a qualified attorney or tax professional when making decisions about your rental property business structure.