Sole proprietorship vs LLC in Texas: which costs less (2026)

At $100,000 profit in Texas, a sole proprietorship costs $22,365 a year in tax and fees and a single-member LLC costs $22,365. On these figures a single-member LLC does not cost less at any profit up to $500,000.

+$0 a year

more for a single-member LLC than a sole proprietorship in Texas, at these numbers.

With these settings the switch does not pay at any profit from $10,000 to $500,000. Setting up costs $300 once in state filing fees.

Texas, 2026: $100,000 profit, single filer

Item	Sole prop	LLC	Change
Self-employment taxirs.gov, 2026 rates	$14,130	$14,130	$0
Federal income taxirs.gov, 2026 rates	$8,235	$8,235	$0
Yearly cost	$22,365	$22,365	+$0

What these figures count

State income tax, and state taxes on the business itself: franchise, LLC, S corp, gross receipts and excise taxes.
Social Security and Medicare on both sides of an owner salary, federal unemployment tax and the state's new-employer rate.
The 20% qualified business income deduction with its income limits and the professional-service rule.
Yearly report fees, and a cost you can change for payroll and the business tax return.

Many S corp calculators leave out state taxes and the QBI deduction, which can make the election look better than it is.

Yearly cost at each profit level

Profit	Sole prop	LLC	Difference
$30,000	$5,181	$5,181	+$0
$50,000	$9,732	$9,732	+$0
$75,000	$15,495	$15,495	+$0
$100,000	$22,365	$22,365	+$0
$150,000	$37,607	$37,607	+$0
$200,000	$53,430	$53,430	+$0
$300,000	$92,125	$92,125	+$0

Federal and Texas tax and fees, single filer, revenue 1.5 times profit, default salary for S and C corps. "Difference" is Single-member LLC minus Sole proprietorship.

What the switch takes in Texas

File the Certificate of Formation (Form 205) with the state: $300 (fee).
Get an EIN from the IRS (free, online) and open a business bank account in the new name.
Federal return each year: Schedule C with your Form 1040, due April 15.
State upkeep each year: Franchise Tax Public Information Report, no fee, due May 15. New for you: Texas franchise (margin) tax.

What changes between the two

A single-member LLC is a disregarded entity for income tax: it files the same Schedule C and pays the same self-employment and income tax as a sole proprietor. What it adds in Texas is $300 to form and Franchise Tax Public Information Report, no fee, plus Texas franchise (margin) tax.

What it gives: business debts and claims stay with the LLC, as long as business and personal money stay apart. Many banks, clients and platforms ask for one. It is also the step before an S corp election, with no new company needed.

Questions

Does an LLC save tax over a sole proprietorship in Texas?

No. It pays the same federal and Texas income tax and self-employment tax, plus the state's LLC fees and LLC taxes.

What does an LLC cost to start in Texas?

$300 to file the Certificate of Formation (Form 205).

How much does it save at $100,000 in Texas?

Nothing. Single-member LLC costs $0 a year more ($22,365 against $22,365).

More for Texas

Common cases in Texas

Other states