Texas vs. California LLC — 2026 Cost, Tax & Requirements Comparison

California is cheaper to form ($70 vs. $300), but Texas is dramatically cheaper over time. California's $800 minimum franchise tax applies every year regardless of revenue — year 1 California total is ~$890 vs. Texas ~$300. Over 3 years: California ~$2,490 vs. Texas ~$300 (for revenue under the $2.47M threshold). Texas is approximately 8× cheaper on a 3-year cost basis for small LLCs.

Yes — California imposes an $800 minimum franchise tax on every LLC every year, including the year of formation. The first-year exemption that applied to LLCs formed 2021–2023 expired January 1, 2024. LLCs with California gross receipts of $250,000 or more owe an additional annual fee: $900 ($250K–$499,999), $2,500 ($500K–$999,999), $6,000 ($1M–$4,999,999), $11,790 ($5M+). Texas's franchise tax is $0 under the $2.47M revenue threshold.

Texas LLCs above the $2.47M revenue threshold pay 0.375% (retailers/wholesalers) or 0.75% (other businesses) on taxable margin — not gross revenue. Below the threshold: $0. California has no comparable revenue threshold; every LLC owes $800/yr minimum. In addition, California taxes LLC members on pass-through income at rates up to 13.3%, while Texas has no individual income tax. The Texas margin tax is a business-level tax on margin, not on member income.

You can form in either state, but forming in the wrong state creates dual-state obligations. If you form in Texas but live in California or earn income in California, California will still require you to register as a foreign LLC ($70 + $800/yr franchise tax) — and California income tax applies to California-source income regardless of LLC formation state. Conversely, forming in California but operating in Texas may trigger a Texas foreign LLC registration requirement ($750 + TX annual obligations). Form in the state where you actually operate and reside.

Yes — California's Statement of Information (Form LLC-12), due within 90 days of formation and every two years thereafter, requires disclosure of the member or manager names and addresses. This information is publicly accessible on the BizFile record and indexed by search engines. Texas does not require member names on the Certificate of Formation; only the registered agent and organizer are disclosed at formation. For founders who value privacy, Texas provides a meaningful advantage.

For most remote-first online businesses, form in the state where the owner lives and works. If you live in California, form in California — attempting to use Texas to escape California tax obligations doesn't work if you earn California-source income or are a California resident. If you live in Texas, form in Texas and enjoy the no-income-tax, low-annual-fee environment. The cost advantage of Texas only materializes if the owner is genuinely domiciled in Texas.

At high revenue, both states impose business taxes, but the structures differ. Texas LLCs above $2.47M pay 0.375%–0.75% on taxable margin. California LLCs owe the $800 minimum plus a gross receipts surcharge (up to $11,790/yr for $5M+ receipts) — and California members still pay up to 13.3% state income tax on profits. For high-revenue businesses, the California cost stack (franchise minimum + gross receipts fee + member income tax) typically far exceeds Texas's margin tax.

California's Statement of Information (Form LLC-12) is a biennial filing due within 90 days of formation and every 2 years thereafter. It discloses the LLC's principal office, registered agent, and the names and addresses of members or managers. The fee is $20. Texas does not have a biennial report equivalent; instead, Texas requires an annual Public Information Report (PIR) filed with the Franchise Tax Report by May 15 — no fee for LLCs under the $2.47M threshold. The PIR discloses the LLC's officers and directors but not necessarily all members.

Both states require an LLC to maintain a registered agent (California calls it an 'Agent for Service of Process') with a physical in-state street address (no PO boxes) available during normal business hours. In California, the agent cannot be the LLC itself. In Texas, the agent must provide written consent (Form 401-A or equivalent). In both states, you can self-serve as registered agent if you have a valid in-state address, but your address becomes publicly indexed. Commercial RA services start around $50–$150/yr in both states.