Honorably discharged veterans can form a free LLC in Texas by getting a Veteran Verification Letter from the Texas Veterans Commission and submitting it with the Certificate of Formation, which waives the standard $300 filing fee. The same qualification also exempts the business from Texas franchise tax for up to five years after formation.1Texas Legislature. SB 1049 – Enrolled Version
Who Qualifies
Texas law calls the qualifying entity a “new veteran-owned business.” Every owner has to be a natural person who served in and was honorably discharged from a branch of the United States armed forces. One non-veteran member disqualifies the whole LLC. The business also has to be new, meaning it first began doing business in Texas on or after January 1, 2022.2State of Texas. Texas Tax Code 171.0005 – Definition of New Veteran-Owned Business You can’t apply the waiver retroactively to an LLC that’s already operating.
If a non-veteran joins as a member at any point during the five-year window, both the fee waiver and the franchise tax exemption end immediately.1Texas Legislature. SB 1049 – Enrolled Version
Get the Veteran Verification Letter First
Nothing about the fee waiver works without a Veteran Verification Letter from the Texas Veterans Commission (TVC). This is the document that triggers the waiver at the Secretary of State’s office and the franchise tax exemption at the Comptroller’s office.3Texas Veterans Commission. Veteran Verification Letter Older guides refer to it as a “Letter of Verification of Veteran’s Honorable Discharge.” The TVC now uses the shorter name.
Start on the TVC website and request to be connected with a Veteran Business Consultant. A consultant contacts you within 72 business hours and asks for your DD-214 (Member Copy 4) or a VA Veteran Benefits Letter that shows your dates of service, branch, and character of discharge.4Texas Comptroller of Public Accounts. New Veteran-Owned Businesses and Texas Franchise Tax Watch your junk folder for messages from @TVC.TEXAS.GOV addresses. Once you’re verified, the TVC issues a letter containing a unique identification code that the Secretary of State uses to process the fee waiver.
If your LLC will have more than one veteran owner, each owner needs their own separate Veteran Verification Letter.
File the Certificate of Formation With the Waiver
Form 205 is the Certificate of Formation for a Texas LLC.5Texas Secretary of State. Form 205 – Certificate of Formation You can complete it through the SOSDirect online portal or download it and file by mail. The form asks for the LLC name, its management structure (member-managed or manager-managed), a purpose statement (a general phrase like “any lawful purpose” is enough), the name and physical Texas address of your registered agent, and the organizer’s signature.
The LLC name must be distinguishable from every other active entity registered in Texas and must include “Limited Liability Company,” “LLC,” or “L.L.C.”6State of Texas. Texas Business Organizations Code 5.053 – Distinguishable Names Required Search the Secretary of State’s SOSDirect database before you commit. A name too close to an existing one gets your filing rejected.
Every Texas LLC also needs a registered agent with a physical Texas address to accept legal documents during business hours.7Texas Secretary of State. Registered Agents The registered office cannot be a P.O. box unless a commercial mail service is itself the agent. You can serve as your own agent at no cost, but the address becomes public record.
Submit the Veteran Verification Letter with the Certificate of Formation, whether you file online or by mail. If you file through SOSDirect, upload the letter alongside Form 205 so the system processes the waiver instead of charging the $300 fee.3Texas Veterans Commission. Veteran Verification Letter If you file by mail, include a copy of the letter in the envelope. Online filings come back as a stamped Certificate of Filing electronically once approved; paper filings return by mail and take longer, from several business days to a few weeks depending on the Secretary of State’s volume.
What the Waiver Actually Covers
The waiver is not limited to the initial $300 formation fee. The Secretary of State waives all filing fees for a qualifying veteran-owned business until the earlier of five years from formation or the date the business stops qualifying.1Texas Legislature. SB 1049 – Enrolled Version Amendments, name changes, and other Secretary of State filings during those first five years are also fee-free.
The franchise tax exemption runs on the same clock. A qualifying LLC owes no Texas franchise tax during the five-year period, provided every owner remains a verified veteran.
What to Do After the LLC Is Approved
Apply for an Employer Identification Number from the IRS as soon as your Certificate of Filing comes back. The EIN is a nine-digit federal tax ID that you need to open a business bank account, file federal taxes, and hire employees.8Internal Revenue Service. Employer Identification Number The application is free on the IRS website and the number is issued immediately.
Open a dedicated business checking account before you take in a dollar of revenue. Mixing personal and business funds is one of the fastest ways to lose the liability protection an LLC provides. Banks typically want to see the stamped Certificate of Filing, your EIN confirmation, government-issued ID, and an operating agreement.
Texas doesn’t legally require an operating agreement, but skipping one is a mistake, particularly for multi-member LLCs. Without a written agreement, your LLC defaults to the rules in the Texas Business Organizations Code, and those defaults may not match how you want to run the business. The agreement spells out ownership percentages, profit distribution, voting rights, and what happens if a member leaves or the business dissolves. It’s the first document a court looks at if members disagree.
Every LLC doing business in Texas must register with the Comptroller of Public Accounts for franchise tax purposes.9Texas Comptroller of Public Accounts. Franchise Tax Overview Provide your Veteran Verification Letter information to the Comptroller so your account reflects the five-year exemption.4Texas Comptroller of Public Accounts. New Veteran-Owned Businesses and Texas Franchise Tax Registration is required even though you’ll owe nothing.
Annual Filings You Still Owe
The five-year exemption covers tax, not paperwork. Every Texas LLC must file a Public Information Report with the Comptroller by May 15 each year.10Texas Comptroller of Public Accounts. Texas Franchise Tax Public Information Report and Ownership Information Report Filing Requirements The report lists officer names, addresses, and similar identifying details. The Comptroller forwards the information to the Secretary of State to keep public records current. Filing late triggers a $50 penalty even if you owe no tax.9Texas Comptroller of Public Accounts. Franchise Tax Overview
Miss the filings entirely and your LLC risks losing its good standing, which can prevent you from filing lawsuits, entering contracts, or maintaining your registered name. Treat May 15 as a hard tax deadline.
When the Five Years End
After the exemption expires, your LLC becomes subject to franchise tax like any other Texas entity, and standard Secretary of State filing fees apply to any future filings. Texas keeps a generous no-tax-due threshold. For the 2026 and 2027 report years, entities with total revenue at or below $2,650,000 owe no franchise tax.11Texas Comptroller of Public Accounts. Franchise Tax If your revenue stays under that threshold, you still file the Public Information Report each year but you won’t owe franchise tax and aren’t required to file a separate franchise tax report.9Texas Comptroller of Public Accounts. Franchise Tax Overview