Entities
LLCs for Texas rental property
Holding rentals in a limited liability company is common in Texas. An LLC can separate a property's risks from your personal assets, but only if it is set up and run properly, and it does not replace insurance. It also brings filings, franchise tax reports and financing questions that an owner holding property in their own name does not face.
Not legal advice. Entity choice affects liability, tax, financing and estate planning. Talk to a Texas attorney and a CPA before transferring property.
Owning in your name vs. in an LLC
| In your own name | In a Texas LLC | |
|---|---|---|
| Liability from the property | Personal assets exposed beyond insurance | Generally limited to the LLC's assets, if the LLC is properly maintained |
| Your own negligence | You are liable | You are still liable |
| State filings | None for ownership | Certificate of Formation, registered agent, annual franchise tax report |
| Federal income tax | Schedule E | Single-member: usually Schedule E as a disregarded entity; multi-member: partnership return |
| Financing | Conventional residential loans widely available | Often commercial or investor loans, usually with a personal guaranty |
| Homestead exemption | Possible for your own residence | Not available: the owner must be an individual |
Forming a Texas LLC
- File a Certificate of Formation (Form 205) with the Texas Secretary of State, naming a registered agent with a street address in Texas. Check the current filing fee on the Secretary of State's site.
- Adopt a company agreement setting out ownership, management, contributions, what happens when a member leaves or dies, and who may sign for the company.
- Get an EIN from the IRS and open a separate bank account in the LLC's name.
- Transfer or buy the property in the LLC's name, after checking the mortgage and title insurance issues below, and record the deed.
- Update insurance so the LLC is the named insured on the property policy, and review liability coverage.
- Put leases in the LLC's name, and have rent paid to the LLC's account.
Series LLCs
Texas allows series LLCs: one company divided into separate series, each able to hold its own property with its own liabilities. Investors use them to keep properties apart without forming a separate company for each. The separation depends on keeping each series' records and assets genuinely separate and following the formation requirements. Lenders, insurers, title companies and courts in other states do not always treat series the way Texas does, and some lenders will not lend to a series.
Annual obligations
- Texas franchise tax. An LLC is a taxable entity, even with a single member. Entities at or below the Comptroller's no-tax-due threshold ($2.65 million in annualized revenue for 2026 and 2027 reports) owe no tax, but must still file a Public Information Report or Ownership Information Report. Reports are due May 15.
- No passive entity shortcut. The franchise tax's passive entity category covers only certain partnerships and trusts, and rent is not passive income for that purpose. See taxes on rental income.
- Registered agent kept current with the Secretary of State.
- Federal tax filings, which depend on how the LLC is classified: disregarded entity, partnership or corporation.
- Records: leases, rent ledgers, deposits, expenses and company decisions, kept in the LLC's name.
An entity that stops filing franchise tax reports can lose its right to transact business in Texas and, eventually, its charter. Keeping the entity in good standing matters for lawsuits, sales and refinancing.
What an LLC does not do
- It does not cover your own negligence. You can still be personally liable for your own acts.
- You may still owe the lender. Lenders commonly require members to sign personally for LLC loans.
- Commingling undermines it. Paying personal bills from the LLC account, or LLC bills from your own account, invites a court to disregard the entity.
- It is not insurance. Landlord liability insurance, and often an umbrella policy, is still the first line of protection.
- It is not a tax saver by itself. A single-member LLC is usually taxed the same as owning the property directly for federal purposes.
The mortgage problem
Most residential mortgages contain a due-on-sale clause. Deeding a mortgaged property from yourself to an LLC can allow the lender to call the loan. Federal law (the Garn–St Germain Act) protects certain transfers of residential property, such as some transfers into a living trust where the borrower remains a beneficiary, but a transfer to an LLC is generally not among them. Speak to your lender and an attorney before moving a financed property.
Title insurance and the transfer
An owner's title policy insures the named insured. Deeding the property to your LLC may affect whether the policy continues to protect the new owner, depending on the policy terms and the relationship between you and the LLC. Ask the title company how its policy treats a transfer to a wholly owned entity before recording the deed. See title insurance in Texas.
Other effects of moving property into an LLC
- Homestead: a home owned by an LLC cannot receive the residence homestead exemption. See homestead exemption rules.
- 1031 exchanges: the taxpayer who sells must generally be the one who buys. Plan entity changes around an exchange, not during one. See 1031 exchanges.
- HOA and landlord duties belong to the owner of record, which is now the LLC. Update the association's records and the ownership disclosure tenants can request.
- Justice court: an entity landlord must be represented in an eviction by a person the court rules allow. See the eviction process.
Common questions
Do I need an LLC to own rental property in Texas?
No. Many owners hold rentals in their own names with insurance. An LLC is a choice with benefits and costs; an attorney can help weigh them for your situation.
Does a Texas rental LLC pay franchise tax?
It is subject to the franchise tax, but an LLC whose annualized revenue is at or below the no-tax-due threshold owes nothing. They must still file an annual information report.
One LLC per property, or a series LLC?
Separate LLCs are widely understood by lenders and courts; a series LLC can reduce filings but may be treated less predictably outside Texas. The choice often turns on financing and the number of properties.
Can I transfer my mortgaged house to an LLC?
You can record a deed, but the lender may be able to call the loan under a due-on-sale clause. Ask the lender first.
Related guides
Official sources: Texas Secretary of State business forms and Texas Comptroller, franchise tax.
Last reviewed 2026-09-17