On May 14, 2025, and May 19, 2025, the State of Texas adopted amendments to its Texas Business Organizations Code (via Senate Bill 29 and Senate Bill 1057, respectively) that contain a slew of new and favorable LLC rules for Texas business entities, signaling its intent to attract companies seeking a business-friendly legal environment.
If you own a Limited Liability Company (LLC), you’ll want to take a look at the most recent changes. They will impact you in several ways, some good, some not-so-good.
- Simplified reporting sounds good, but it could become a compliance trap.
- Further legislative efforts to curb property taxes have been enacted.
- A significant new business personal property exemption will be up for a vote.
Texas has built a reputation as one of the most business-friendly states in the country. These changes add to that. There’s meaningful tax relief for most Texas LLCs, compliance requirements that are easy to follow if you’re aware of them, and new checks and balances that prevent counties from assessing exorbitant property taxes on small businesses.
What kind of tax and administrative relief can your business expect?
LLCs that generate less than $2.47 million per year are no longer required to file “No Tax Due” reports.
To simplify franchise tax reporting rules for small and medium-sized businesses, the state has eliminated unnecessary filings for LLCs. Typical LLCs have paid as much as $300 to $500 to file No Tax Due reports in the past. Eliminating that puts money back in your pocket. This is particularly important for smaller LLCs working with limited capital.
Small LLCs (under $2.47M revenue) still need to file either a Public Information Report (PIR) or an Ownership Information Report (OIR). The state comptroller’s website contains the specifics on PIR/OIR filing requirements.
These forms require detailed information about your LLC’s management structure, ownership, and business activities.
Failing to file these documents can result in penalties and potential administrative dissolution of your LLC. The state removed some paperwork, but it didn’t eliminate the need to stay compliant with information reporting requirements. Our office can assist you with this by creating a compliance calendar that outlines due dates for submitting required forms and payments.
“Medium LLCs” ($2.47M – $20M revenue) can use simplified EZ Computation forms instead of complex Long Form reporting.
“Larger LLCs” (over $20M revenue) must continue using Long Form reporting.
Less complex reporting directly translates into savings because it reduces the time you or your accountant needs to spend on it. That being said, there are filing obligations that remain in place.
The new round of changes includes a “circuit breaker” to limit annual property tax increases.
If you’re new to Texas, the property tax rules can be confusing. A county appraisal district (CAD) is responsible for determining the property tax base, but local and/or county governments set the actual tax rate. In the past, Texas LLC rules left property tax decisions to local governments, but the new “circuit breaker” is the state government’s direct intervention to limit property tax increases.
What kind of properties are affected under May’s new Texas LLC rules?
Property tax limitations cover commercial properties like office buildings, warehouses, and manufacturing facilities, as well as expensive office equipment—any non-homestead properties with a value of less than $5 million.
Smaller LLCs will find this to be a significant cost saver over the years. Firms of all sizes can reallocate those funds for growth projects.
What is business personal property?
The list includes computers, office furniture, manufacturing equipment, vehicles, inventory, cell phones, and other tangible assets used for business purposes. Real estate is not on this list, but you can potentially claim this deduction multiple times if you have more than one business location in the same taxing jurisdiction. Let’s run the numbers:
- $125,000 exemption at 2.5% effective tax rate = $3,125 annual savings
- Multiple locations in the same taxing unit = multiple exemptions possible
- Could easily save $5,000-$15,000+ annually for multi-location businesses
The catch? LLCs will need to enhance some aspects of reporting.
Tax changes typically come with new compliance standards. This year’s regulations also include some reporting requirements. Most of these are common sense, the type of things your CPA would recommend. Here’s what you need to keep:
- Six years of tax returns: Federal, state, and local returns must be kept
- Certificate documents: Current copies of formation documents and all amendments
- Membership records: Detailed ownership information organized by class or group
- Five-day response rule: All records must be kept in your primary US office and made available within five days of an official written request
To be clear, the state is not asking you to have the documents somewhere in your filing system.
Documents must be readily accessible and on hand to respond to official inquiries. Startups and small LLCs often keep minimal records, especially if they’re using personal money to fund their business. This new rule changes that. A new level of vigilance will be required.
What are the benefits of the new Texas LLC rules?
I’m going to make this simple with a list of benefits versus requirements.
Small LLCs will get the most benefits.
Small LLCs, defined as any Texas LLC with annual revenue of $2.47M or less, are the primary beneficiaries of this round of changes.
Benefits
- No more “No Tax Due” reports (saves time and money)
- Potential property tax exemptions up to $125,000
- Simplified compliance for franchise tax purposes
Requirements
- Filing Public Information Reports or Ownership Information Reports must be filed
- Enhanced recordkeeping rules starting September 2025
- Six years of tax returns maintained and can be produced within five days
Don’t let the tax relief lull you into compliance complacency. Start organizing your tax documents now, not when someone shows up with a five-day production request.
Medium LLCs get meaningful benefits, but with increased compliance obligations.
If you recall, your LLC is considered “medium” if your business brings in between $2.47M – $20M in annual revenue. Here’s how the changes break down.
Benefits
- Simplified EZ Computation forms (reduces preparation costs)
- Property tax circuit breaker for properties under $5M
- Business personal property exemptions up to $125,000
Requirements
- Enhanced recordkeeping requirements hit harder for smaller LLCs
- More likely to face formal document requests
- Must maintain full compliance with information reporting
The enhanced recordkeeping requirements will impact you more than smaller LLCs because you’re more likely to face formal document requests. Invest in proper document management systems now.
Larger LLCs will receive limited benefits under the new changes.
Let’s take a look at the benefits and requirements for LLCs with $20M in annual revenue.
Benefits
- Property tax circuit breaker and exemptions could save tens of thousands annually
- No franchise tax filing simplification (still use Long Form)
Requirements
- Enhanced recordkeeping requirements are a mandatory compliance upgrade
- More likely to be targeted for formal document requests
- Cannot afford to scramble when requests arrive
Consider the recordkeeping requirements a mandatory upgrade to your compliance infrastructure, not an optional enhancement.
Take the following action steps immediately.
These are relatively simple tasks, so be sure to attend to them promptly.
- Determine your LLC category: Based on your annual revenue, determine which tax forms and compliance obligations apply to you.
- Double-check your recordkeeping: Can you produce six years of tax returns within five days? Do you have current copies of all formation documents?
- Assess business property: List everything that might qualify for the $125,000 personal property exemption and calculate potential savings.
Prepare for upcoming requirements sooner rather than later.
- September 2025 recordkeeping deadline: Implement document management systems that can handle five-day response requirements.
- Professional help assessment: Calculate whether tax savings justify investing in enhanced compliance systems or professional services.
- Constitutional amendment monitoring: Review the outcome of the November 2025 vote on business personal property exemptions.
The September 2025 recordkeeping requirements aren’t optional, so start implementing document management systems that can handle the five-day response requirement. This might mean investing in cloud-based storage, hiring additional administrative support, or engaging a professional service to manage compliance.
Tax relief is real and substantial for many LLCs, but it comes with compliance costs that you need to factor into your planning.
If you’re feeling overwhelmed by these changes or want to ensure your LLC is positioned to maximize the benefits while maintaining compliance, don’t hesitate to reach out. I’ve been helping Texas business owners navigate these waters for years, and I’d be happy to help you develop a strategy.
Schedule a discovery call today to get started.
Talk soon,
Jeremy A. Johnson, CPA