How to Form a Partnership in Texas (2026)
Understanding Partnership Types in Texas
Texas recognizes three main partnership structures: general partnerships (GPs), limited partnerships (LPs), and limited liability partnerships (LLPs). In a general partnership, all partners share management responsibilities and personal liability for business debts. Limited partnerships require at least one general partner with unlimited liability and limited partners with liability capped at their investment. Limited liability partnerships protect all partners from personal liability while allowing management participation. Your choice depends on liability protection needs, management structure, and tax treatment preferences.
General Partnerships: Formation and Liability
A general partnership in Texas requires no state filing if all direct owners are natural persons and the partnership has unlimited liability. However, you must file a DBA (Doing Business As) certificate with your county clerk if you operate under a name other than your own. The DBA filing costs $25.00 and is required before you can legally conduct business under that name.
In a general partnership, all partners bear unlimited personal liability for partnership debts and obligations. This means creditors can pursue your personal assets if the partnership cannot pay. Partners also have joint and several liability—creditors can collect from any partner, even if that partner didn't personally incur the debt. This structure offers simplicity but exposes you to significant personal risk.
Formation Requirements
General partnerships in Texas form by agreement alone—no state filing is required. You don't need to register with the Texas Secretary of State to create a general partnership. However, if you operate under a name other than the partners' legal names, you must file a DBA certificate with your county clerk before beginning business operations.
File your DBA with the County Clerk in the county where your partnership's principal place of business is located. The $25.00 filing fee is paid to the county clerk, not the state. This registration gives you the legal right to use the business name and provides public notice of ownership.
Liability Structure
General partnerships impose unlimited personal liability on all partners. Each partner is personally responsible for all partnership debts and obligations, regardless of whether they personally incurred them. Under Texas Tax Code § 171.002(b), a general partnership is defined as one where direct ownership is entirely composed of natural persons and liability is not limited under Texas law or another state's law.
You are personally liable for debts created by any partner acting within the scope of partnership business. If a partner signs a contract, incurs debt, or causes injury in the course of partnership operations, you can be held personally responsible with your personal assets. Your personal bank accounts, home, and other assets are at risk.
Tax Treatment
General partnerships are not subject to Texas franchise tax. Under Texas Tax Code § 171.002(b)(2), a general partnership composed entirely of natural persons with unlimited liability is exempt from franchise tax, making it the most tax-efficient partnership structure for many small businesses.
However, the partnership must file federal Form 1065 (partnership return) and provide Schedule K-1 to each partner. Partners report their share of income on their individual federal returns and pay self-employment tax. Texas has no state income tax, so you pay no state income tax on partnership income. You do pay federal income tax and self-employment tax on your share of partnership profits.
DBA Registration
If your general partnership operates under a name other than the partners' legal names, you must file a DBA certificate with your county clerk. The filing fee is $25.00. File your DBA in the county where your partnership's principal office is located. This requirement applies regardless of your partnership structure.
You don't file your DBA with the Texas Secretary of State—only with your county clerk. Contact your local county clerk's office directly for specific filing procedures, as requirements may vary slightly by county.
Limited Partnerships: Certificate and Structure
To form a limited partnership in Texas, you must file a certificate of formation with the Texas Secretary of State. According to Texas Business Organizations Code § 3.001(a), "To form a limited partnership, the partners must enter into a partnership agreement and file a certificate of formation."
Your certificate of formation must include the address of the principal office where partnership records are kept, as required by § 3.001(c). The certificate must also list each general partner's name and address. You can file online through the Texas Secretary of State's SOSDA system at https://www.sos.state.tx.us/corp/sosda/index.shtml or by mail to P.O. Box 13697, Austin, TX 78711-3697.
Certificate Contents and Filing
Your certificate of formation must include the address of the principal office of the partnership in the United States where records are kept or made available. Filing the certificate with the Secretary of State provides constructive notice that your partnership is a limited partnership and of all facts contained in the certificate, per § 3.001(d).
You can file your certificate online through the Secretary of State's filing system or submit a paper copy by mail. Contact the Texas Secretary of State at (512) 463-5555 for specific certificate requirements and to obtain the official form, as filing requirements may be updated periodically.
Partnership Agreement Requirements
Your partnership agreement is a mandatory document that you must enter into before filing the certificate of formation. While Texas law does not specify exact contents in the statute text, the agreement governs the rights, duties, and obligations of general and limited partners.
The partnership agreement should address capital contributions, profit and loss allocation, management authority, transfer restrictions, and dissolution procedures. You may include the partnership agreement in a plan of merger or conversion if you're forming the limited partnership through those mechanisms, per § 3.001(b).
General Partner Liability and Structure
A limited partnership must have at least one general partner who manages the partnership and bears unlimited personal liability for partnership debts and obligations. Limited partners contribute capital but have no management authority and enjoy limited liability protection—they are not personally liable for partnership obligations beyond their investment.
This dual-structure arrangement is the defining characteristic of a limited partnership under Texas law. The general partner's unlimited liability contrasts sharply with the limited partners' protected status.
Franchise Tax Obligations
Limited partnerships are classified as "taxable entities" under Texas Tax Code § 171.002(a) and are subject to Texas franchise tax. Your limited partnership must file an annual franchise tax report with the Texas Comptroller of Public Accounts, which is then forwarded to the Secretary of State per § 171.354.
The franchise tax rate is 0.75% of taxable margin (standard rate), 0.375% for retail/wholesale, or 0.331% for the EZ computation method. No franchise tax is due if your annualized total revenue does not exceed $2,650,000 (2026 threshold), per Texas Tax Code § 171. Your franchise tax is due annually on May 15.
Annual Reporting to the Comptroller
You must file an annual franchise tax report with the Texas Comptroller containing specific information about your limited partnership's structure and ownership. This report must include the names, titles, and mailing addresses of all general partners as of the filing date, per § 171.354(a)(3)(B).
The report must also list any entities in which your partnership owns a 10% or greater interest and any entities that own a 10% or greater interest in your partnership. You must send a copy of the report to each general partner not currently employed by the partnership or a related entity.
Limited Liability Partnerships: Registration Requirements
A limited liability partnership (LLP) is a general partnership that registers with the Texas Secretary of State to obtain liability protection for all partners. This structure is particularly common among professional service providers like law firms, accounting firms, and medical practices.
In an LLP, partners are not personally liable for the negligence or misconduct of other partners, though they remain liable for their own actions and for partnership debts. You register an LLP by filing a registration statement with the Texas Secretary of State; the partnership itself must maintain the registration in good standing.
Formation and Filing
To form a limited liability partnership in Texas, you must enter into a partnership agreement and file a certificate of formation with the Texas Secretary of State, as required by Texas Business Organizations Code § 101.003(a). Your certificate of formation must include the address of the principal office of the partnership in the United States where records are kept or made available under § 153.551.
Filing your certificate with the Secretary of State provides constructive notice that your partnership is a limited liability partnership and establishes all facts contained in the certificate as required by § 3.005. You can file online at https://www.sos.state.tx.us/corp/sosda/index.shtml or by mail to P.O. Box 13697, Austin, TX 78711-3697.
Liability Protection for All Partners
In an LLP, all partners receive liability protection for partnership debts and the negligent or wrongful acts of other partners. You are protected from personal liability for partnership obligations, though you remain liable for your own misconduct and personal guarantees you've made.
This structure is ideal if you want to protect personal assets while maintaining active management rights. Unlike limited partnerships, all partners can participate in management without risking liability protection.
Franchise Tax and Annual Reporting
Limited liability partnerships are classified as "taxable entities" under Texas Tax Code § 171.002(a) and are subject to Texas franchise tax. This distinguishes LLPs from general partnerships composed entirely of natural persons with unlimited liability, which are exempt from franchise tax.
Your LLP must pay franchise tax at the standard rate of 0.75% of taxable margin, unless you qualify for a lower rate. The retail/wholesale rate is 0.375%, and the EZ computation rate is 0.331%. No franchise tax is due if your annualized total revenue does not exceed $2,650,000 (2026 threshold). Franchise tax returns are due to the Texas Comptroller of Public Accounts by May 15 each year.
Partnership Agreements: Essential Documentation
While Texas does not require a written partnership agreement for general partnerships, creating one is strongly advisable. Your partnership agreement should address capital contributions, profit and loss distribution, management authority, decision-making procedures, dispute resolution, and exit provisions.
For limited partnerships, a partnership agreement is mandatory under § 3.001(a). The agreement governs the relationship between general and limited partners, specifies limited partners' rights and restrictions, and establishes management procedures. Even though the statute does not require the agreement to be filed with the state, you should maintain it with your partnership records.
Key Provisions to Include
Your partnership agreement should specify each partner's capital contribution, profit and loss allocation percentages, and management responsibilities. Define how decisions are made—whether by unanimous consent, majority vote, or designated managing partners.
Include provisions for partner withdrawal, death, or incapacity. Establish procedures for admitting new partners and transferring partnership interests. Address dispute resolution through mediation or arbitration rather than litigation.
Tax Implications
Multi-member general partnerships default to partnership taxation under federal law (Form 1065). Texas imposes no state income tax, but you must file annual reports with the Texas Comptroller of Public Accounts if your partnership qualifies as a "taxable entity" under Tex. Tax Code § 171.002.
General partnerships composed entirely of natural persons with unlimited liability are exempt from Texas franchise tax. However, if your partnership has any liability limitations or includes non-natural-person members, you may owe franchise tax at 0.75% of taxable margin (standard rate) or lower rates for specific industries, with no tax due if annualized revenue doesn't exceed $2,650,000 (2026 threshold).
Filing and Storage
You don't file your partnership agreement with the Texas Secretary of State—only your certificate of formation. Keep your partnership agreement in your partnership records at your principal office. The Texas Secretary of State will provide constructive notice that your partnership exists once your certificate is filed, per Tex. Bus. Org. Code § 3.001(d).
Filing Requirements with the Secretary of State
General partnerships with all natural-person owners and unlimited liability do not require state filing. However, limited partnerships and LLPs must file formation documents with the Texas Secretary of State.
For limited partnerships, file the certificate of formation online or by mail. The Secretary of State's website provides forms and filing instructions. Once filed, the certificate creates constructive notice that your partnership is a limited partnership and of all facts contained in the certificate, per § 3.001(d).
For LLPs, file a registration statement with the Secretary of State. The registration must include the partnership name, principal office address, registered agent information, and the names and addresses of all partners or managing partners.
Online Filing System
You can file your certificate of formation or registration statement electronically through the Texas Secretary of State's SOSDA system at https://www.sos.state.tx.us/corp/sosda/index.shtml. Online filing is the fastest method for registration and provides immediate confirmation of filing.
You can also submit paper copies by mail to the Texas Secretary of State, P.O. Box 13697, Austin, TX 78711-3697. Contact the Secretary of State at (512) 463-5555 for questions about filing procedures or requirements.
Certificate Contents
Your certificate of formation must include the address of the principal office where partnership records are kept or made available. For limited partnerships, the certificate should also list each general partner's name and address. The Secretary of State provides the official form with all required fields.
Contact the Secretary of State to confirm current certificate requirements, as filing requirements may be updated periodically. The Secretary of State's business search tool at https://www.sos.state.tx.us/corp/sosda/index.shtml allows you to verify your partnership's filing status and view registered information.
DBA Registration for General Partnerships
If your general partnership operates under a name other than the partners' legal names, you must file a DBA (Doing Business As) certificate with your county clerk. The filing fee is $25.00 and must be completed before you begin business operations.
The DBA certificate is filed at the county level, not the state level. You file with the county clerk in the county where your principal place of business is located. This registration gives you the legal right to use the business name and provides public notice of ownership.
Where and How to File
File your DBA with your county clerk, not the Texas Secretary of State. Contact your local county clerk's office directly for specific filing procedures, as requirements may vary slightly by county. You can locate your county clerk through the Texas Secretary of State's website or a simple online search for "[Your County] Texas County Clerk."
The $25.00 filing fee is paid to your county clerk when you submit your DBA application. This is a one-time filing fee for the initial registration.
Important Tax Consideration
General partnerships composed entirely of natural persons with unlimited liability are exempt from Texas franchise tax under Tex. Tax Code Ch. 171, Section 171.002(b). However, this exemption does not apply if your partnership registers as a limited liability partnership (LLP), which limits member liability.
If your partnership loses this exemption status, you become subject to Texas franchise tax at 0.75% of taxable margin (or lower rates for retail/wholesale businesses), with a filing deadline of May 15 each year.
Tax Classification and Federal Reporting
By default, multi-member partnerships are taxed as partnerships for federal purposes and file Form 1065 (U.S. Return of Partnership Income) with the IRS. The partnership itself pays no federal income tax; instead, income flows through to partners' individual returns.
Texas has no state income tax, so you will not file a state income tax return. However, you must register for a federal Employer Identification Number (EIN) with the IRS, which is free. You also must register for a Texas sales tax permit if you sell taxable goods or services—this registration is free through the Texas Comptroller at https://comptroller.texas.gov/taxes/sales/.
Federal Tax Classification Defaults
A general partnership composed entirely of natural persons with unlimited liability defaults to partnership taxation under Form 1065 (Internal Revenue Code treatment), unless the partners elect otherwise. This default applies regardless of Texas state tax treatment.
Limited partnerships and limited liability partnerships are also taxed as partnerships on Form 1065 by default for federal purposes. You can elect S corporation or C corporation treatment if your partnership meets federal eligibility requirements, though this requires filing Form 2553 or Form 8832 with the IRS.
Federal Estimated Tax Payments
As a partnership, you do not pay federal income tax directly—your partners report their share of income on their individual returns. However, if your partnership generates self-employment income, your partners must make federal estimated tax payments on their individual shares.
The federal estimated tax deadlines are April 15, June 15, September 15, and January 15. Each partner is responsible for calculating and paying their own estimated taxes based on their distributive share of partnership income.
Self-Employment Tax
Partners in a Texas partnership are subject to federal self-employment tax on their distributive share of partnership income. Self-employment tax covers Social Security and Medicare taxes and is calculated on Schedule SE (Self-Employment Tax) attached to each partner's individual tax return.
The self-employment tax rate is 15.3% (12.4% for Social Security on income up to the annual cap, plus 2.9% for Medicare on all net self-employment income). Partners can deduct half of their self-employment tax as an adjustment to gross income on their individual returns.
Franchise Tax Obligations for Partnerships
Under Texas Tax Code § 171.002(b), a general partnership composed entirely of natural persons with unlimited liability is exempt from the Texas franchise tax. However, if your partnership is structured as an LLP or limited partnership, it is a "taxable entity" subject to franchise tax.
The franchise tax rate is 0.75% of taxable margin (standard rate) or 0.375% for retail/wholesale businesses. No tax is due if your annualized total revenue does not exceed $2,650,000 (2026 threshold). The franchise tax is due May 15 each year. You file the report with the Texas Comptroller of Public Accounts at https://comptroller.texas.gov.
Which Partnerships Pay Franchise Tax
Not all partnerships pay Texas franchise tax. General partnerships composed entirely of natural persons