Perhaps you are hoping to form an LLC in Texas. People assume that starting an LLC is difficult and costly. However, it’s generally not difficult, and the cost would vary across states. We have all the info you need to know about the cost of forming an LLC, particularly the LLC cost in Texas.
On this page, you’ll learn about the following:
- Texas LLC Cost of Filing
- Taxes Payable to Texas Comptroller sales and Franchise
- Cost Comparison between states
- Other Costs
Texas LLC Cost of Filing
Here are the costs involved in forming an LLC in Texas.
Cost of Filing Formation Certificates
The Texas Certificate of Formation is responsible for the majority of the cost, which could also vary depending on whether you’re forming a domestic LLC or a foreign LLC. Still, you can file both at the Texas Secretary of State.
Texas Domestic LLC
- Online Filing costs $300.
- Annual Report filing is free
- Name Reservation fee costs $25
- By Mail: Fill out the application form, and send it to Secretary of State P.O. Box 13697 Austin, TX 78711. Costs $300.
Texas Foreign LLC
- Online Filing costs $750.
- Annual Report filing is free
- Name Reservation fee costs $25
- By Mail: Fill out the application form, and send it to Secretary of State P.O. Box 13697 Austin, TX 78711. Costs $750.
Note that filing online is ideal, not only because you need to go to the Secretary of State office, but also it would be faster. You won’t have to wait in a queue in doing so.
Texas LLC Formation Service or Registered Agent Fee
You need a registered agent to form an LLC in Texas, hence, added costs for service fees. Here are three of the best LLC services on our list that will provide you with registered agents to ease your worries.
Business Permits and Licenses
The business licenses depend on your business’s activity and location and are renewed yearly. As such, the cost will vary. Check the Texas Department of Revenue for regulatory boards or agencies requiring licensing.
Taxes Payable to Texas Comptroller sales and Franchise
At the stage of its formation, an LLC has to pay certain taxes to the Federal & State Governments. This article lists all such important taxes that are to be paid by LLCs in Texas. The state taxes are to be paid to the Texas Comptroller sales and franchise. The main state and federal taxes that an LLC has to pay are:
State Income Tax
The state of Texas is among the nine states in the USA, which do not levy any state income tax.
State Sales & Use Tax
If your LLC is a seller of physical goods or a service provider providing services, it has to collect sales & use taxes & then pay them to the Texas Comptroller sales and franchise. The Sales & Use Tax varies in different regions, counties, & cities. The current state sales & use tax rate on LLC in Texas is 6.25%
State Franchise Tax
The state of Texas levies this essential tax on LLC called the State Franchise tax. This tax is for enabling the LLC to be legally valid & to be able to do business in the State. The STate Franchise Tax is also called a transaction tax or a privilege tax.
Federal Self-Employment Tax
Federal Self Employment Tax is to be paid by all the LLC Business members or managers. This kind of tax applies to all the earnings you withdraw from your business.
The Federal self-employment tax rate in Texas is 15.3 percent.
Federal Income Tax
The Federal Income Tax is levied on the Income & the amount of the Federal Income Tax depends upon your earnings, the income tax bracket your LLC falls, the deductions, & the manner/ mode of filing.
You pay Federal Income Tax on all the profits your LLC makes after calculating the deductions & allowances such as Healthcare or Retirement Plans.
Employee & Employer Taxes
An LLC with several employees drawing monthly salaries will have to bear some added Employee-Employer taxes. These tax implications vary, depending on various factors, e.g., the amount, number of employees, etc.
Cost Comparison between states
Texas is surrounded by many states, namely Louisiana, New Mexico, Oklahoma, Arkansas, etc. Each of these states has a different rate of taxes levied on LLCs. Let us take a look at this comparative chart.
|States||Filing Fee||Annual/Biennial Fee||Sales Tax|
Based on the kind of industry you LLC operated in, your LLC will be liable to some other taxes & duties. For Example, if your LLC is in the sector of import & export, you have to pay the import-export duty. You should consult with a professional to verify the tax rates or business costs of registering an LLC in Texas.
- Texas Name Reservation: $40 for fillings by mail
- Doing Business As (DBA): $25 for online filling or if filing by mail
- Certified Document Copies: $30
- Certified of Good Standing: $15
- Business Domain Name and Website: depend on your preference, but domain name could be as low as $2.99/yr at NameCheap, and web hosting is at least $30/mo at Kinsta.
- Online workspace: at least $4.20/mo for GSuite.
- Business Insurance: would vary depending on insurance type–whether general liability insurance or professional liability insurance–and coverage.
- Dissolution of Texas LLC: $40
How Much Does It Cost to Maintain an LLC in Texas
To maintain an LLC in Texas you do not need to pay an annual fee. However, sales & use tax at 6.25%, state franchise tax and federal taxes are levied.
Many entrepreneurs are unsure of how much it will cost to maintain an LLC in Texas. If you are among them, here are some tips that can help you save money and avoid pitfalls. In Texas, it is important to register your LLC within the state’s business codes. An LLC is a legal entity that offers liability protection for the owners. These taxes are required by Texas law and must be paid to maintain the legality of the business.
Generally, the largest part of the cost of maintaining an LLC in Texas is the cost of filing the Certificate of Formation. Filing it online takes about two business days. Filing it by mail, however, can take seven or more days. This fee is one-time only, and will only apply once. In addition, you will have to file an annual franchise tax statement with the Texas Comptroller. Another cost to consider is the fee for a Registered Agent.
While many entrepreneurs understand that forming an LLC in Texas costs $300, some are unaware of other expenses. Other fees that can be included in this price include an annual report, registered agent service, and taxes. To form a Texas LLC, you will also need to pay the state’s fee for the business license. In addition to the state fee, you will also have to pay payroll taxes, self-employment taxes, and other taxes. For more information, visit the Texas Business Tax page.
When forming an LLC, it is also necessary to choose a registered agent, which is a person designated to receive the business’ legal filings on the owner’s behalf. A registered agent service will cost between $199 and $400 per year. Once you have chosen the registered agent, you must file the Certificate of Formation – Limited Liability Company (Form 205) with the state’s Secretary of State. This filing fee is $300.
If your foreign LLC is expanding into Texas, it must file an Application for Registration with the Texas Secretary of State, which replaces the Certificate of Formation. It is essential to comply with Texas tax laws, as violating these requirements will result in serious penalties and disqualification. After obtaining a Certificate of Registration, you can create a physical presence in Texas and hire employees. You can also open a bank account in Texas.
While this information is helpful in the beginning, the fees can vary from year to year. The Secretary of State will provide the most updated information and fee schedule on its website. To keep up with the latest fees and requirements, you should visit the website of the Secretary of State of Texas. There are fees and expenses to form and maintain an LLC, so be sure to budget accordingly. The fees depend on the requirements of your business and the state.
Filing annual reports. In most states, LLCs must file annual reports with the Secretary of State. However, Texas requires LLCs to file annual franchise tax reports. These are complicated and require special knowledge and information. You can obtain additional information from the Texas Comptroller of Public Accounts. This is an important step to take when establishing a business in Texas. In addition to the annual report, you must also file articles of organization with the Texas secretary of state or county clerk. It is also important to form an LLC operating agreement. LLC operating agreements detail the members of the company and their role in the management. They act as the equivalent of a board of directors in a corporation.
It is possible to form an LLC without professional help, but forms still have associated costs, regardless of where your LLC is formed.
It is difficult to say whether forming an LLC is expensive. Nevertheless, the cost could be anywhere from $40 to $500. If you refuse to hire professionals, you’ll still have expenses like form fees to cover.
The need to separate personal money from business funds, thus necessitating the creation of a business bank account for your LLC.
The cost of Texas is much lower compared to other forms of business. Apart from the state filing fees and annual taxes, you might bear the cost of the registered agent. Compare the price of professional LLC services and choose the most affordable one.