LLC Cost in Texas | How Much Does It Cost to Start an LLC

Forming a Limited Liability Company (LLC) in The Lone Star State is a popular choice for entrepreneurs and small business owners who want to protect their personal assets and enjoy flexibility in their business operations. LLC formation costs vary from state to state, and it is essential to understand the costs involved in forming and maintaining an LLC in Texas. This article will overview the initial and ongoing costs of establishing and running an LLC in Texas.

If you would like to understand Texas LLC Costs and to know more about how much it costs to form an LLC in Texas, read the whole article until the end.

Webinarcare Editorial Team will help you understand how much an LLC Costs in Texas. You must be guided by all the factors gathered in this article.

Initial LLC Formation Costs

When starting a limited liability company (LLC), knowing the initial costs associated with forming and registering your new business entity is essential. Understanding and preparing for these expenses can help you budget effectively and set your Texas business on a path to success. Some common initial costs associated with forming an LLC include Certificate of Formation filing fees, Registered Agent fees, and additional services, such as business name reservation fees.

Certificate of Formation Filing Fee

The first step in forming an LLC in Texas is to file the Texas Certificate of Formation with the Texas Secretary of State. This document officially creates the LLC and includes essential information about the business, such as its name, address, and Registered Agent.

This document includes essential information about your LLC, such as:

The name of your LLC
The address of your LLC’s principal office
The name and address of your Registered Agent
The purpose of your LLC (optional in some states)

You can typically file the Certificate of Formation online, by mail, or in person. A filing fee is associated with this process, which costs around $300. You can also file by mailing it to Texas Secretary of State, which is located at Secretary of State, P.O. Box 13697, Austin, TX 78711-3697.

Registered Agent Fee

An LLC in Texas must designate a Registered Agent who will be responsible for receiving legal and government documents on behalf of the business. You can act as your own Registered Agent or appoint someone you know. Professional Registered Agent in Texas typically charge an annual fee ranging from $50 – $200.

In Texas, your Registered Agent must:

Be a resident of Texas or a business entity authorized to do business in the state.
Have a physical address in Texas (P.O. boxes are not acceptable)

Choosing a reliable and responsible Registered Agent is essential, as failure to receive and respond to legal documents can seriously affect your business.

You can serve as your own Registered Agent or appoint a friend, family member, or professional Texas Registered Agent Services.

Business Name Reservation Fee

If you have a specific business name in mind and want to ensure it is available when you are ready to file your Certificate of Formation, you can reserve the business name with the Texas Secretary of State.

In Texas, your LLC name must:

Include the words “Limited Liability Company,” “LLC,” or “L.L.C.”
Not contain any words or phrases that are prohibited by state law
Be distinguishable from the names of other businesses registered in the state

However, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 120 days. You must file a name reservation application in the Texas Secretary of State to keep the name.

The online name reservation fee costs around $40, while the mail name reservation fee costs $40.

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). If you have decided to file for a DBA, you can file it in two methods, by mail and in person. for an easier way.

However, before filing Texas DBA, you should know that you need to renew your DBA up to ten years, which costs around Varies by county

Ongoing LLC Costs

After you know the initial costs of forming an LLC in Texas, you should also know the ongoing costs once you have filed for an LLC. Here are the involved costs that you need to know.

Annual Report Filing Fee

To keep your LLC in good standing in Texas, you must file Annual Report with the Texas Secretary of State. The Annual report provides updated information about your LLC, such as changes in address, members, or Registered Agent.

In Texas, the Annual report fee costs around $0 because it is not mandatory which can be paid on 1 year.

Franchise Tax or Annual LLC Tax

Some states require LLCs to pay an annual franchise or LLC tax, separate from the Annual report filing fee. Franchise tax, or annual tax, is a fee imposed by Texas on businesses, including LLCs and Texas Corporations, for the privilege of operating within their jurisdiction. This tax is separate from income taxes and is usually based on factors such as the company’s net worth, assets, capital, or a fixed dollar amount, depending on the Texas’s specific tax regulations.

The franchise tax in Texas costs $400 minimum; varies based on revenue.

Texas LLC Taxes To Be Paid

The State of Texas is one of those rarest states in the United States that does not levy any personal income tax on businesses. However, the business LLCs must file other taxes with the State authorities.

Texas Sales Tax

A sales tax is a government-imposed tax on the sale of goods and services. It is generally added to the price of a product or service at the point of sale and paid by the consumer. The tax is collected by the retailer or service provider, who then remits the collected tax amount to the relevant government authority. In Texas, the sales tax rate is 6.25%.

Texas State Income Tax

Considering other taxes in Texas, you should pay for the state income tax, which costs Texas has no state corporate income tax.

Texas LLC Federal Self-Employment Tax

Federal self-employment tax rates are the same across all states. Self-employment taxes are imposed on self-employed individuals or members of a Limited Liability Company (LLC) taxed as a sole proprietorship or partnership.

The self-employment tax consists of the Social Security tax and the Medicare tax. As of 2021, the self-employment tax rate is 15.3%, which consists of:

Social Security Tax: 12.4% (applied to the first $142,800 of net self-employment income in 2021)
Medicare Tax: 2.9% (applied to all net self-employment income)

Please note that these rates are subject to change, so it’s essential to consult the IRS website or a tax professional for the most up-to-date information. Additionally, some self-employed individuals may be eligible for deductions, which can reduce their taxable income and the amount of self-employment tax they owe.

Texas Property Tax

The property tax is fixed at 1.81% of industrial, commercial, residential, agricultural, and all other properties.

Business Licenses and Permits

Depending on the nature of your Texas business and the location of your operations, you may need to obtain a Business License and permits. The costs of these licenses and permits will vary based on your specific business and location. In Texas, the business license ranges from $50 – $300. However, research the requirements for your LLC in Texas and budget for these expenses accordingly.

Optional LLC Costs

Here are the optional costs you must consider if you will form an operating agreement or hire a professional service.

Operating Agreement

Although not required by law in Texas, it is highly recommended that LLCs draft an operating agreement. This document outlines the LLC’s ownership structure, management, and operating procedures. Hiring a Business Attorney to draft an operating agreement can cost anywhere from $500 to $2,000, or you can use online resources and templates to create one yourself.

However, if you are wondering how to create an operating agreement, you can check out the Operating Agreement to know and understand how it works.

Professional Services

You may hire professionals such as attorneys, Texas Accountants, or business consultants to help you establish and run your Texas LLC. These services can provide valuable expertise and guidance but come at an additional cost. Consider the potential benefits and weigh them against the costs when hiring professional assistance.

Can I Set Up an LLC For Free?

It’s impossible to set up an LLC entirely for free, as state filing fees and other costs are associated with establishing an LLC. Each state has its own fees for filing the Certificate of Formation, the primary document required for forming an LLC. These fees typically range from $50 to $500, depending on the state.

However, you can save money by handling the formation process instead of hiring a professional service. Here are some steps to help you minimize the cost of setting up an LLC:

Choose your LLC’s name and check for availability in your state. This can generally be done through the Secretary of State’s website.
Prepare and file the Certificate of Formation yourself. Texas offer an online filing option or downloadable forms on their websites. By completing this process independently, you can avoid paying additional fees for a professional service.
Act as your own Registered Agent if permitted within Texas. Texas allows the business owner to serve as the Registered Agent, saving you the cost of hiring a professional registered agent service.
Create your own Operating Agreement using online resources and templates. Although not required in every state, an Operating Agreement is highly recommended to outline your LLC’s ownership structure and management. By drafting this document yourself, you can save on legal fees.
Research and apply for any required licenses and permits on your own. Depending on your business type and location, you may need specific permits or licenses. These costs can vary, but handling the application process yourself can save you the expense of hiring a professional service.

While you can’t set up an LLC for free, taking a do-it-yourself approach and minimizing the use of professional services can help you save money during the formation process. However, handling these tasks requires time and effort, and there may be additional legal or financial risks if mistakes occur.

FAQs

What is the cost to form an LLC in Texas?

The filing fee to form an LLC in Texas is $300.

Are there any annual fees for maintaining an LLC in Texas?

Yes, there is a required public information report fee that LLCs in Texas must pay each year. This fee is $25.

Can I form an LLC on my own, or do I need to hire a lawyer?

While it is possible to form an LLC on your own in Texas, it is recommended that you consult with a lawyer to ensure compliance.

How long does it take to form an LLC in Texas?

Typically, it takes 2-3 weeks for the Texas Secretary of State to approve your LLC formation documents.

Is there a name reservation fee when forming an LLC in Texas?

Yes, the name reservation fee in Texas is $40 and is required if you want to officialize your LLC’s name before forming it.

Are there any other fees associated with forming an LLC in Texas?

Other possible fees include publishing requirements, registered agent fees, and service fees if you hire a third-party vendor to assist with formation.

Are there any specific rules about the name I choose for my Texas LLC?

There are certain rules about LLC names in Texas – such as the name should be distinguishable from any other entity in the state and include ‘Limited Liability Company’ or a variation in the title.

Can I change my LLC’s name after forming it in Texas?

Yes, you need to file Articles of Correction with the Texas Secretary of State to update your LLC’s name.

What is the cost to file Articles of Dissolution to close an LLC in Texas?

The cost for filing Articles of Dissolution in Texas depends on the method you choose, but usually, it is $40-100.

Do I need a lawyer to dissolve my LLC in Texas?

It is recommended that you seek legal guidance while dissolving your LLC in Texas to avoid any disputes and complications later.

Can a foreign LLC operate in Texas?

Yes, the Texas Business Organizations Code allows foreign LLCs to operate business in Texas after registration with the Texas Secretary of State.

What is the fee for a foreign LLC to register for business in Texas?

The state filing fee for a foreign LLC in Texas is $750.

Does Texas require a designated registered agent for an LLC?

Yes, the Texas Business Organizations Code requires LLCs with state registration to have a designated registered agent to serve as the point of contact between the business and state authorities.

Can I serve as my LLC’s registered agent in Texas?

You may serve as your LLC’s registered agent in Texas, however, it’s recommended that you consider hiring a commercial registered agent provider.

What are the benefits of using a commercial registered agent provider in Texas?

Benefits of engaging a commercial registered agent as opposed to self-servicing include the agent’s wide network, reliability for prompt handling of key legal documents, and credibility with the state’s stakeholders.

What is an Operating Agreement?

An Operating Agreement is a document that sets out the management’s roles, voting structure, ownership distribution, and member meetings of an LLC.

Is an Operating Agreement required in Texas for forming an LLC?

An LLC Operating Agreement is optional and not a mandatory document needed to establish an LLC in Texas.

Is it wise to have an LLC Operating Agreement for a Texas LLC?

It is wise to have an Operating Agreement for a Texas LLC because the agreement can be crucial when resolving complex issues such as liquidity crises, death of a member, or transfer of ownership.

How do I obtain an EIN for my Texas LLC?

You can apply for an Employer Identification Number (EIN) through the IRS website or by mailing form SS-4. The EIN process is completely free with the IRS.

Is additional documentation required of an LLC with a Non-Texas series agreement?

Yes, the LLC organizers will need to file a Non-texas Series LLC registration to form and maintain the legal structure with the Texas Secretary of State.

What’s the penalties for filing late for annual renewal of my Texas LLC?

The penalties depend on the number of days of delay and durations of skipping for annual reporting, the penalties start from $50 and go up to $400.

What Amendments require me filling a simpler AC Form for my Texas LLC?

Simple amendments processed using AC Form include changes in registered agent name and address and appointment of new managers or members to the existing team.

How long does it take to solidify amendments for a Texas LLC filing using the AC Form?

It takes roughly two business days to process amendments made with the abbreviated filings in Texas.

Do I need to report the initial members’ shares in Texas when I formation my LLC?

Gratefully, unlike some states, Texas does not require the members of newly formed LLCs to indicate the division of interests in the business records.

Can I register a name for the purpose of reselling to another LLC in Texas?

It is illegal in Texas to register a Business Name solely for the purpose of reselling to another LLC and applicants recorded for such purposes may be subjected to punitive criminal charges.

Can I relocate my LLC to another State from Texas?

Yes, it is possible to relocate your LLC out of Texas, and follow appropriate filing processes after you’ve resolved all debts and obligations.

What important terms can I add to the Operating Agreement of my Texas LLC?

Relevant and important terms of your Texas LLC’s Operating Agreement can include valuation mechanisms, definitions of allowable distributions transfers, and the rights assigned to each LLC interest.

What do I need to worry about regarding my IRS tax licensing if I fail to renew it on time?

The IRS that has procedures to warn dormant LLCs and if you fail to renew the TX Sales Tax License on time, the IRS may assume inactive status initially but it may harm sales tax collection that would lead to strict legal penalties of fines if you fail to rectify the issue on time.

What tax reliefs are available for newly formed businesses in Texas?

Society Offering members and drafted chartered business organizations are given a sales tax exemption notification permitting them to avoid collecting sales taxes underselling tax-exempt donated items. It permits the business interactions to create relaxation via zero rates for outlined taxable investments.

What is the cost to start an LLC in Texas?

The filing fee to start an LLC in Texas is $300.

Is there any other cost involved in setting up an LLC in Texas?

Yes, you may need to pay for legal fees, filing assistance, and other services, depending on your needs.

What is the annual franchise tax in Texas for an LLC?

The annual franchise tax for an LLC in Texas is $0.7525 per $100 of taxable margin.

Are there any exemptions for the Texas franchise tax?

Yes, businesses with $1.18 million or less in annual revenue are exempt from the franchise tax.

Do I need to file my taxes separately for my LLC in Texas?

No, LLCs in Texas are pass-through entities, which means that all profits and losses pass through to the owner’s personal tax return.

Is there a minimum capital requirement for starting an LLC in Texas?

No, there is no minimum capital requirement to start an LLC in Texas.

Do I need to hire a registered agent for my LLC in Texas?

Yes, all LLCs in Texas are required to have a registered agent with a physical Texas address.

How much does it typically cost to hire a registered agent in Texas?

Registered agent services in Texas typically cost between $100 and $300 per year.

Can I be my own registered agent for my LLC in Texas?

Yes, you can be your own registered agent if you have a physical Texas address where you can receive legal notifications during business hours.

How long does it take to set up an LLC in Texas?

It usually takes around 2-3 weeks to set up an LLC in Texas.

Can I hire a service to set up my LLC in Texas for me?

Yes, there are many services available that will assist you in setting up your LLC in Texas.

How much will it cost to hire a service to set up my LLC in Texas?

The cost of hiring a service to set up your LLC in Texas varies depending on the provider and the level of service, but it typically ranges from $500 to $2,000.

Are there any ongoing expenses I need to consider for my LLC in Texas?

Yes, you should budget for things like annual franchise taxes, registered agent fees, and other expenses related to running your business.

Can I change the name of my LLC in Texas if I want to?

Yes, you can change the name of your LLC in Texas by filing an amendment with the Secretary of State’s office.

How much does it cost to amend an LLC in Texas?

It costs $150 to file an amendment to change the name of an LLC in Texas.

Can I add members to my LLC in Texas?

Yes, you can add members to your LLC in Texas by filing an amendment with the Secretary of State’s office.

Can I remove a member from my LLC in Texas?

Yes, you can remove a member from your LLC in Texas by following the procedures outlined in your operating agreement and by filing the appropriate paperwork with the Secretary of State’s office.

Can I dissolve my LLC in Texas if I want to?

Yes, you can dissolve your LLC in Texas by filing a Certificate of Termination with the Secretary of State’s office.

How much does it cost to dissolve an LLC in Texas?

It costs $40 to file a Certificate of Termination to dissolve an LLC in Texas.

Can I reinstate my LLC in Texas if it was dissolved?

Yes, you can reinstate your LLC in Texas by filing an Application for Reinstatement within 3 years of the dissolution date.

How much does it cost to reinstate an LLC in Texas?

It costs $750 to reinstate an LLC in Texas that was dissolved for failure to file an annual report or pay franchise taxes.

What is a Series LLC and can I register one in Texas?

A Series LLC is a unique form of LLC that allows you to create separate series within the same LLC. Yes, you can register a Series LLC in Texas.

Does a Series LLC in Texas require multiple filing fees and annual reports?

No, in Texas, a Series LLC requires only one filing fee and one annual report.

How much does it cost for a foreign LLC to register in Texas?

It costs $750 for a foreign LLC to register to do business in Texas.

Do I need to file an annual report for my foreign LLC conducting business in Texas?

Yes, all foreign LLCs doing business in Texas are required to file an annual report.

Can I convert my existing business entity into an LLC in Texas?

Yes, you can convert a Texas corporation, partnership, or other business entity into an LLC by filing a certificate of formation.

How much does it cost to convert an existing business entity into an LLC in Texas?

The cost of converting an existing business entity into an LLC in Texas varies depending on the type of entity and other factors, but it typically ranges from $300 to $750.

Conclusion

Forming and maintaining an LLC in Texas involves various costs, including initial filing fees, ongoing annual report fees, and taxes. Understanding and planning for these costs is essential when establishing your LLC. Additionally, consider any optional expenses, such as hiring professional services or drafting an operating agreement, to ensure the success and longevity of your LLC in Texas.