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
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 |
Texas | $300 | Free | 6.25% |
Louisiana | $100 | $30 | 4.45% |
New Mexico | $50 | Free | 5.125% |
Oklahoma | $100 | $25 | 4.5% |
Arkansas | $50 | $150 | 6.5% |
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.
Other Costs
- 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
F.A.Qs
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.
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.
Maintaining an LLC in Texas involves various ongoing expenses that every business owner should be aware of. While the initial cost of forming an LLC may seem relatively low compared to other business structures, it is essential to consider the long-term financial commitments that come with owning and operating an LLC in the state.
One of the ongoing costs of maintaining an LLC in Texas is the annual franchise tax. The franchise tax is imposed on entities organized in Texas or doing business in the state, including LLCs. The amount of the franchise tax varies depending on the gross receipts of the business. Failure to pay the franchise tax can result in penalties and fines, so it is crucial for LLC owners to factor this expense into their budgets.
In addition to the franchise tax, LLC owners in Texas are also required to file an annual report with the Texas Secretary of State. The annual report includes information about the LLC’s ownership, management, and any changes that may have occurred during the past year. There is a filing fee associated with the annual report, which is another cost that LLC owners must be prepared for.
Another expense that LLC owners may face is the cost of obtaining any necessary business licenses and permits. Depending on the nature of the business, there may be specific licenses or permits required to operate legally in Texas. These licenses and permits come with their own set of fees, which can add up quickly if the business operates in multiple locations or across various jurisdictions.
Furthermore, LLC owners may also need to consider the cost of professional services, such as legal and accounting fees. As the business grows and evolves, legal and financial obligations become more complex, necessitating the expertise of professionals to ensure compliance with state laws and regulations. While these services are an investment in the success and sustainability of the business, they are an added cost that must be factored into the overall maintenance of an LLC in Texas.
Overall, the cost of maintaining an LLC in Texas is not insignificant and requires careful consideration and planning by business owners. Understanding the various ongoing expenses, from franchise tax and annual reports to business licenses and professional services, is essential for budgeting and financial management. By staying informed and proactive about the financial responsibilities associated with owning an LLC in Texas, business owners can avoid costly surprises and position their businesses for long-term success and growth.
In Conclusion
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.
Hello,
I am Salvadorean. I live in El Salvador.
My son live and work in Texas (work permit).
I would like to start a real state LLC in Texas together. The idea would be to buy a house to rent it and in the future make a bank loan to buy another one.
Is that possible considering that I do not live in the USA?
Best regards,