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.
The cost of maintaining an LLC in Texas depends on a number of factors, including the type of business you operate, the amount of business activity, and the location of your business. For example, if you run a tattoo studio, the cost of forming an LLC may be as high as $927. On the other hand, if you only run a home-based service, the fee is likely to be much lower. You also need to pay for certain permits and licenses that are associated with your business.
A business license is important for operating a business in Texas. If you’re not sure what type of license you’ll need, check with the state or local government. Some licenses are free, while others have a small fee. Also, you’ll want to look into the renewal requirements. Business licenses are usually issued annually.
Depending on the type of business you operate, you might need to apply for a sales and use tax permit. The process is fast and easy. Besides, you’ll be able to do so online at the Texas Comptroller’s website.
Another cost to consider is the franchise tax. In the state of Texas, this is a tax that you have to pay for your LLC’s legal existence. There are two types of franchise taxes: the state franchise tax and the privilege tax. If you fail to pay the tax, you’ll receive a 5% penalty for each month the unpaid amount goes unpaid.
One of the best ways to ensure your LLC is in good standing is to pay for a registered agent. The registered agent will serve as your official representative and be able to handle all of the legal documents related to your business. They can also accept service of process for your LLC. However, you’ll need to be sure to choose a registered agent with a physical address in Texas.
Another key aspect of the cost of maintaining an LLC in Texas is the annual report. An annual report is a quick update of your company’s financial information. It’s required for most active LLCs. Many companies offer a service to help you submit your report. Typically, the fee for an annual report is $50-$150, though it varies by state. This fee includes an information report and a franchise tax report.
To begin the process of forming an LLC in Texas, you’ll need to register with the Secretary of State. Fortunately, this application can be done online, and it’ll only take about three to four business days to complete. After that, you’ll need to pay an additional $30 for a certified copy of your LLC Certificate of Formation. Lastly, you’ll need to pay the Franchise Tax.
Creating an LLC is an exciting endeavor. However, it’s one that requires a lot of preparation and hard work. It’s a good idea to consult an attorney to ensure your business is set up correctly. Whether you need to form a new LLC or if you’re looking to restructure your current one, taking the time to carefully plan and make sure you follow the right steps can be a big help.
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.