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.
Starting a new business venture can be exciting, yet challenging. There are countless decisions to make, including the kind of business entity you should use for your company. Many entrepreneurs in Texas choose a limited liability company (LLC) because it is flexible and provides liability protection. However, operating an LLC in Texas comes with costs that business owners need to account for.
To maintain an LLC in Texas, you need to understand various recurring and non-recurring costs that are too critical. Recurring costs include franchise taxes, annual affiliation fees, and registered agent fees. Non-recurring costs include filing fees, setting up costs, and legal fees. Franchise tax and annual affiliation fees are assessed on all LLCs registered in Texas.
The Texas franchise tax is determined by a company’s taxable margin within the state. Currently, it stands at 1 percent for companies under the $1,360,000 margin threshold, whereas businesses with a taxable margin above this limit will have to pay their franchise tax on their revenues divided by .7 percent. The affiliation fee is a rate depending upon an LLC’s revenue collected in any given year. Nevertheless, returns are compulsory even if the annual revenue amounts are zero.
A registered agent is crucial for all Texan LLCs since they supply a physical address in the state to receive essential legal documents and official notices. Registered agent services are extendable via hire only to national law firms but also to external entities. Costs may differ from company to company, ranging upwards of $400 annually, relying on the kind of registered agent you use.
Texas continues to simplify the processes associated with LLC fundraisers, enabling any company to access public tools that exist to enrol online cost-effectively. Utilizing these standard online files and supplementary business processes could reduce expenses immensely. Nevertheless protecting legal advice coupled with tailored planning to navigate specific commercial industry obstacles become even less cost-effective when not taken into account reasonably early as the correct and conducive course may quantity upwards of $3000.
Another non-recurring cost for creating an LLC in Texas involves conducting business plans working your second service names into the discussion opening it up to core laws and long documents essential to the placement, strategic inclination, and decision making of Texas-based businesses.
To remain compliant with state policies and running a smooth LLC in Texas proves to have many sets of net recurring operating costs that allocate around $200 annually in administrative expenses. Constant usage could cultivate mailing charges arising from exchanging crucial official material on distributions which would inevitably further accommodation expenses like added tech units such as smartphones to complement and keep coherence and flow for the growth of the LLC.
In conclusion, the expenses to maintain an LLC in Texas can be higher than expected for inexperienced businesses owners. Therefore, it is essential to understand the costs associated with an LLC well, in advance to contemplate the levels that contribute to more significant while also realistically tracing the minimal whilst you progress in this line of work. Every business model has its requirements in Texas, and an LLC is no different. However, with the right guidance and financial planning, maintaining an LLC should become effortless in achieving successful business maneuvers.
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.
1 thought on “LLC Cost in Texas – How Much to Pay for an LLC”
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?