The registration paperwork for forming an LLC in Texas costs $300. First and foremost, you must name your business, and your Texas LLC should have a unique name that distinguishes it from others in the state. Contact the Texas Secretary of State Offices or check the Secretary of State website to ensure your name isn’t already taken.
If the name you choose does not appear in the state database, you can pay $40 to reserve it for 120 days. You can file the reservation online or by mail with the Secretary of State’s office. As a result, terms like “limited company” or “limited liability company” should be added to the end of your firm name.
Although Texas LLCs are not required to reserve a name, doing so prevents competing organizations from filing the appropriate paperwork under the same name. The Secretary of State’s office also offers a certificate of formation filing form for your convenience. Knowing how much it will cost to incorporate an LLC is crucial to getting your company off to a good start.
If you manage an LLC in Texas, you should be aware of the charges associated with establishing your firm with the Texas Secretary of State. The fees listed below are in force as of June 2018, although they may vary in nature and quantity. Visit the Secretary of State’s website for the most up-to-date information on the paperwork and costs of managing an LLC in Texas.
In Texas, your LLC must choose a registered agent. You may be eligible to have an owner or employee act as the registered agent if your LLC satisfies the standards for maintaining a fully staffed office in Texas. Otherwise, you’ll have to engage a registered agent, likely costing between $50 and $500 every year.
Filing the Certificate of Formation
The Texas Secretary of State requires every LLC to obtain a certificate of formation.
To acquire formal registration in Texas, all LLCs must submit a certificate of formation to the Secretary of State’s office. Fill in the blanks on the certificate with vital details like:
- Business Information
- Business Objectives
- Each Company Member’s Name and Address
The certificate must also include the name of the registered agent, who will accept official documents on behalf of your firm.
The certificate should include an electronic or paper consent letter from the chosen agent and the address.
The state requires a registered agent for all LLCs. An agent might be a Texas resident or a company allowed to do business in Texas. Furthermore, the agent must be physically located in the state. It’s worth noting that LLCs can’t act as their agent.
An individual or organization must submit an appointment and consent form, also known as Form 401-A, to the Secretary of State’s office to be considered a registered agent. Form 401-A filing costs are $15 for profit-based LLCs and $5 for non-profit LLCs.
The document should contain the following information:
- The person or organization that agrees to act as an agent.
- Confirmation of the agent’s Texas location.
- Texas physical street address
- The Agreement’s Effective Date
Completion of Certificate
After completing the registered agent form, the certificate of formation should specify whether the LLC is member or manager-based. Incorporate the name of the entity and the addresses of each member, as well as any dissolution dates.
The certificate can be filed online at the Secretary of State’s website. You can also mail the paperwork or hand it up to authorities. The approval procedure usually takes 1-2 business days, and you should get an email confirmation of your application. You may pay an extra $25 to speed up the process and get it approved in one business day. However, if officials discover an issue with your application, turnaround times may vary.
An operating agreement is an internal letter that outlines your LLC’s operational structure. It is not required by Texas law, but it is a helpful document to prepare so that all members are informed of the regulations.
Include the following in your operating agreement:
- Organizational Structure
- Members’ Compensation Plan and/or Share Disbursement System
- All members and workers have roles, rights, and obligations.
If your firm has more than one member, you need a limited liability corporation operating agreement. The operational agreement does not need to be filed with the certificate of incorporation, and it should then be filed when you submit your tax license.
Identification Number for Employees (EIN)
The IRS uses an employee identification number (EIN) to identify your firm and impose taxation when needed. Even if there are no workers, LLCs with more than one member must file for an EIN. If you’re the lone proprietor, you’ll only need an EIN if you hire employees or select a corporation tax structure over a sole proprietorship. The IRS website offers a free EIN application.
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Costs of Starting a Texas LLC
A new LLC forming in Texas must file a Certificate of Formation—Limited Liability Company (Form 205) and pay a $300 filing fee with the Texas Secretary of State.
There is a $30 cost for a certified copy of the Certificate of Formation, and there is a $5 charge for a Certificate of Status. You can file an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) and pay a $40 fee to reserve a name for your LLC for 120 days before registration.
Registration Fees for a Foreign LLC in Texas
If you found an LLC in another state and want to do business in Texas, you must register your LLC as a foreign LLC with the Texas Secretary of State. This is accomplished by completing Form 304, Application for Registration of a Foreign Limited Liability Company, and paying a $750 filing fee.
There is a $30 cost for a certified copy of the Application for Registration, and there is a $5 charge for a Certificate of Status. You can file an Application for Registration of an Entity Name (Form 502) and pay a $40 fee to reserve the name of your LLC for a year before registering it.
Annual Cost of a Texas LLC
In Texas, there are no yearly registration costs for LLCs. However, the Texas Comptroller may require your LLC to produce an annual franchise tax statement. The Comptroller’s website has further information about the Texas franchise tax.
The Texas Secretary of State must be notified of the proper form. A fee must be paid whenever the LLC makes certain changes, such as revising the articles of formation or replacing the registered agent. Most modifications cost $15; however, replacing the registered agent costs an extra $15 since the registered agent must sign a permission form.
In Texas, the entire cost of incorporating an LLC is $300. In Texas, the basic overall cost of forming a foreign LLC is $750. The price of a certified copy of the filing form, a certificate of status, and engaging an outside registered agent might add another $85 to $535 to this total.
Taxes Payable to Texas Comptroller sales and Franchise
An LLC must pay certain taxes to the federal and state governments at the time of creation. This page details all of the import taxes that LLCs in Texas must pay. For sales and franchise taxes, the Texas Comptroller must be contacted. Here are the principal state and federal taxes that an LLC must pay:
State Income Tax
Texas is one of nine states in the United States that do not have a state income tax.
State Sales & Use Tax
If your LLC sells real items or provides services, it must collect sales and use taxes and pay them to the Texas Comptroller of Public Accounts. Various regions, counties, and cities have different sales and use taxes. In Texas, the current state sales and use tax rate for LLCs is 6.25 per cent.
State Franchise Tax
The State Franchise Tax is a mandatory tax imposed by the state of Texas on LLCs. This tax is required in order for the LLC to be legally valid and conduct business in the state. The State Franchise Tax is sometimes known as a privilege tax or a transaction tax.
Federal Self-Employment Tax
All LLC Business members or managers must pay the federal self-employment tax. This tax applies to all of the profits you take out of your firm.
In Texas, the federal self-employment tax rate is 15.3 per cent.
Federal Income Tax
The Federal Income Tax is imposed on earnings, and the amount is determined by your profits, the income tax bracket in which your LLC falls, deductions, and the manner/mode of filing.
After deducting deductions and allowances like healthcare and retirement plans, you pay federal income tax on whatever earnings your LLC produces.
Employee & Employer Taxes
Employee-Employer taxes must be paid by an LLC, with many employees receiving monthly wages. These tax consequences vary based on a variety of criteria, such as the amount, the number of employees, and so on.
- Reservations for Texas names are $40 through the mail.
- DBA (Doing Business As): $25 for online filing or $50 by mail
- Document Copies with Certification: $30
- $15 for a certificate of good standing
- Business Domain Name and Website: prices vary depending on your preferences, but a domain name from NameCheap may cost as little as $2.99 per year, while web hosting from Kinsta costs at least $30 per month.
- Online workspace: GSuite costs at least $4.20 per month.
- Business insurance would differ based on the type of insurance (general liability or professional liability) and coverage.
- Texas LLC Dissolution: $40
How Much Does It Cost to Maintain an LLC in Texas?
Operating and sustaining an LLC in Texas comes with a number of expenses. A franchise tax is one of these expenses. If you don’t pay your franchise tax on time, the state will take away your LLC’s licenses and rights. Late franchise tax payments are also subject to state fines. The penalty might be up to 25% of the overdue tax amount. However, the majority of these costs are one-time, and yearly maintenance is quite inexpensive.
Other costs involved with running a business in Texas include state licensing and tax filing fees. The Texas Department of Revenue is in charge of issuing and maintaining business licenses in the state. While Texas has no state income tax, your LLC is subject to a State Franchise Tax. This tax is essential to keep your LLC lawful. The privilege tax or transaction tax is another name for the state franchise tax.
You must file an annual state franchise tax report to start a business in Texas. You must pay the franchise tax if your firm is forecast to produce more than $1.18 million in revenue in a single year. On the Texas Comptroller’s website, you may learn more about this cost. You can also deduct your annual franchise tax charge as a company beginning expense.