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Texas LLC CostYou have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.

And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching an LLC in Texas.

Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Texas startup fees here.

Bare Minimum Cost to Start an LLC in Texas

Optional: LLC Name Reservation Fee

    • $40 for online or paper filings, plus $25 for optional expedited processing

Optional: LLC Formation Service

    • $39 for an LLC service like ZenBusiness and $79 for LegalZoom

Required: Certificate of Formation Fee

    • $300 for online or paper filings, plus $25 for optional expedited processing

Overall Texas LLC Formation Costs

LLC Name Reservation Fee

Name reservation isn’t a mandatory step to start an LLC, but it can be a useful tool. If you’re still working out some details before filing the Certificate of Formation, but have a great name in mind, it might be worth applying for a reservation. A $40 fee will give you 120 days of exclusive rights to that name, which you can renew for subsequent $40 payments. You can reserve a name online or with a paper form.

However, if you’re prepared to file your start your LLC, you’ll save time and money by going straight to the Certificate of Formation, which automatically registers your name. To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.

 

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Certificate of Formation Fee

This is the big one, the most important (and most expensive) form that you’ll file to start your Texas LLC. Without the Certificate of Formation, your LLC doesn’t technically exist, so it’s important to file it as soon as you can. It comes with a $300 fee whether you file online or with a hard copy. The good news is that, as long as it’s accepted, you only need to file the Certificate of Formation once, so this is the only time that you’ll pay this fee. If you’re submitting a paper form and want to expedite the filing process, you can pay an extra $25 fee.

The information required to file the Certificate of Formation includes your LLC’s official business name, the name and address of your registered agent, an indication that your LLC will be managed by its members or a manager, the names and addresses of your LLC’s members and/or managers, the name and address of your LLC organizer, the effective date of your LLC’s formation, the date, and your name and signature.

If you would rather get some help for this step, you’re in luck! There are plenty of reputable LLC formation services that will prepare and file your Certificate of Formation on your behalf. You have plenty of options for this service, but we prefer ZenBusiness. They offer great low rates and well-rounded services, and with our exclusive discount code, you can get 20% off!

 

Business and Professional Licenses

Your Certificate of Formation is on file, but your LLC might still need to obtain certain professional licenses before doing business in Texas. The cost and type of licenses you need depend on your location and what kind of business you’re doing. Only certain professions and business types require state licensure. But cities and/or counties often have their own licensing laws. Check with the Texas Department of Licensing and Regulation website along with your local government to see which (if any) your LLC needs.

What are some of the most commonly required business licenses for Texas LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.

 

LLC Formation Service

Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC incorporation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.

Most of these services (which are often frequently used LegalZoom alternatives) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, operating agreements, and expedited filing.

There are many different companies offering LLC formation services these days, and it can be tricky to tell which one is the right choice for your needs. We think ZenBusiness and IncFile are the two best LLC formation companies, and we wouldn’t hesitate to recommend either of them to our families and friends.

 

Registered Agent Service

Appointing a registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Texas business law. In short, you need an agent you can trust.

While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently, saving you from the penalties of delinquent filings and the stress of having to do it yourself.

Not all registered agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to registered agent services, Northwest also handles LLC formation — and they’ll include a registered agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Registered Agent Services guide.

 

Attorney Fees

If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.

Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2,000.

Cost variations depend on the experience and location of the lawyer. There are thousands of qualified business lawyers, but you only need one. How do you make the right choice? You’ll need to do a little research. Using a site like Avvo can help. It provides access to a whole database of Texas business attorneys, sortable by location, rates, specialties, and more. It will help you find the right fit for your LLC.

If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Texas. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.

 

Foreign Qualification Fee

This only applies if your LLC was formed in another state and is now expanding into Texas. For foreign business entities, the “Application for Registration” takes the place of the Certificate of Formation.

All foreign business entities are required to foreign qualify in Texas, or they could incur some pretty severe penalties. Avoid these penalties by submitting an Application for Registration online or on paper to the Secretary of State before doing business. But be warned, the application fee isn’t cheap — it’s $750. Fortunately, you only need to file the application and pay the fee once.

 

LLC Annual Fees

Texas doesn’t require its LLCs to submit annual or biennial reports like many states do. But LLCs do have to file an annual Franchise Tax Report when they pay their Franchise Tax. See below for more details.

 

Taxes

Because they’re considered “pass-through” entities, LLCs don’t have to file corporate tax returns with the federal government. At the state level, however, they must pay a Franchise Tax each year for the privilege of doing business in the state. This means filing a Franchise Tax Report with the Texas Comptroller of Public Accounts before May 15 every year. The amount your LLC will owe depends on its revenue and margin. For more information on this report, check out our full article on the subject.

There are certain circumstances that will add separate business taxes to your list. If your business sells merchandise, for example, it will owe a Sales and Use Tax, and if it maintains employees, it will need to pay an Unemployment Insurance Tax.

Take a look at the Texas Comptroller of Public Accounts website for more information regarding business taxes.

What if I Don’t Pay?

Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.

Right from the start, if you don’t file a Certificate of Formation or Application for Registration, you’ll be prohibited from doing business in the state until you do. And after you’re up and running, if you miss a Franchise Tax Report filing and/or payment, you’ll incur a penalty amounting to $50 plus 5% of the tax due (10% if it’s more than 30 days late). The same goes for the Sales and Use Tax.

If your taxes, most specifically the Franchise Tax, remain outstanding for too long, the Comptroller will send your LLC a notice of pending forfeiture. From that point, you have 45 days to reconcile any missing filings and payments or your LLC will be forfeited and unable to continue doing business in the state.

Planning Your Expenses

By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Texas.

Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like Franchise Tax Reports — so your business doesn’t fall out of good standing.

Key Steps for Starting a Texas LLC

  • The first step to forming a Texas LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
  • Next, you’ll need to choose your registered agent. While you can legally serve as your own registered agent in Texas, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable registered agent service that can handle the responsibility of this position on your behalf.
  • The third step involves the preparation and filing of your Certificate of Formation. You’ll need to fill out the paperwork and pay a $300 fee. Once the state processes this document, your LLC will be officially open for business!
  • That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Texas LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
  • You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
  • Next, you’ll need to register for any relevant taxes with the Texas Comptroller of Public Accounts, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.

Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Texas!

Key Steps for Maintaining a Texas LLC

After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.

You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.

As we already mentioned, Franchise Tax Reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.

The Top 3 Texas LLC Services

If you want to hire a reputable LLC formation service to handle the heavy lifting on your behalf, these are the three companies we trust and rely on the most.

  • ZenBusiness ($39) – ZenBusiness offers a well-rounded LLC formation package at a great low rate. Their standard LLC package includes a full year of registered agent service, an accounting assessment, and a customizable operating agreement. ZenBusiness also receives stellar customer feedback.
  • IncFile (FREE) – That’s not a typo! IncFile really does form LLCs for free. Even better, they include 12 months of registered agent service in their free package. IncFile has a ton of experience and more than 500,000 satisfied customers, so they’re always a reliable choice.
  • Northwest Registered Agent ($225) – Northwest offers a bit more of a premium service, but if you have the money, we think it’s worth it. Like ZenBusiness and IncFile, Northwest also includes a year of registered agent service with the purchase of any LLC formation package. They also offer the best customer support in this industry, with knowledgeable representatives who are familiar with the details of business formation processes in every state.

Frequently Asked Questions

Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Texas.

What are the state business tax rates in Texas?

The state of Texas forbids income taxes for both individuals and businesses. Texas makes up for this by charging high sales and use taxes, along with steep property taxes. Businesses pay the state’s franchise tax based on their taxable income margins. Some businesses will owe nothing at all, while others will owe 0.375% of their taxable income within Texas.

How quickly does Texas process LLC formations?

The Secretary of State should be able to process your LLC’s formation within 5-7 business days. If you’re in a hurry, you can pay a $25 expediting fee to shorten your turnaround time to roughly one business day.

How many small businesses are there in Texas today?

The state of Texas is home to 2.8 million small businesses. Entrepreneurs of all backgrounds and business types find that Texas is a great place to own and operate a small business.

What are the top small business resources and websites in Texas?

The Texas chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Texas LLCs. The U.S. Small Business Administration’s Texas District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.

Should I form my LLC in Texas, or choose a state like Delaware or Wyoming?

Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.

However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.