Think about your LLC a year from now: raking in profits and taking Texas by storm. You 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.
While you’re making plans and dreaming big, 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.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
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
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 right 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.
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.
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.
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 formation 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 (like ZenBusiness and Northwest) 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.
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 and on-time, 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.
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 $500-2000.
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.
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.
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.
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.