Cost for LLC in Texas: Everything You Need to Know
Costs will include a fee for filing a Certificate of Formation, a fee for filing an Acceptance of Appointment and Consent, and a fee for reserving a name. 3 min read
Understanding the cost for LLC in Texas is an important step. Costs will include a fee for filing a Certificate of Formation, a fee for filing an Acceptance of Appointment and Consent, and a fee for reserving a name. Later, you may also need to pay franchise taxes.
How to Form an LLC in Texas: Key Steps
Forming an LLC in Texas is both easy and affordable. Being the second most populous state in the country, Texas is a popular place for both LLC formation and incorporation. This is because Texas offers access to land, natural resources, and a large market population. Based on these factors, Texas offers a thriving business community and associated support.
If you plan to form a Texas-based LLC, you will need to file a Texas LLC Certificate of Formation with the Secretary of State. You can complete this process by filing online. After 1-2 business days, you will then receive confirmation that your LLC was officially formed.
You will then need to take the following steps:
- Choose a unique name that is not yet registered.
- File Form 205 for LLC formation, also known as a Certificate of Formation.
- If you will be selling taxable services or products, a Texas Sale Tax Permit will also be required.
- Obtain an EIN, also known as an employer identification number.
- Create your operating agreement, which should be reviewed by your attorney.
- Open a business bank account.
- Discuss your company's bylaws.
- Gather and file all required business licenses and permits.
What Is the Cost of a Texas LLC?
When filing to become a Texas LLC, the Secretary of State charges $300. However, if you plan on forming a Texas-based nonprofit corporation, you will only be subject to a $25 fee. If you would like this process to be expedited there is an additional $25 fee.
There is also a fee for the following:
- Filing the Acceptance of Appointment and Consent (Form 401-A). This costs $5 for a nonprofit LLC and $15 for a for-profit LLC.
- Reserving a name (Form 501). This costs $40.
If necessary, you will also need to pay the Texas Franchise Tax. This is essentially a tax that allows LLCs the privilege of doing business in the state of Texas. This tax is based on the company's total revenue. The associated tax rates are 0.375 percent for retailers and wholesalers and 0.75 percent for all other types of businesses. Although you may not owe tax if your gross revenue is less than $1,130,000, you will still need to file the associated paperwork.
Unlike most states, completing a tax return in relation to franchise tax is not a simple process. It is recommended that you seek professional assistance when completing these forms and paying the associated fees.
- Franchise taxes are due by May 15 each year.
- If you do not pay on time, you will be subject to a $50 late fee + 5 percent if you pay in less than 30 days and 10 percent if you pay after more than 30 days.
- Although most LLCs will not need to pay Texas taxes, there is a sales tax of 6.25 percent.
- If you plan on selling goods or services within Texas, you will need to apply for a Texas Sales Tax Permit.
How to Form a Texas LLC
When forming an LLC, under tax law, your name must include "limited liability company," "LLC," or an associated abbreviation. Your name must also differ from any other name that is currently filed with the Secretary of State. You may check name availability here.
If you would like to reserve your name, you can do so for 120 days. You will need to file an Application for Reservation and pay a fee of $40.
Once you select a name, you will need to complete the following steps:
- File a Certificate of Formation.
- Select a registered agent.
- Prepare an operating agreement.
- Understand and comply with all regulatory and tax requirements.
If you will be operating as a foreign LLC in the state of Texas, the Texas Secretary of State provides an informative FAQs page. If you would like to register, you will need to file Form 304 either online or by mail. The cost associated with this submission is $750.
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