Cost of LLC in Texas: Everything You Need to Know
The cost of an LLC in Texas depends on several factors. For-profit and non-profit organizations pay different rates. 3 min read
Updated November 12, 2020:
The cost of an LLC in Texas depends on several factors. For-profit and non-profit organizations pay different rates. There are also costs for obtaining proper licenses, permits, and other documentation. It is important to understand all of the costs involved in starting up and maintaining an LLC in Texas.
How to Form an LLC in Texas
Anyone who wants to form a limited liability company (LLC) in Texas needs to file a Certificate of Formation (Form 205) with the Texas Secretary of State.
Before filing your Certificate of Formation, you need to do the following:
- Come up with a suitable name for your company that is not registered to any other organization and abides by all Texas regulations.
- Get a federal employer identification number (EIN) from the Internal Revenue Service.
- Create a Texas LLC operating agreement.
- Decide whether you will act as your own registered agent or will hire a service.
- Open a bank account for the LLC.
- Apply for the proper business licenses and permits.
- File a Texas sales tax permit application with the Texas comptroller's office.
- Determine the organization's bylaws.
- Decide whether the LLC will be managed by a member or a manager.
The state charges most LLCs a $300 fee for filing a Certificate of Formation. Non-profit corporations pay only $25. Additional fees may apply for some services. Here are some examples:
- $15 for processing a certificate of withdrawal of registration
- $15 for filing an acceptance of appointment and consent (Form 401-A)
- $25 for rush orders
The state accepts various forms of payment, including money orders, personal checks, and LegalEase debit cards. You can also pay using any major credit card. However, you will be charged an additional 2.7 percent of your filing fees for using a credit card.
Texas LLC Taxes
An LLC's federal income tax requirements depend on whether the LLC is a corporation, single-member LLC, or limited liability partnership.
In Texas, LLCs must pay a franchise tax. The amount of tax an LLC pays is based on the business's total gross revenue. Most businesses pay 0.75 percent tax. However, wholesalers and retailers pay only 0.375 percent.
Most LLCs do not need to pay state income tax since Texas does not have a personal income tax. Even though LLCs that earn less than $1.13 million in gross revenue may not need to pay state income tax, they are still required to file a report. There is a 6.25 percent sales tax in Texas. Often, cities and municipalities charge an additional 2 percent sales tax.
LLCs must submit a public information report and franchise tax report to the Texas comptroller by May 15 of each year. The process is complicated and may require the assistance of a certified public accountant. The LLC must file its federal taxes before it can file its Texas franchise tax.
LLCs that miss the deadline to submit their franchise tax report must pay a late fee of $50. They must also pay an additional 5 percent if they are up to 30 days late and 10 percent extra if they are more than 30 days late.
How Long Does It Take to Start an LLC?
Once the paperwork is in order, LLCs can file the Certificate of Formation on the Texas Secretary of State's website or through the mail. If you apply online, you will receive a zip file via email confirming your LLC has been formed within 24 to 48 hours of receipt of your application. The process takes two to five days through the mail.
For even faster service, you can file in person at the Secretary of State building in Austin. You can wait at the building for confirmation that your LLC has been formed or have the confirmation sent in the mail.
Does an LLC in Texas Need a Business License?
While there is no state-level business license in Texas, you should be aware of any small business licenses related to your industry. In addition, certain professions are required to obtain occupational licenses. When applying for a business license, be sure to include the following information:
- Tax ID number
- Insurance information
- Articles of organization or incorporation
- Your mission
The cost of an LLC in Texas depends on a variety of factors. Knowing what is expected will help ensure a smooth application process.
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