Texas LLC Cost Guide (2024)

How much is an LLC in Texas?

The fundamental cost to start an LLC in Texas is a $300 state filing fee for the Certificate of Formation. This mandatory fee is the primary expense required to legally establish your LLC. However, the overall expenses can vary depending on additional, optional choices.

Understanding the Texas LLC cost is essential for entrepreneurs embarking on starting a new business in the state. From the initial filing fees to ongoing expenses like annual reports and taxes, the financial requirements of maintaining an LLC vary.

This guide provides a detailed overview of potential fees involved in forming and running an LLC in Texas, including:

• Common Texas LLC Fees
• Ongoing Texas LLC Fees
• Other Texas LLC Costs to Consider
• Calculating Your Total Texas LLC Cost

By exploring the cost of an LLC in Texas, you can prepare for the financial aspects of business ownership. This article aims to offer a comprehensive breakdown, assisting you in making informed decisions that contribute to a successful enterprise.

Common Texas LLC Fees

Business Name Reservation Fee in Texas

Opting to reserve a business name is a strategic move for Texas entrepreneurs looking to ensure their desired name remains available prior to formally establishing their LLC. This optional step provides a 120-day hold on the name, giving you plenty of time to prepare and submit your Certificate of Formation.

Certificate of Formation Filing Fee in Texas

The Texas certificate of formation is essential for legally establishing your LLC in Texas. A mandatory filing fee of $300 is required, which covers the administrative cost of processing your LLC’s formation documents. 

Veterans are given special consideration in Texas, where this fee is waived to encourage veteran entrepreneurship, significantly reducing the startup costs for qualified individuals.

Registered Agent Fees

Each LLC in Texas must designate a Texas registered agent to handle all official correspondence and legal documents. This is a mandatory requirement, but it offers flexibility: you can serve as your own agent at no cost or opt for a professional service, which generally ranges from $50 to $300 per year.

EIN Fee

An Employer Identification Number, or EIN, is crucial for any LLC planning to hire employees or open a business bank account. Issued for free by the IRS, this federal identifier is akin to a Social Security number for your business, essential for all your tax and financial dealings.

Texas DBA Name Fee

A Texas DBA name allows your LLC to operate under a name other than its legal registered name. This option, which carries a $25 per county filing fee, is particularly useful for branding purposes and must be renewed every 10 years. It’s an optional step that provides flexibility for your business’s public identity.

Foreign LLC Formation in Texas

For LLCs originally formed outside of Texas but looking to operate within the state, registering as a Texas foreign LLC is required. This process involves a $750 filing fee and ensures your business is recognized and able to legally conduct business across Texas state lines.

Texas Annual Report

Although Texas does not require a traditional annual report, all LLCs must file the Texas Franchise Tax Report annually by May 15th. This report is crucial for maintaining compliance with state tax obligations, and while there is no specific filing fee, your LLC may need to pay franchise taxes based on its earnings.

Certificate of Status in Texas

A Certificate of Status, also known as a Certificate of Good Standing, is an important document for LLCs that need to prove their compliance with state regulations. Available for a $15 fee, it’s often required when opening bank accounts, securing funding, or expanding business operations outside of the state.

Operating Agreement

While not mandated by Texas law, having a well-drafted Texas operating agreement is recommended for all LLCs. This internal document clarifies the LLC’s operational procedures, ownership structure, and financial policies. Drafting one can be done independently using online resources, though engaging an attorney to tailor a specific agreement offers additional security and clarity, especially for more complex arrangements.

Ongoing Texas LLC Expenses

Annual Franchise Tax

LLCs in Texas are subject to an annual franchise tax, which is calculated based on the taxable margin of the business. The rate ranges from 0.375% to 0.75%. This tax is a crucial aspect of your financial obligations as an LLC operating within the state.

Registered Agent Renewal Fees

Using a professional registered agent service incurs annual renewal fees. These services handle the reception of legal documents and ensure compliance with state requirements, representing an ongoing cost for those who choose not to act as their own agent.

License and Permit Renewals

The cost of renewing business licenses and permits varies depending on the specific industry and operational needs of your LLC. Regular renewal is essential to maintain compliance with state and local regulations, and these costs should be anticipated as part of your annual budget.

Operational Costs

Operational costs for an LLC can include expenses such as insurance, office space rent, and employee salaries. These are recurring costs that will fluctuate based on the size and scale of your business operations. Planning for these expenses is vital for maintaining a smooth operational flow and financial stability.

While the minimum cost to form an LLC in Texas is $300 entrepreneurs should consider these optional and ongoing expenses when budgeting for their new business. The precise total cost will vary based on individual business decisions and specific regulatory requirements.

Other Texas LLC Costs to Consider

When establishing an LLC in Texas, entrepreneurs need to account for various additional costs associated with their specific business activities and locations. These expenses are vital to consider for comprehensive budget planning.

Seller’s Permit Fee

LLCs engaged in the sale of taxable goods or services must secure a seller’s permit from the Texas Comptroller of Public Accounts. This permit is issued without a fee.

Holders of a seller’s permit are required to collect sales tax from customers and remit it to the state regularly. This can be on a quarterly or annual basis, dependent on the volume of sales. Non-compliance with these obligations can lead to significant penalties, including fines and legal consequences.

Franchise Tax

The franchise tax is a notable obligation for most LLCs in Texas. This tax rate is calculated based on the LLC’s revenue and industry, typically falling between 0.375% and 0.75% of the taxable margin.

LLCs with less than $1.18 million in annual revenue usually qualify for an exemption from this tax. The franchise tax must be reported and paid annually through the Texas Franchise Tax Report. Failure to meet this requirement can result in penalties, interest, and forfeiture of the business’s right to operate in Texas.

Certified Documents

There are circumstances where LLCs may need certified copies of their formation documents or other filings. The Texas Secretary of State charges $15 plus $1 per page for these documents. Expedited processing is available for an additional charge.

Certified documents are often required for activities such as opening bank accounts, securing funding, or registering to do business in other states.

Calculating Your Total Texas LLC Cost

The total cost of starting and maintaining an LLC in Texas can vary based on industry, location, and specific business activities. Here’s how you can estimate your total LLC costs:

• Create a checklist of all required and potential fees based on your business specifics.
• Utilize tools like free cost calculators to estimate your expenses.
• Include additional costs such as website setup, marketing expenses, and professional services like legal or accounting advice.

This approach will help you develop a realistic budget for your LLC in Texas, helping ensure you’re prepared for both expected and unexpected expenses.