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Starting a Limited Liability Company (LLC) in Texas involves more than just completing forms and following rules. It’s also about entering the complex world of finance that comes with starting a business. The process includes various costs, from the initial setup fees to ongoing expenses, which all shape your LLC’s financial situation.
This article explores the costs of establishing and running an LLC in Texas. We look at essential expenses such as filing fees, the importance of choosing a registered agent, and the often-overlooked value of having operating agreements.
Amid these complexities, companies like Tailor Brands play a crucial role. They simplify the formation process and assist entrepreneurs in confidently managing the financial aspects of launching an LLC in the active Texas business scene.
What Is the Cost of Forming an LLC in Texas?
When setting up an LLC in Texas, it’s crucial to know that you must file a Certificate of Formation – Limited Liability Company (Form 205) with the Texas Secretary of State, which carries a filing fee of $300. If you require an authorized copy of this Certificate, there’s an additional cost of $30.
Obtaining a Certificate of Status costs $5. For those looking to reserve a specific LLC name before formal registration, submitting an Application for Reservation or Renewal of Reservation of an Entity Name (Form 501) is necessary, and this costs $40.
Texas Foreign LLC Formation Costs
If you already have an LLC in another state and want to do business in Texas, you must register your business in Texas as a foreign entity with the Texas Secretary of State. What is the cost of forming a foreign LLC in Texas? You must submit an Application for Registration of a Foreign Limited Liability Company (Form 304) with a filing fee of $750.
If you need an official copy of this application, you must pay an additional $30. A Certificate of Status costs $5. If you want to reserve your LLC’s name for up to one year before completing the business registration, you can file an Application for Registration of an Entity Name (Form 502) for $40.
Annual Cost for LLCs in Texas
LLCs operating in Texas do not face yearly registration fees. However, your LLC may need to file an annual franchise tax statement with the Texas Comptroller. Please visit the Comptroller’s official website for more information on the Texas franchise tax.
When your LLC undergoes specific changes, like amendments to its articles of organization or a switch in its registered agent, you need to notify the Texas Secretary of State by submitting the relevant form along with a fee. Most changes incur a fee of $15. However, if you’re changing the registered agent, there’s an extra $15 charge for a consent form that the new agent must sign.
Additional costs may arise if you need a certified copy of the filing document, a certificate of status, or if you hire an external registered agent. These extra expenses could increase your total costs from $85 to $535.
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How Much Does It Cost to Start an LLC in Texas With the Best LLC Service?
Tailor Brands LLC Formation Cost
Filing an LLC in Texas starts with a basic fee of $300. The usual processing time is about 2 to 3 weeks. If you need faster processing, you can pay an extra $50 to reduce the time to 10 to 12 days or $100 to speed it up to 7 to 8 days.
The Tailor Brands Lite LLC plan offers LLC formation with standard processing times. This plan is the least expensive and only charges the state filing fee. The Essential LLC plan by Tailor Brands costs $199 plus state fees and includes expedited processing for LLC formation, annual compliance services, and an operating agreement. A yearly fee of $199 is required to maintain these services.
The Elite LLC plan, Tailor Brands’ highest tier, costs $249 plus state fees. It includes everything from the Essential plan to extra business tools and services. These extras include a free business domain for the first year, a DIY website builder, an online store, eight free logos, a digital business card, a business card tool, and a social media post maker. To continue receiving these services, an annual fee of $249 is needed.
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Additional Costs When Starting an LLC in Texas
Texas LLC Name Costs
Choosing the right name for your Texas LLC is integral to the setup process. Fortunately, the cost to start an LLC in Texas doesn’t include any fees for name selection. The Texas Secretary of State doesn’t charge a fee for reserving a name or related processes.
Before you file your Certificate of Formation, check the availability of your desired name by contacting the state by phone or email. This step is crucial to ensure that the name you want is available and can be included without any additional costs.
Texas Registered Agent Costs
When setting up an LLC in Texas, many people ask about the Texas LLC cost for a Registered Agent. You must appoint a Registered Agent, but there are no direct fees if you or someone you know can serve in this role.
However, choosing a Commercial Registered Agent might lead to an annual fee of about $125, which affects the overall Texas LLC cost. This fee is important if you still need a physical address in the state or want to keep your address private from public records.
Texas Operating Agreement Costs
The Texas LLC Operating Agreement is offered free and acts as a written agreement among the LLC Members. It details complex aspects like ownership, the management setup of the LLC, and how profits are divided.
It’s recommended that both Single-Member LLCs and Multi-Member LLCs draft an Operating Agreement and keep it in their business records while providing each Member with a copy.
Although many websites charge between $50 and $200 for LLC Operating Agreements, you can obtain this document at no cost.
Texas EIN Cost
An EIN Number, or Employer Identification Number, also known as a Federal Tax ID Number, acts as a unique identifier for your Texas LLC. While some websites charge fees to help, you can get an EIN for your LLC for free through the IRS. Remember, your EIN differs from the 11-digit Texas “Taxpayer Number” required by the Texas Comptroller for business entities.
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Texas LLC Taxes
Texas LLC owners must pay federal and state income taxes and their employees’ payroll taxes. Consulting an experienced Texas accountant can assist in identifying the types and amounts of taxes owed. Accountancy fees vary, typically from $400 to $900 per year for most small business owners.
These are important considerations regarding taxes for Texas LLCs:
Federal Income Taxes
Depending on its ownership structure, the IRS applies different tax treatments to a Texas LLC.
- Single-member LLCs are viewed as disregarded entities, meaning the owner handles federal income taxes personally.
- If an individual owns it, taxation mirrors that of a sole proprietorship; if owned by another company, it’s taxed as a division of the parent company.
- Multi-member LLCs are treated like partnerships, filing a 1065 Partnership Return.
- Owners receive Schedule K-1 and report their profit shares on personal returns (Form 1040).
Husband and Wife LLC Taxes
In states with community property laws, such as Texas, a husband and wife who own an LLC can choose Single-Member LLC (Qualified Joint Venture) taxation instead of Multi-Member LLC. This decision is made either during the EIN Application process or by requesting a change from the IRS. Otherwise, the default status is partnership taxation.
Electing to be Taxed as a Corporation
An LLC can select corporate taxation instead of its default choices. There are two kinds of corporate elections:
- S-Corporation
- C-Corporation
Opting for LLC status as an S-Corp can offer potential savings on self-employment taxes, which benefits established profitable businesses. Choosing LLC status as a C-Corp may be suitable for larger employers looking to save on healthcare benefits, although this choice is less frequent.
Texas State Income Tax for Texas LLCs
Texas LLCs don’t need to file state income tax returns since Texas doesn’t impose a state-level income tax. Instead, they’re subject to industry-specific and business-related taxes. It’s advisable to seek assistance from an accountant to file these taxes.
Local Income Tax for Texas LLCs
Local municipalities in Texas may mandate income tax filing and payment for individuals and LLCs. To ensure compliance with these particular requirements, it’s important to consult with an accountant and verify the regulations with the local municipality.
Texas Sales Tax
LLCs in Texas that sell products to customers within the state may have to gather sales tax using a Seller’s Permit from the Texas Comptroller. This permit allows them to gather sales tax on retail transactions. Terms such as “resale license” or “wholesale license” pertain to the same permit.
Texas LLC Payroll Taxes
Texas LLCs with employees manage payroll taxes, including withholding federal and state income taxes, Social Security and Medicare taxes, federal and state unemployment taxes, and other deductions. Employers must set up payroll systems, perform calculations accurately, and submit taxes correctly to prevent penalties. It’s often advised to seek professional help from payroll companies or accountants.
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Texas LLC Cost – FAQs
Conclusion
Setting up an LLC in Texas requires handling several expenses and details beyond the initial filing fee. These costs include obtaining essential documents, hiring registered agents, and managing key issues such as operating agreements and getting an EIN. Understanding these financial details is essential, and companies like Tailor Brands significantly help make the process smoother.
By understanding these costs and relying on Tailor Brands’ expertise, entrepreneurs can confidently start their Texas LLC journey, prepared with the necessary knowledge and support to build a solid business foundation.
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