If you’ve decided to form a limited liability company (LLC) in the state of Texas, this is an exciting time for your business.
You’re probably ready to build up your LLC and operate the business you’ve always dreamed of!
However, before you get started, it’s important to understand all of the various fees and other expenses that come with forming a Texas LLC.
Most entrepreneurs understand that they’ll have to pay the state a fee in order to get their LLCs formed. However, we find that some people are often unaware of all the potential additional expenses, like LLC formation service fees, registered agent service fees, Annual Report fees, taxes, and more. Let’s take an in-depth look at all the possible expenses you’ll encounter when forming a Texas LLC.
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Forming an LLC has a lot of steps involved, some of which can be complicated. That’s why many entrepreneurs hire a service like ZenBusiness and LegalZoom to take care of the LLC formation process.
However, hiring us at ZenBusiness will get you more value and will save $79+ on your LLC formation.
The Required Upfront Costs of Forming a Texas LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Texas without filing the Certificate of Formation, or the document that officially registers your business within the state. This filing costs $300, plus a 2.7% service fee if you pay by credit card.
The Certificate requires some important information about your LLC, such as your business name, the registered agent who will accept service of process on your behalf, your organizers, and more.
But what if you’re not forming a brand-new business, and instead you’re transferring a pre-existing LLC into Texas from another state? In this situation, you would instead file the Application for Registration of a Foreign Limited Liability Company. The application is pretty similar to the Certificate, but it also requests some information about the jurisdiction where your business was originally formed. The filing costs $750 to submit.
For many LLCs, these are the only upfront expenses that are required. That said, your Texas LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Texas LLC.
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The Optional Upfront Costs of Forming a Texas LLC
The first optional expense for a Texas LLC is name reservation. The only time you need to reserve a business name for a Texas LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $40 to reserve a business name in this state, which gives you exclusive rights to the name for 120 days.
However, considering that you can simply form your business instead, the $40 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Certificate of Formation, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire registered agent services, and these companies also charge their own fees. Every LLC needs a registered agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your registered agent, who will inform you and forward the documents to you.
We like to bundle registered agent and LLC formation services, as there are some formation services that will throw in a full year of registered agent service at no extra charge. For the most part, these companies charge an average of roughly $150 per year for this service, although rates can vary widely based on which company you choose.
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Certificate of Formation because it’s important to get the URL you want for your website. Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of a Texas LLC
No matter if you’re forming a new domestic LLC or you’re transferring in a foreign LLC from another state, your LLC will need to file annual reports. The report keeps the state up-to-date about certain vital information for your business. But unlike most states, Texas does not require a filing fee for this form. But don’t think you’re off the hook from annual business expenses.
Depending on your LLC’s business pursuits, you will almost certainly need to pay some form of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Comptroller of Texas to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of a Texas LLC
Much like you can hire an LLC formation service and a registered agent service, many of these same companies offer annual report services. If you’d like a reputable company to draft and file these reports on your behalf, you’ll need to pay their yearly service fees, on top of Texas’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
Next, while there is no general business license in Texas, depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Texas LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
The Potential Penalties for Avoiding These Costs
At this point, the costs are really adding up for some Texas LLCs. You might be wondering what the consequences would be for avoiding some or all of these expenses. In short, it’s certainly not in your LLC’s best interests to skip out on any necessary fees.
If you don’t pay your Certificate of Formation filing fee, your LLC will never exist to begin with. If you fail to pay your annual report fee, the state can administratively dissolve your business. Meanwhile, failing to pay your taxes in full can lead to some severe penalties for you and your business.
While it might seem that these expenses add up quickly, paying these fees is still a far better option than the alternative. If there is simply no way to cover these LLC formation costs, a secondary option is to operate as a sole proprietor.
The Best Texas LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together our comprehensive guide to the top-rated business formation services available online. We encourage all of our readers to check out that guide and choose the right company for your specific situation.
We think ZenBusiness is the most well-rounded business formation service available today. It’s tough to beat the ZenBusiness pricing model, as this company charges just $49 to form your business and provide a full year of annual report service. In addition, ZenBusiness has outstanding customer feedback, with more than 10,000 reviews available online and nearly all of them being positive in nature.
We also appreciate ZenBusiness because this company gives back to the communities it serves. ZenBusiness partners with Kiva.org to provide loans to low-income individuals, and also donates money to help build businesses owned by women and minorities. Doing good while providing helpful business services is the ZenBusiness way!
Northwest Registered Agent
You don’t need us to tell you that Northwest’s $39 entry-level price point is a good deal. What does Northwest Registered Agent do that makes them stand out? In short, Northwest has the best customer support we’ve ever experienced in this industry.
While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer.
In addition, Northwest also offers its customers a year of registered agent service, just like Incfile. However, only Northwest locally scans every document it receives as your agent, while Incfile only scans the government forms they’re legally required to scan.
Incfile is one of a very small handful of companies in this industry that will form an LLC or corporation with no service fees. All you need to do is pay your state’s fee and Incfile will take care of everything else. That’s not the only piece of good news we have regarding Incfile’s business formation services though.
Like ZenBusiness, Incfile also receives excellent feedback from its customers, with around 27,000 positive reviews available online and just a few negative reviews.
The main reason we rank Incfile behind ZenBusiness is that Incfile has more third-party offers and upsell attempts than ZenBusiness does. However, if you don’t mind promotional partnerships and upsells, Incfile could be a great fit for your new LLC or corporation.
Frequently Asked Questions
What is the absolute minimum cost to form a Texas LLC?
The cheapest possible price tag for an LLC formation in Texas is $300, which covers the cost of filing the Certificate of Formation with something other than a credit card. All other upfront expenses for a Texas LLC formation are optional.
How much does it cost to form a corporation in Texas?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. However, in Texas, that’s not the case since the filing fee for a corporation’s Certificate of Formation has the same $300 filing fee as one for an LLC.
How long does it take to form my Texas LLC?
The Secretary of State’s office says it can typically process LLC formation paperwork within 3-5 business days. If you need faster processing, expedited service is available for $25.
How much does ongoing LLC maintenance cost per year in Texas?
Most states have flat fees for Annual Report filings, but that’s not the case in Wyoming. Here, it depends on your LLC’s assets within the state. For companies with $250,000 or less of domestic Wyoming business assets, there is a flat $60 filing fee. However, if your company has more assets than that, you’ll instead pay $0.00002 for each dollar your company holds in Wyoming assets.
Where can I find more information about expenses for Texas LLCs?
The Texas Secretary of State provides a comprehensive list of every possible business form (and their accompanying fees) on this page.
How many small businesses are there in Texas today?
There are more than 3 million small businesses currently operating in Texas, comprising all but 0.2% of businesses in the state. Roughly 45% of the Texas workforce is employed by one of these businesses.
What are the top official state resources for entrepreneurs?
The governor’s website actually lists a variety of helpful resources for entrepreneurs, including guides on financing, licenses, webinars, events, and much more. Not all states make this information so easy to access, so we appreciate Texas’s results in this regard.
We’ve discussed many Texas LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Certificate of Formation filing and provide registered agent service.