Calculating monetary expenses is among the crucial steps before incorporating your limited liability company. With complex business filings and legal documents to maintain good standing, losing track of your incurred costs is very likely. In this step-by-step guide, our business experts will show how to handle your Texas LLC annual fees properly to avoid non-compliance risks.
Formation Costs for a Texas LLC
Business Name Reservation
To form a Texas business, you’re obliged to choose a distinct trade name not similar to other companies operating within the state. So if you’re still in the middle of planning and taking your time in handling formation documents for your limited liability company, our team’s advice is to reserve your business name for the Texas Secretary of State. It costs only around $40.
Although it’s not a mandatory requirement, going through this process will lessen the chances of your Texas LLC being involved in trademark issues. Should disputes occur, your business could suffer additional expenses like fees for legal advice and other law firm services.
Certificate of Formation & Filing Requirements
As you may already know, there are several requirements that any Texas LLC must accomplish before its business structure gets legally formed. Among all of them, the initial formation document that you need to secure is the Certificate of Formation (Form 205), which includes your company’s contact information and elected registered agent service or individual.
Upon submitting your LLC Certificate of Formation to the Texas Secretary of State’s office, you need to pay a one-time fee of $300 for the processing of your requests. If you find it hard to make time to file it personally, we suggest downloading the document online or directly filling up everything on the website.
Other than the registration fee, it’ll cost you another $30 once you request a certified copy of the Certificate of Formation and another $5 for Certificate of Status.
(To help you with your business formation, you can consider hiring the best LLC formation services listed here)
After submitting your Certificate of Formation to the Texas Secretary of State, you probably think you’re done with all the legal documents needed to run your LLC — but let us stop you there. Despite not being a mandatory requirement, curating operating agreements could save you pennies and time when faced with internal disputes when you form an LLC.
As a Texas LLC, this document will guide handling management decisions concerning ownership, capital contribution, profit distribution, tax statements, and membership voting. Unlike the formation certificate, any business can form an LLC operating agreement on its own with no filing fee required.
However, because this business document involves legal matters, our trade experts highly suggest seeking professional services when customizing this agreement.
Any LLC in Texas with the intention to hire employees or open a business bank account will find the need to acquire an employer identification number. The federal government also requires employer identification numbers for tax purposes.
Although some formation companies include EIN in their service packages, you can obtain it at no cost at IRS. Keep in mind that this registration isn’t the same as your business Taxpayer Number (for Franchise Tax) from Texas Comptroller.
Aside from the state filing fee, any LLC in Texas must pay local, state, or federal taxes. However, federal income taxes for a Texas LLC aren’t filed to the company itself. Instead, all losses and profits flow through the personal income tax return of LLC members. If an LLC only has one member, it’ll be taxed as a sole proprietorship.
Registered Agent Service
Under the Texas law or most commonly known as Texas Business Organizations Code (“BOC”) regulations, any business operating within the state must maintain a registered agent with a physical address available to receive documents during normal business hours .
As long as your Texas registered agent meets the age requirements and other standards, then they’ll qualify right away. In some cases, an LLC can choose to hire a registered agent service to assume this role for a yearly fee.
The main perk of signing up for registered agent services is that you wouldn’t need to worry about non-compliance as they’re professionals in the field and ensures that all notices and demands reach you on time. Besides that, the public accounts will record your registered agent address instead of yours.
The registered agent fee varies depending on company offerings, but some provide it for free as long as you purchased their standard packages.
LLC Filing Company
Some Texas LLCs opted to sign up for professional companies to handle all their filings, such as submitting the Certificate of Formation and other needed documents to make your business legal. These service providers also allow you to execute your LLC formation online through their navigational platform.
While there are some providers that offer business formation assistance for free, payments vary depending on the packages you’ll choose. Most of them also provide registered agent service, so our team isn’t against this.
(For reliable options, you can also check our list of the best online incorporation companies here)
Foreign LLC Registration
As an out-of-state business, you’re not exempted from any Texas LLC fees or formation requirements. In fact, filing an Application of Registration to the Secretary of State costs around $750.
Process of Registering Your Texas LLC
To form your LLC and operate legally in Texas, you need to file a formation certificate to the state’s office along with a processing fee. This procedure can be accomplished online, through mailing services, or personal appointments. On top of that, you must create an operating agreement.
We also suggest acquiring EIN right away if you’re hiring employees and opening a bank account for your business finances.
Texas LLC Annual Requirements
If you’re running a small business, you’re in luck because Texas is one of the few states with tax leverages. However, annual report filings are a must to maintain your good standing with the state. Aside from franchise tax reports, your LLC must also submit a public information report yearly.
The franchise tax report and information report must be submitted at the same time, so you better add them to your LLC’s annual list of reminders.
Although most small LLCs aren’t obliged to pay franchise tax fees, filing an annual report to the office of Texas Comptroller is a must. For this case, you can submit a No Tax Due Report if your revenue didn’t exceed set limits.
However, if your LLC reaches revenue requirements, the taxes you’ll pay varies from certain taxable margins and total profits.
Importance of Paying LLC Formation and Annual Fees
While paying annual fees allows you to maintain your liability protection privileges, it also saves your LLC from additional expenses from penalties and administrative disputes that could lead to forced dissolution. Filing a periodic report also makes it easier for an entity to wind up in case LLC members agree to do so.
Is there an annual fee for LLC in Texas?
No, there’s no annual fee to form an LLC in Texas. However, the Texas Comptroller obliges any business operating in its jurisdiction to file a yearly franchise tax report. The filing and processing of these annual reports will also cost your LLC nothing. On the other hand, the franchise tax rates of an LLC in Texas vary depending on the nature of your business and revenues.
Do I have to renew my LLC every year in Texas?
Yes, you have to renew your LLC business license every year in Texas, depending on the date of issuance. To renew the application for registration of your entity, you must submit the form to the Texas Business Organization Code (BOC) office, along with the filing fee amounting to $40. The payments may be settled through checks, debit cards, and money orders.
What is the LLC renewal fee in Texas?
The only LLC renewal fee in Texas is the yearly taxes from your business revenues. Despite not having annual registration fees, you are obliged as an entity to submit franchise tax reports and public information reports to the Texas Comptroller. These filings also cost nothing and could be filed through the state’s website platform.
As you may already have noticed, Texas LLC annual fees offer a bit of an advantage to small businesses. However, this leverage doesn’t exclude you from filing an annual report. Should you find yourself overwhelmed with all the legal requirements, we highly recommend seeking professional services like formation companies and registered agent providers.