An LLC is a Limited Liability Company (LLC) that must follow state regulations. The first thing you need to do is check the laws for your state of residence. For example, in Texas, an LLC must be registered with the Secretary of State and only one person can hold title to the company.
Keep in mind that filing fees vary by state and may be different from county to county. The cost is also determined based on the number of members, officers, and directors for your LLC.
If you don’t want to deal with the hassle of preparing legal documents or filing them with the Secretary of State, you can use a service such as an online service. You’ll first need to register your LLC online and then file it with the government.
Keep in mind that many services are scams if they ask for any fees upfront whatsoever. Additionally, if you want to “select this for your state” on the registration form, it can cost anywhere from $40 to $200.
If you just want a basic LLC, you can find out about that on the website, but if you want more than that and have any questions on the laws in your state or regulations in your state you’ll need an attorney.
In this article, I am going to explain how much it costs for the state-level filing and will give you a basic guide on what each document is supposed to include and the types of documents that may be needed. The average cost running this type of business in Dallas Texas is between $945 – $1,410 depending on the services chosen.
So let’s get started!
Many people such as myself have heard about the LLC before, but have never actually researched how much it would cost for me to start one here in Texas.
Cost to Form an LLC in Texas
The fees are based on a variety of factors, including:
- the number of members, officers, and board of directors in your LLC
- if there will be any corporations to the LLC
- whether you will create an operating agreement or not
If you are going to form a one-member LLC in Texas it is going to cost approximately $90 – $150 dollars depending on your county. If you have multiple members, add another $10 per member. If you are going to operate as a corporation or a professional service LLC, you will have to pay an additional $50.
If you are going to have more than one member, it is important that each member has his or her Social Security number on the paperwork. Each member needs to sign the documents and get a notary involved.
If you do not want to use an attorney, you need to file Articles of Organization with the Secretary of State.
The fee for this is $65 and it allows you to open a bank account as well.
What Documents Do I Need For My LLC
In Texas, an LLC does not need any additional documents in addition to the Articles of Organization, but there are other documents that may need to be filled out depending on your state.
In order for me to give you the most basic guide on the documents needed in Texas LLC I will do a general breakdown of each document.
- The Articles of Organization are the documents that you file with your state and they are what allows you to open a bank account for your LLC. The Secretary of State requires that a member’s Social Security number be included in the Articles of Organization.
- If you choose to have an operating agreement for your LLC, it is going to cost approximately $250 dollars. This is purely optional and for those who are unsure about how their business will operate.
- The LLC Operating Agreement states that all members must agree on how their LLC will be operated. For example, if there are multiple members of an LLC and one member owns 2/3rds of the company while another person owns 1/3, the two parties will need to decide how their business will be run. It is important to note that all members must sign the agreement; otherwise it is not valid. It is important to mention that it is only valid if all legal documents are signed by a notary and notarized. If any member does not sign it, the operating agreement will be deemed invalid and the LLC will not be registered with your state’s government. If this happens, you will need to go back through the process and sign all legal documents again.
You can find out more information about general LLC rules and regulations at the Small Business Administration website.
Bare Minimum Cost to Start an LLC in Texas
If you wish to start an LLC with a bare minimum of services, you can expect to spend around $250 dollars.
If you want to use a service that will file all documents with the Secretary of State and register your bank account, you will also be looking at spending approximately $500 dollars.
The average price is about $1,058 – $1,070 because most people buy more services than they truly need. It is no different than any other service that you do not know how to use or need such as an attorney.
The cost is based on the level of services provided as well as how experienced the service is. Some companies may provide basic services such as a notary and will charge you $50 dollars or more, but if you want a legal document, they will charge you an additional $200 or more.
Texas Certificate of Formation Fee
Certificate of Formation is the official document that you file with your Secretary of State. The fee to file is rather inexpensive and costs $65 dollars as of 2012.
The filing fee is a one-time cost depending on your state and has to be paid when starting your company.
LLC Name Reservation Fee
If you want to reserve your entity name, you can expect to pay either a one-time fee or a monthly fee depending on the state or province.
For the one-time fee, it will cost around $100 – $150, but if you want your title reserved for at least 12 months you can expect to pay approximately $125 – $175 dollars.
LLC Annual Fees
The most you can expect to pay in fees in Texas for an annual fee is around $125 – $225 dollars. The fees are based on the type of company that you wish to establish such as a professional service LLC or a corporation. If the fees have been added to your annual expenses, it is only fair that you do not get charged extra at some point in the future.
State-Level Fees for Texas
This fee is set by each state and province and covers the general registration and accounting of all transactions.
This is a flat fee and it will usually cost around $100 – $150 dollars. It is one of the cheapest fees that you will have to pay in forming an LLC.
State-Level Accountant Fees
This is representative of you as the CEO. Accountants usually charge by the hour or a flat rate per month depending on the company.
State-Level Annual Bookkeeping Fee
You can expect to pay anywhere from $200 – $500 dollars for the annual bookkeeping fee.
County-Level Fees for Texas
This is set by the county and will be based on your business’s location.
Depending on how large your Texas business will be, this fee can increase significantly. Some counties have different rates for retail stores or manufacturers. If you are operating a chain of retail stores, you may have to pay more in fees than a small mom-and-pop store.
County-Level Annual Fee for Application for Registration
This fee is set by the county in which you are going to register your business. The fee is usually around $200 – $800 dollars and depends on the size of your business.
In Texas, if you happen to be selling alcohol at a brewery, bar, or restaurant, you also have to pay an additional $50 dollar tax on top of the county annual fees.
County-Level Annual Tax Fees
This fee is charged by each county in which you will operate your business. The fee is usually charged per employee and can range from $10 – $100 dollars. In addition, you may also be charged a yearly business tax that can cost anywhere from $200 – $800 dollars.
The county-level taxes and fees are set by the county depending on the location of your business. In Texas, if you operate a restaurant, they will charge you extra just to have a liquor license because they view it as an additional profit for them to help keep their county running smoothly.
If you plan to open a new manufacturing business, they will charge you extra to help keep the machinery and employees running. If you are planning on opening a new retail store, they will charge you extra because they view it as an additional profit for them regardless if your store is large or small.
Overall, county-level fees are very costly and vary drastically from county to county in Texas. It is the same in most other states.
County-Level Sales Tax
Texas has a 7.25% sales tax or more depending on your area. You will need to decide if you want to collect sales tax from customers or not. If you plan to collect it, there are fees in association with that depending on what service you hire. If you decide not to collect it, Texas will charge you a 6% and additional 1% fee per year for the state revenue lost on taxes that were not collected by your customers.
Each year, your LLC will be charged for county-level taxes as well as state-level taxes. The state and county level tax fees are the same with an additional 1% fee per year by Texas to make up for the money lost in uncollected sales tax.
Registered Agent Services Fee
This fee is charged by the company that you register as your LLC’s registered agent service. The fee is usually between $50 – $200 dollars per year. However, if you are registering a limited liability partnership (L LP), the fee will be higher.
The registered agent must file all of your forms and other legal documents with the Texas Secretary of State and provides copies to other banks where you set up an account.
This fee is based on how many services you use such as notary or accounting services.
If you are planning on using an attorney to establish your LLC, you can expect to pay at least $1,000 dollars. The fee will depend on how complex the process is and how much work the attorney has to do.
If you have documents that you already filled out and want your attorneys to look over them for mistakes, it will cost around $500 dollars or more depending on how detailed it is. For example, different types of documents will cost more than others.
If you have an LLC that is pretty simple and you want it certified, expect to pay around $1,000 dollars all in for the attorney fee.
If you plan to use an attorney to do your upkeep and filings after you have opened the business, then expect to pay between $500 and $600 dollars. You can expect to pay additional expenses for each step you file certain documents after a year or two.
Foreign Qualification Fee
If you are thinking about opening up a foreign LLC in another state, your company will need to be qualified to do business there as well. This fee is charged by the Secretary of State of the state in which you want to open your business. It is usually $50 dollars and will depend on how long it takes to qualify.
Business Permits and Licenses
To run a business in Texas, you will need to pay a fee associated with the industry that your company falls under. This is the price of conducting business. The price may vary depending on what state your LLC is in but expect to pay fees no matter where your company is located.
Costs of Business Permits and Licenses
There are different licenses and permits for each type of business that you plan to operate in Texas. Here is a shortlist for each type of company.
FOOD AND BEVERAGE:
This is the license that you will need if you run a restaurant, bar, or other food serving company. The license is $750 dollars per year and comes with many requirements like having an inspection every three months. The fee varies in other states. However, the cost of doing business will be similar to Texas.
This permit is required if you plan on showing movies or a play at your attraction. It is $200 for one year and $250 for two years. The fee will depend on the county that you live and the size of your theater.
MUSEUM AND GALLERY:
This allows you to display artwork, artifacts, or anything else that you want to display from past years out in a museum or gallery setting. The fee is some type of yearly fee that ranges from $50 to $500 dollars per year. The permit will vary based on the size of your business and whether you want to display artwork in the gallery or not.
This permit is for those who wish to build a building, fence off an area, remove a fence, or anything else that has to do with construction. The permit is $100 dollars per year for one fence or $200 dollars for multiple fences. The fees vary in other states.
This license is required if you want to conduct training courses, cleaning, pest control, or any type of service that involves potentially hazardous materials. The fees are different depending on the type of training that you will provide and differentiate between various chemicals and other hazardous materials.
PEST, DISEASE CONTROL, AND ENVIRONMENTAL:
This license is for cleaning and exterminating pests and diseases. The fee is usually between $100-$500 dollars per year depending on the type of service you provide in your business. The licensing process can be time-consuming but it will also depend on the type of business that you are planning to run.
This license is required if you plan to work in Texas with teeth or other medical-related services. The fee is usually around $300 dollars per year.
OFFICE OF LABOR COMMISSION:
This license is required if you plan to employ other people in your business, collect unemployment insurance, or have employees that individually file taxes for their income. The cost of this license is usually around $100 dollars per year.
Duplicate licenses are used when a business goes through any type of change or reorganization which will require you to pay more money to the Secretary of State in order to keep operating as previously established. The fee is usually $25 dollars for each change.
This permit is required if you want to store, manufacture, or sell materials that have anything to do with explosives. The fee is $75 dollars per year. People who own or buy fuel tanks are not required to pay this fee.
This license will allow you to have jewelry, gold buying business organizations in Texas without worrying about the theft of precious metals and jewels. The cost of this license is $100 dollars per year.
This license will allow you to travel with your business in any form of transportation such as a vehicle, taxi, airplane, or even an animal. The cost of this license is $75 dollars per year.
Listed below are examples of the different types of notary licenses you can purchase if you want to give your company the fancy notary stamp that looks like a seal. The cost and type depend on what type of document you need to have signed by a notary.
It is the most basic of all notary licenses. The cost is $10 dollars per year to be a notary in Texas.
This license is for people who have felony convictions or are under investigation for felony charges. The cost is $100 dollars per year.
Surveyor license allows you to survey and sign documents on behalf of other people instead of signing them yourself. The cost for this license varies depending on what territory you are going to be surveying.
This license allows you to use any type of demonstration equipment within the limits of your area. The cost of this license is $10 dollars per year.
There are many other types of licenses and permits that do not fall under any specific category. These are things like the rights to be an alien, licensed appraisers, school enrollment, and so on. However, these are more uncommon than the ones listed above.
Once you have completed the process of purchasing your initial license, you will need to continue maintaining the process. Most licenses renew on a yearly basis and are required to be renewed at least once every 5 years.
Some companies choose to get their license renewed more often than once every 5 years for the extra cost of doing business. The renewal process is easy and simple but it does require having the right type of software and being able to handle all of the paperwork that will come your way from various government offices.
Domain Business Name & Website cost
We recommend purchasing your business domain name from a website such as Namecheap.com. This will allow you to access all of your domains through a single account and will provide you with lower prices in regard to the purchase of the domain. They also provide free domain privacy protection in which they will never sell, transfer, or give away your information out to any third party.
Buying a Business Website The cost of a website can range from $5 to $15 dollars per month and can be paid upfront or in advance depending on the size of the site. We recommend formatting your website so that it can be easily viewed on any device which is why we have created our own templates for starting a website in less than 15 minutes.
A large majority of websites use WordPress as their platform which will provide you with everything that you need to purchase and install your website or blog.
In most states, it is required that you pay taxes for all of your business transactions. Here is a listing of the different types of taxes that you will have to pay in Texas.
STATE INCOME TAX:
This tax is also called the corporate income tax and is required to be paid by businesses operating in Texas. The amount varies based on the type and size of business that you own or have control over. If you are just starting out then you can get away with a lot less than if you already have employees that you will be paying out of your profits.
There is a tax calculator available on the internet that will provide you with an exact amount of what you have to pay in Texas.
EQUALIZATION/VARIABLE PROPERTY TAX:
This tax is required to be paid by people who own rental properties or any type of real estate for that matter. The amount of tax that you will have to pay varies based on the size of your property. If you own a house or business then there is a good chance that you will have to pay this type of tax.
The gas tax is required for all public and privately owned vehicles that are used for business. The tax is based on the amount of fuel that you will be using in your vehicle and your company’s quarterly income. These taxes are due to the Texas Department of Motor Vehicles in a timely manner or you will be risking having your business shut down due to a tax liability disruption.
This tax is required whenever you rent out hotel rooms to people who have come into your city on a business trip. The amount of tax that you will have to pay is dependent on the number of rooms that you have rented out. Generally, one room or suite per week will be considered the minimum.
The tax will be taken from your hotel’s main company bank account and paid to the city. To avoid any penalties or a ticket, it is very important that you don’t wait too long to pay this taxes since it has to be paid on a quarterly basis.
COMMERCIAL RENTAL TAX:
This tax is required to be paid by any business that rents out any type of office space, storage, or retail building. These taxes are also due on a quarterly basis and are generally based on the size of the property.
CLASS A LICENSE:
Any company that is planning on doing any type of construction or remodeling for commercial purposes will need to buy a Class A license. These licenses are very important because they state that you have been properly trained and have the required knowledge to complete any type of construction or remodeling project on your own.
If you are caught doing any type of construction without a Class A license then that would be considered criminal.
All companies that plan on operating vehicles for business purposes such as transporting employees or equipment will need a valid inspection certificate from the Texas Department of Motor Vehicles. The cost to file a certificate will vary depending on the type of vehicle that you are operating or want to operate.
However, most vehicles will cost around $2,000 dollars for an annual inspection. The certificate must be renewed each year and can usually be done online to save time and money.
Partnership and Sole Proprietorship Taxes
There are 2 types of business structures: C Corporation or an S Corporation. In almost all cases, it is recommended that you set up your company as an S Corporation. This type of business uses what we call “pass-through income” which means that your company’s profits and losses will pass through to your personal tax return to be taxed at the shareholder’s level.
The C Corporation profits are taxed twice since it has to pay taxes on the earnings before they are paid out as dividends, then again when they are distributed to the shareholders as wages and dividends.
An S Corporation is a business structure that is set up according to IRS rules and regulations. This structure is used by most small businesses which will have the opportunity of double taxation if it chooses to incorporate its status as an S Corporation. However, this can be avoided by electing to be taxed like a C Corporation.
If you plan on being the sole owner of your company then you will need to file the IRS form called Schedule C which will have your total income and expenses connected together in one place. If you have other partners or employees that will be contributing to the company then you will need to file form 1065, Schedule K-1 with the IRS.
All companies in Texas are required to pay a franchise tax on top of all of their other state and federal taxes. The franchise tax is based on the value of your business, not its profits.
Franchise Tax In Texas
The Franchise Tax is currently 18% and will be calculated based on the previous year’s net taxable income. There are 3 different ways to calculate this tax so it is best to hire an accountant to do so for you. This tax is calculated on the gross taxable income of the previous year and is then subtracted from the yearly net operating income (NOn-Taxable Income).
Non Taxable Income is the difference between Non-Taxable Income and Taxable Income. What will make this easier for you to calculate is if you have a business that has had a loss during the year then they will be subtracting that loss from their yearly Net Operating Income.
Non-Taxable Income is just the difference between Gross Income and Taxable Income. Taxable Income is the same as for Gross Income plus any losses or gains that have been written off during the year.
Annual Franchise Tax Reports
You will want to pay these taxes as soon as possible because the penalty fees could start at $500 for failing to pay on time. The reports that you need are your Quarterly Report, Monthly Filing, and finally your Annual Report.
The Quarterly public information Report covers January through March of the year, the Monthly Filing covers April through June of the year, while your annual report covers July through December of the year. The easiest way to calculate your franchise tax is by calculating both Non-Taxable Income and Taxable Income.
The difference between those two numbers will give you a pretty accurate reading of where you stand with the tax.
The easiest way to prepare your Quarterly report is by using TurboTax as they have a very user-friendly program. You can either work off of their pre-designed templates or use the one that best fits your needs. The Monthly Filing is similar to the Quarterly Report in that they are both online forms that you have to file.
However, you will need to pay an annual fee for TurboTax and other online filing companies so make sure that you know how much it is going to be before making a final decision. TurboTax has a limited-time offer so you might want to take advantage of it while it lasts.
The Annual Franchise report must be printed out and submitted on paper.
Final Franchise Tax Reports
The final Franchise Tax reports are due on or before the 15th day of the next month after the end of each quarter. So your April report is due on May 15th, your May report is due on June 15th, and so on.
You may also be able to file for an extension if you need more time to prepare your reports. If you are filing electronically then the extension will cost $5 per business entity. If you are filing by paper then the extension will cost $175.
The Franchise Tax Extension form must be signed by the business representative and notarized. The notary fee will range from $5 to $40 depending on your county. The two exceptions to this rule are if you have already filed for an extension or if you are filing your franchise tax report late then there is no fee to pay.
There is an annual franchise tax holiday between January and April every year. This means that the tax is not due during that time period and should be able to be filed without penalty fees. While this is a nice time to prepare your reports for next year, you may want to wait until the actual filing date comes around.
Notary publics are needed in Texas to certify all of your personal income taxes and corporate filing statements. Texas has a couple of different programs that a notary will need to be familiar with in order for them to be able to certify your Franchise Tax reports.
Texas Notaries (Texas.gov)
A new Texas Notary public benefit is that it can take an 8-hour course and then become a Certified Notary. This is the highest level of notarization that is needed for all of your commercial filings.
The process can be completed by taking the course online or in-person once you have been appointed as an official Texas Notary by the Secretary of State. The Texas Notary Department will have the registration forms that you need to fill out in order to become a part of their program.
This is a free course but you will need to register online before you can sign up, so make sure that you have your username and password ready when it is time.
The Certified Texas Notary Course will cover all of the things that you need to know in order to become a Certified Notary. After you have completed that course you will need to pass a notary exam in order to get your certificate and exam materials.
Texas Notary Exam (Texas.gov)
A Certified Notary is ready to sign documents on behalf of their clientele but there are two levels of notaries that are needed before they can do so. All notaries must be a Texas Notary Legal. This means that they have been appointed by the Secretary of State as an official Texas Notary and therefore have the authority to certify your Franchise Tax reports.
The Texas Notary Legal is the next level of notary that can sign documents that are over $100. This means that the notary must have their notary certificate, a bond, and liability insurance in order to certify your Franchise Tax Reports.
There are a couple of different companies that you can choose from when it comes to getting your notarial certificates. The process will be pretty much the same regardless of which you choose.
Tax Rates, Thresholds, and Deduction Limits
- Income Tax Brackets. Taxable Income Rate $0 -$21.7k 0.05% $21.7k – $122k 0.20% $122k – $223k 0.25% Over $223k 1.25%
- Personal Exemptions. There are 4 personal exemptions each person can claim depending on their filing status. Single $4,150 Married Filing Jointly $8,250 Head of Household $6,300 Qualifying Widow(er) $5,800
- Standard Deduction Taxpayers are able to claim a standard deduction which is the same amount for single filers as well as those that are married filing jointly or head of household.
Mortgage Interest and Property Tax
There is no municipal property tax in Texas so it is very important to check with your local government to find out what the property taxes will be for your specific area. Texas does not charge any state-level tax on Property Tax so you won’t have to worry about that. Texas has a fairly steep interest rate for the mortgage tax which is 5.5%.
Taxpayers can deduct some of the interest paid on their home loan from their state taxable income. The maximum amount of mortgage indebtedness that you can use this deduction is $500,000. This deduction will only reduce your tax liability but it will not get you a refund if you don’t owe any taxes.
Taxpayers can deduct the interest paid on their home loan and up to $10,000 in property taxes each year.
Penalties and Interest
One of the problems with filing online is that if you have any penalties then you will be charged a late fee. If you file by paper then there will be no late fees. Texas does not charge an income tax on taxpayers who are under the age of 18 and they do not charge interest on taxes that have been paid in full.
There is an alternative minimum tax that is implemented in order to help decrease the amount of tax savings that taxpayers are receiving from the standard deduction and personal exemptions.
If you owe any income tax in Texas then you will have to pay it by April 15th. If you are filing online then your payment is due on April 17th. You will be charged $2 per day if you do not pay your taxes on time.
- You can pay your taxes online and you can use a credit card or paper check. If you use a credit card then there will be a 2.7% processing fee added to your bill.
- Texas also has a quarterly estimated tax payment plan that you can get involved in. If you are going to be making more than $1,500 of taxable income then you will be required to make estimated quarterly tax payments in order to cover the amount that is due each year in taxes. Estimated Tax Payments must be done by March 1st, June 1st, September 1st, and January 15th of the following year.
- Those who are self-employed will have to take a pass-through deduction. This means that you will be able to reduce your taxable income by the number of your gross receipts.
- Those who own an S-corporation will have to pay a franchise tax of 2.5%. This is only applicable for the first $1 million of total income that has been reported each year.
Taxpayers can also file their taxes early with the Texas Franchise Tax Board. This will allow them to get their tax refund faster by depositing it at a local bank instead of waiting for it to be deposited in their account. The Texas Franchise Tax Board is open from 8:00 AM to 5:00 PM on Monday through Friday.
Residents of Texas are required to file their taxes by April 15th, May 15th, or June 15th. However, there are several reasons that you can file your taxes a little early that will allow you to get that much more back in your bank account. This will depend on when you use the early deposit option which is available for no extra charge or if you file by paper then there will be no late state fees.
- Taxpayers who are active members of the military can file their returns and get their refund faster if they do it early. It is recommended that you submit your return at least 4 weeks before the March 1st deadline.
- Taxpayers who have a balance due will not be charged a late fee as long as they file by April 15th.
- Taxpayers who expect to receive a refund can request for their refund to be deposited into their bank account. This must be done by April 15th and the extra $30 fee will be waived.
- Taxpayers can file their taxes online up until midnight on April 15th. This option is free of charge so if you are going to file your taxes on time then this is the best option for you.
There are several things that you need in order to file your taxes with the Texas Franchise Tax Board.
- PIN number
- Social Security Number
- A copy of your W–2 form
- Any other 1099 forms that you may have received during the tax year.
It is also recommended that you keep copies of all of your receipts in case the computer software is used to prepare your tax forms asks for proof of purchase.
The numbers above are just for the prices of Texas. There are many factors that can affect your fees such as where you live and if you hire a professional to help you with your paperwork.
Keep in mind that the prices mentioned in the above information are the only representative of the average fees set by Texas. The amount charged can be higher or lower depending on your own situation. As mentioned before, if you do not do a lot of research and prepare properly for setting up your business, you will end up spending more money than necessary.
Most of the forms that you will need to file with Texas are very similar. The forms are available online at the Texas Franchise Tax Board, or you can request for them to be mailed from your local government.
The only form that you might have trouble with is a Schedule CT-1 which is an information return form for evaluating the establishment of your company. This form must be completed by an accountant or someone who has experience in the small business and accounting field which will greatly help you when preparing for taxes.
So the next time that you need to complete your taxes for Texas, make sure to do some research. That way you will not spend thousands of dollars in fees and it will be money well spent.