Texas LLC Costs – Summary

Here is a brief summary of the key LLC costs you will incur in starting your business in Texas:

Certificate of Formation (LLC filing fee)	300$
Business license	Varies by type
Registered agent (optional)	$199-$400
Operating agreement (optional)	0$-1000$
Reserve business name (optional)	$40
Filing a DBA (optional)	$15-$25
Franchise tax (annual)	0.375%-0.75%
Annual report	$0

There’s a myth that forming an LLC in Texas is expensive. However, the cost depends on the type of business that you are forming. The LLC Texas cost structure includes some standard fees all LLCs pay and others that vary based on the business type.

Again, knowing the right steps to take, or having a dedicated strategic partner to help, can make all the difference.

Costs When Forming a Texas LLC

How much does an LLC cost in Texas? There’s no one answer. There are mandatory and optional costs, and some vary. Let’s go over the costs of initially setting up an LLC in Texas:

Naming your Texas LLC (optional name reservation fee)

Texas law mandates that any legal entity have a distinct name that is recorded with the Secretary of State. The name must be different from other filed entities, including foreign-filed entities.

You can check on a potential name for free by contacting the Texas Secretary of State’s office at (512) 463-5555 or dialing 7-1-1 for relay services or by e-mailing your desired name to the Corporations Section at [email protected].

Once you’ve chosen a name, you can file Form 501 or via the SOSDirect website. The cost to file a name is $40. Once filed, your name reservation is valid for 120 days. Once reviewed and accepted, the registration is valid for a year, renewable.

The legal name for your LLC will be on the filed formation documents. You can also choose to establish a doing-business-as (DBA) name. You do not need to file this name with the state. The DBA is a way for the public to identify your company for standard business.

If you choose to do business under a different name than that of your DBA, you will need to file Form 503, an Assumed Name Certificate, with the Secretary of State and the county clerk in every county where you have business premises.

Filing articles of organization fee

When you start a new business, you want to be sure that the rules of the road are clearly spelled out. The Articles of Organization create the roadmap that guides the major decisions within your business. These articles establish what the rights, powers, duties and liabilities are for each of the members of the LLC. In addition, the articles spell out what the LLC is obligated to provide to its members,

Many states require companies to file Article of Organization. Texas requires the filing Form 205—a Certificate of Formation. The cost to file this form is $300.

The Certificate of Formation asks for the following information:

• Company name
• Registered agent or registered office
• Whether the company has managers
• he name or organization and address for initial governing people
• The initial mailing address
• Supplemental provisions or information
• The organizer’s name and address
• When the filing is effective
• On the occurrence of a future event (up to 90 days after signing)
• Date
• Signature

Registered agent service (optional)

A registered agent is an important and necessary step to take when forming an LLC. A registered agent acts as your designee and can receive legal filings on your behalf.

Some people choose to serve as their own Texas registered agent. In such cases, there is no cost. However, it’s a smart idea to consider hiring a registered agent service.

Using a registered agent service is a prudent move, allowing you to have the freedom and flexibility to concentrate on your business. You can also gain peace of mind knowing someone else is available to receive legal documents privately.

The cost for registered agent services ranges from $199 up to $400 in annual fees.

Cost of creating an operating agreement (optional)

You are not required to file an operating agreement for a Texas LLC. However, it is a smart idea to create one. An operating agreement lays out the ownership structure of your LLC and its basic organizational structure. In a typical operating agreement, you will list:

• LLC members and the ownership percentage of each
• Rights and responsibilities of your members
• Membership structure (member-managed or manager-managed)
• Rules and processes for buy-ins and sell-outs
• How assets are distributed if the LLC is dissolved
• Rules for when a member leaves or dies
• Amendment procedures

You may choose to do this work yourself. However, hiring a lawyer for such legal documents, or using the Tailor Brands operating agreement service, is a better choice. The cost is anywhere from $0 to $1,000.

Other Annual and Additional Texas LLC Costs

In addition to the formal fees for various services, there are other required fees, taxes and permitting costs for an LLC in Texas.

Franchise tax

Like other types of Texas businesses, an LLC is subject to an annual franchise tax. It is called a “privilege tax” and is imposed on each taxable entity that is formed, organized or doing business within the state.

The cost of the franchise tax depends on the type of entity doing business. For retail or wholesale businesses, the rate is 0.375 percent of total revenue (which includes gross receipts or sales, dividends, interest, rents, royalties, gains or losses and other revenue). For other businesses, the rate is 0.75 percent.

Businesses earning $1.23 million or less do not have to pay the franchise tax. Up to $400,000 in compensation may be deducted.

Business licenses & permits

All Texas businesses that sell tangible personal property in Texas must obtain a sales tax permit. There is no fee for this permit, which can be obtained online.

Various types of businesses must acquire other licenses and permits to conduct business within the state. The types of licenses and permits, and the associated fees, vary widely based on the business type. Here are a few common licenses and permits, for example, for retail establishments:

• Abusable volatile chemicals permit ($57 every two years)
• Alcohol licenses and permits (varies)
• Copyrighted music license (varies)
• Lottery sales license ($125 annually for the first location)
• Medical devices, equipment and supplies license (varies)
• Retail food establishments license (Based on business type and gross annual volume of food sales)
• Sign license (varies; must also provide bond coverage)

Annual report

An annual report is a summation of the financial results of the previous 12 months. For publicly held companies, these reports are a legal requirement. For Texas, a Public Information Report is due on May 15 each year and is filed with the franchise tax. There is no fee to file this report.

The Public Information Report asks for basic information, including:

• Taxpayer number
• Taxpayer name and mailing address
• Principal office and place of business
• The name, title and mailing address of each officer, director, member, general partner or manager, with their term expiration date
• Ownership interests held by or held of the LLC by other business entities of 10 percent or more
• Registered agent name, office and address
• Signature

What Expenses You Can Write Off

There’s good news when it comes to filing your taxes related to your Texas LLC. Many of the formation costs are tax deductible on your federal tax return. Among the deductible expenses are:

• Cost of completing articles of organization
• Filing fees
• DBA fees
• Operating agreement costs
• Registered agent costs
• Attorney and bookkeeping fees

Texas LLC State Filing Fees

Here is a list of the LLC related filing fees in Texas, taken from the Secretary of State’s fee schedule.

Fee type	Fee cost
Reservation/Renewal of Entity Name	$40
Registration/Renewal of Foreign Entity Name	$40
Withdrawal of Registered Entity Name	$15
Application for Registration to do Business	$750
Amended Certificate of Authority/Registration	$150
Withdrawal of Certificate of Authority/Registration	$15
Termination of Foreign Registered Entity	$15
Preclearance of any filing instrument	$50
Expedited Processing Fee per document	25
Reservation/Renewal of Entity Name	$40
Transfer of Reserved Name	$15
Withdrawal of Reserved Name	No fee
Certificate of Formation	$300
Articles/Certificate of Amendment	$150
**Articles/Certificate of Merger	$300
***Articles/Certificate of Conversion	$300
Articles/Certificate of Share Exchange	$300
Restated Certificate of Formation/Articles of Incorporation	$300
Change of Registered Agent/Office	$15
Change of Address by Registered Agent	$15
Resignation of Registered Agent	No fee
Statement of Operation as a Close Corporation	$15
Statement of Restriction on Transfer of Shares	$15
Amendment to Established Series of Shares	$15
Articles of Dissolution/Certificate of Termination	$40
Revocation of Voluntary Dissolution	$15
Reinstatement after Voluntary Termination	$15
Reinstatement following tax forfeiture	$75
Reinstatement after Involuntary Dissolution/Termination	$75
Statement of Delayed Effective Condition	$15
Articles/Certificate of Correction	$15
Preclearance of any filing instrument	$50
Any instrument for which no express fee provided	$15
Expedited Processing Fee per document	$25

When you start a new business in Texas, like in any other state, you should take into account all expected expenses. Check out this guide about starting a business in Texas for more information. 

Conclusion

Forming an LLC takes careful planning and understanding of the steps and fees. It’s an exciting process that helps spell out how the company will operate, its name and its business structure.

Using a trusted partner to coordinate the various business filings, processes and documents allows you to focus on other key work on behalf of your LLC. To learn more about how Tailor Brands can help with your Texas LLC filings, contact us today.

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