Are you thinking of starting a business in Texas? One of the most accessible business structures is the LLC or Limited Liability Company. It combines the tax freedom of a sole proprietorship with the liability protection of a corporation. If you’re considering setting up an LLC, this article will provide everything you need to know to get started.
Steps to Start Your LLC
Steps to set up an LLC in Texas:
- Choose the Type of Your Texas LLC
- File Formation Documents
- Create an Operating Agreement
- Get an EIN
- Open a Business Bank Account
- Comply with Additional Requirements
- File an LLC Franchise Tax
This article covers all the steps, LLC requirements, and federal and state tax implications.
Costs of Setting Up an LLC
State Filing Fees
When forming an LLC in Texas, the basic cost is the state filing fee. The fee for filing Articles of Organization with the Texas Secretary of State is $300. For expedited processing, there’s an additional $25 fee.
Federal Income Tax
An LLC’s federal income tax requirements depend on its classification. Texas requires LLCs to pay a franchise tax based on the business’s total revenue.
Business Structure in Texas
The most adopted business structure is the LLC and the corporation. Texas offers an ideal place for startups due to its business-friendly tax environment and low cost of living.
How to Set Up an LLC By Yourself
To set up an LLC in Texas by yourself:
- Name Your Texas LLC
- Choose a Registered Agent in Texas
- File the Texas Certificate of Formation
- Create a Texas LLC Operating Agreement
- Get an EIN
Alternatively, you can use professional services like:
- Northwest ($29 + State Fees)
- LegalZoom ($79 + State Fees)
Starting an LLC in Texas is straightforward. File the Certificate of Formation with the Texas Secretary of State and comply with federal tax requirements, such as applying for an Employer Identification Number (EIN).
Liability and Capital Challenges
Owners can be personally liable for debts, legal actions, or if they do not maintain separate personal and business activities. LLCs cannot issue stock, which may complicate raising capital compared to corporations.
Tax Responsibilities
In Texas, the general sales/use tax’ rate is 6.25%, with local jurisdictions adding up to 2%, for a maximum combined rate of 8.25%. Certain products like automotive oil, mixed beverages, and tobacco have separate tax rates. Businesses must collect and report sales tax to the state.
Forming an LLC in Texas: Benefits and Timeframe
Forming an LLC provides advantages such as economic strength, asset protection, tax benefits, and flexibility. LLC formation typically takes four to six weeks to process. Professional online Texas LLC formation services can ensure all legal requirements are met.
Alternative Registration Methods
- Fax: Send documents to (512) 463-5709.
- Mail: Corporations Section P.O. Box 13697 Austin, Texas 78711-3697.
- Delivery: James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701.
- Courier: Use a suitable courier service to the above delivery address, including payment.
LLC Cost In Texas
To create a Texas LLC, submit the Certificate of Formation with a $300 fee. You may apply online or by mail.
Easy Steps to Follow
- Name Your Texas LLC
- Choose a Registered Agent
- File the Certificate of Formation
- Create an Operating Agreement
- Get an EIN
Considering starting an LLC in Texas? This business structure is ideal for small businesses and startups due to its asset protection features and ease of establishment. LLCs require less formal management compared to corporations and can be owned by just one individual – perfect for sole proprietorships.