How to Start an LLC in Texas for Free
Most LLCs in Texas must pay the $300 domestic filing fee. But is there a way to avoid this fee? Find out in this article.
 |
Starting an LLC in Texas without spending anything might be a stretch. But cutting down costs is achievable. Specifically, you don't have to spend a dime on LLC formation services.
That said, this guide will help you determine where and how you can save. You'll also find out the necessary expenses you'll have to budget for at the end of the article. Read on.
Can I Form an LLC in Texas for Free?
You can start an LLC in Texas for free through waiver fees if you're a veteran. You can also save on others through free LLC formation packages or by filing all the paperwork yourself.
Here's how to do each of them.
Apply for a Veteran-Owned LLC Fee Waiver
In Texas, veterans who form an LLC can waive the $300 filing fee and gain a five-year exemption from the state's franchise tax.[1]
Your LLC only needs to meet the following qualifications (as stated in the Senate Bill 938):[1]
- Formed on or after Jan. 1, 2022 and before Jan. 1, 2026
- 100% owned by a veteran from the U.S. Armed Services
- The veteran has been honorably discharged
To create a veteran-owned business in Texas, you must first request a Veteran Verification Letter from the Texas Veterans Commission. Then, you must file the Certificate of New Veteran-Owned Business and Certificate of Formation to the Secretary of State. [1]
If you're not a veteran, however, a DIY can help you save on the cost of starting an LLC.
Try a Do-It-Yourself Approach
If you plan to form an LLC in Texas, you can perform the process yourself instead of opting for LLC formation services. These services can cost around $50 to $399.
That said, there are still LLC formation expenses you need to prepare for even if you perform a DIY:
| Texas LLC Fee | Cost |
|---|---|
| Texas LLC Formation Fee | $300 - $750[2] |
| Name Reservation Fee | $40[2] |
| Assumed Name Certificate Fee | $25[2] |
| Operating Agreement Fee | Up to $500+ |
| Registered Agent Services Fee | Up to $399+ |
The cheapest way to start an LLC in Texas is to do everything on your own. For example, you can file the Certificate of Formation, be the LLC's registered agent service, and create the Operating Agreement using a free template online.
Here's how you can get started:
- Name your LLC ($0 to $25)
There's no cost to naming your Texas LLC. It's included when you pay the LLC formation filing fee.That said, be sure to check if your desired business name is available. The Secretary of State has an online database that shows all the names already being used in Texas. There's a $1 fee for each name search.[3]
You can register a trade name for your Texas LLC.
For an additional $25, your Texas LLC can do business under a name different from its official registered name. Also called a DBA (Doing Business As), it's ideal if you want to operate under a business name that is more marketable or doesn't have an "LLC" at the end. - Create an operating agreement ($0 to $500+)
You're not required to have an operating agreement in Texas. But it's highly recommended because it outlines how the business will operate.It's a legally binding contract between the members and managers of the LLC. And it states important details such as the management structure, responsibilities, procedures, etc.
You can create an operating agreement for free with online templates. Alternatively, it could cost upward of $500 if you hire an attorney.
- Choose a registered agent ($0 to $399+)
All LLCs in Texas must have a registered agent.[4] They will be responsible for receiving business and legal documents on behalf of your LLC.You can do this for free if you appoint yourself as your LLC's registered agent. You only need to be at least 18 years old with a physical street address in Texas. Otherwise, registered agent services cost as low as $35 a year.
- File your Articles of Organization ($300 to $750)
Your LLC formation documents are commonly referred to as Articles of Organization. It contains important information about your LLC, like your LLC name, registered agent's name, management structure, etc.Texas' filing fee costs $300 for domestic[2] and $750 for foreign LLCs.[2] Unfortunately, there's no way around these fees unless you're a veteran.
Foreign LLC Registration in Texas
In Texas, the filing fee for foreign LLC registrations costs $750. Instead of the Articles of Organization, you need to register an Application for Registration of a Foreign Limited Liability Company in Texas. This is an entirely different process from a domestic LLC application and involves other steps. - Get an EIN ($0)
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS). It's used to identify a business entity for tax-related purposes.Applying online is the fastest and easiest way for most applicants. If you register online, you can get an EIN in 15 minutes at no cost.
Do these steps seem too complicated? Some business formation services below can help you do this for free.
Select a Free LLC Formation Package
LLC Formation services can answer your questions and ensure you're following the correct procedures when forming your LLC. They also remove the hassle of doing the paperwork yourself.
These services often offer:
- Business name availability search
- Preparation and filing of your LLC paperwork
- Registered agent services
- EIN services
Some companies offer to file your LLC formation documents for free while providing freebies like registered agent services for 1 year. But you may still have to pay for other services, like creating an operating agreement.
Fortunately, you don't always have to pay for Texas LLC formation services. Check out the companies below.
Best Free LLC Formation Packages
The best free packages offer additional services like registered agent services or free bank accounts. Read on.
Bizee: Silver Package
Bizee, formerly known as Incfile, offers a Silver Package that comes with a free LLC formation. You just need to pay the state filing fee.
You also get free registered agent services for a year, which can mean huge savings on your end. These include receiving and scanning important legal documents on your behalf, such as tax notices and service of process.
ZenBusiness: Starter Package
ZenBusiness has a Starter package for new entrepreneurs. It includes an LLC formation service and a 100% accuracy guarantee. This means your formation documents will be refiled for free if there is any mistake due to their error.
It even offers a Worry-Free Compliance service to ensure you don't miss deadlines for your annual report. Unlike Bizee, however, ZenBusiness' registered agent services aren't free. It costs $199/yr.[5]
Starter - $0 + State Filing Fees
- Includes 1 optional free year of Worry-Free Compliance that renews at $199/year
- Standard filing speed
- 100% accuracy guaranteed
- Other services are available with additional costs
Tailor Brands: Basic LLC Formation
Tailor Brands doesn't charge a fee for LLC formation services. Plus, it can get you a free business bank account through Mercury.
Mercury accounts have no monthly maintenance fees and don't require a minimum balance.[6]
In addition, Tailor Brands can help with business branding and marketing. It offers affordable services like social media marketing, logo creation, and website design.
Inc Authority: Free LLC Package
Inc Authority helps you form an LLC online for free. But like all free LLC formation packages, you still need to pay the $300 Texas domestic LLC filing fee.
Similar to Bizee, you won't pay for Inc Authority's registered agent services during your first year.
You may even benefit from its live customer support by phone or email. This makes it easy to ask questions about your business formation.
Having said all this, it's not possible to start an LLC in Texas completely for $0. Below are annual expenses you can't avoid.
LLC Annual Expenses You Can't Avoid
LLCs generally consider 2 types of expenses—the annual report fees and business taxes. Read on to see if Texas charges these and for how much.
Texas Annual Report
Unlike most states, Texas doesn't require LLCs to file annual reports with the Secretary of State. Texas doesn't charge annual report fees either.
But you must still submit the Public Information Report to the Comptroller's Office by May 15 each year.[7] LLC services offer to file this for you for a fee, but you can do this online at no cost.
The minimum cost of maintaining an LLC in Texas equals your annual franchise tax. You may have to pay between 0.331% and 0.75% of the LLC's taxable income if your annualized total revenue exceeds the "no tax due" threshold.[8]
Texas Business Taxes
LLC members are considered self-employed and must pay self-employment taxes on their share of the profits. But there's also a federal income tax to take note of.
| Tax | Rates |
|---|---|
| Self-employment Tax | 15.3% (combined); 12.4% goes to Social Security and 2.9% to Medicare[9] |
| Federal Income Tax | 10% to 37% of your taxable income[10] |
In addition, as of 2024, LLCs that earn more than the annual tax threshold must file a franchise tax report each year. The no tax due threshold as of 2024 is $2.47 million.[11]
You may be subject to more tax depending on the nature and purpose of your business.
A franchise tax, also called a privilege tax, is a fee that businesses pay to the state for the privilege of doing business in Texas. The franchise tax report is submitted to the Comptroller's Office for free. The only payment due is any franchise tax that your Texas LLC owes for that filing year.[12]
Other Potential Costs for LLCs
Some of these costs aren't mandatory. But since they can be essential in starting an LLC, it's always better to prepare for them.
BOI Report
The Corporate Transparency Act of 2021 requires businesses to submit a Beneficial Ownership Information (BOI) report to the Financial Crimes Enforcement Network (FinCEN).[13]
You are considered a beneficial owner if you own 25% or more of the ownership interests in your LLC. Or if you exercise substantial control over the LLC.
The BOI report includes detailed information about your LLC's beneficial owners, including name, birth date, and address. This information will not be disclosed to the public.
LLC services offer to file this on your behalf for a fee ($79 to $99). However, there's no filing fee for the BOI report. Also, watch out for penalties. Civil fines cost up to $500 per day for late filings.
The BOI report's due date depends on when your LLC was formed:[13]
- Before January 1, 2024: due on January 1, 2025
- On or after January 1, 2024: due within 90 days after the date your LLC was formed
- On or after January 1, 2025: due within 30 days of company formation
Business Permits and Licenses
Texas doesn't have a general state license. However, you need a Texas sales and use tax permit if your LLC sells tangible personal property. Or if you offer taxable LLC services.
You can get this online for free. Just allow 2 to 3 weeks to receive your permit.[14]
Aside from the sales and use tax permit, the Lone Star state prefers leaving business licensing requirements to local jurisdictions and specific industries.
The number of permits and licenses your LLC needs depends on its business purpose. Some businesses may be regulated simultaneously by various governmental offices, racking up total costs of over $1,000.
There isn't a single, comprehensive website or resource that lists all available permits and licenses for businesses in Texas.[15] Reach out to the Texas Business Permit Office or ask a business lawyer to ensure you comply with all necessary licensing requirements.
Business Bank Account
An LLC provides limited liability. This means personal assets (like your home and car) are protected from business debts and liabilities.
That said, LLCs are required to have a separate business bank account to maintain a clear separation of personal and business finances.
While opening a business bank account is frequently accompanied by charges, check out banks for LLCs that have low fees and valuable perks to help your business grow.
Often required by banks, a Certificate of Account Status is a document that proves that your LLC can do business in Texas. It means you've paid your LLC's fees and taxes. You can get a Certificate of Status from the Texas Comptroller.[16]
Business Insurance
Unlike other states, Texas doesn't require most private employers to have workers' compensation insurance.[17] However, it's still recommended to have business insurance to help protect your LLC.
When shopping around for one, consider the specific risks your LLC faces. Prioritize getting the right coverage for your specific needs and get quotes from multiple providers.
Let's say you don't have employees. Your LLC may still benefit from business insurance that covers expenses from unexpected events and damaged property.
Investing in the right insurance can help protect your business from financial losses. For example, business property insurance covers your LLC's furniture and equipment against damage or loss.
Business Website
A website and social media presence are dedicated online spaces for your business. They're essential for marketing, customer engagement, and brand visibility in today's digital world.
Hire a professional web developer if you want a highly customized and unique website. Or do it yourself using a website template through popular content management systems like WordPress and Wix (around $15 to $20/mo).
Even if you're not planning to build a business website now, it's a good idea to at least buy the domain name. This prevents others from using your LLC's name as a web address.
Domain squatters often monitor newly registered LLC names. They purchase corresponding website domains and then resell them at significantly higher prices.
Bottom Line
You can start an LLC in Texas for free if you qualify for fee waivers. These fee waivers are available for veteran-owned LLCs. And they waive the mandatory fees for filing your paperwork.
Unfortunately, if you're not qualified, there's no avoiding the filing fees. There are also other fees that you'll have to budget for that come with starting an LLC.
LLC formation services that offer free packages can make the work easier without adding to the cost. You can also do the paperwork yourself so you can avoid extra fees altogether.
Starter - $0 + State Filing Fees
- Includes 1 optional free year of Worry-Free Compliance that renews at $199/year
- Standard filing speed
- 100% accuracy guaranteed
- Other services are available with additional costs
References
- ^ Texas Secretary of State. Business Information for Veterans, Retrieved 01/29/2024
- ^ Texas Secretary of State. Business Filings & Trademarks Fee Schedule, Retrieved 01/29/2024
- ^ Texas Secretary of State. Filing Your Business, Retrieved 01/30/2024
- ^ Texas Secretary of State. Acceptance of Appointment and Consent to Serve as Registered Agent, Retrieved 01/30/2024
- ^ ZenBusiness. Products & Pricing, Retrieved 05/10/2024
- ^ Mercury. Frequently Asked Questions, Retrieved 02/12/2024
- ^ Comptroller.Texas.gov. Filing Requirements, Retrieved 01/30/2024
- ^ Texas Comptroller of Public Accounts. Franchise Tax, Retrieved 04/02/2024
- ^ IRS. Self-Employment Tax (Social Security and Medicare Taxes), Retrieved 01/30/2024
- ^ IRS. Federal income tax rates and brackets, Retrieved 02/12/2024
- ^ Comptroller.Texas.Gov. Texas Comptroller of Public Accounts, Retrieved 01/29/2024
- ^ Comptroller.Texas.gov. Changes to No tax Due Reporting for 2024 Reports, Retrieved 01/29/2024
- ^ FINCEN. Frequently Asked Questions, Retrieved 01/29/2024
- ^ Comptroller.Texas.Gov. Texas Online Tax Registration Application, Retrieved 01/30/2024
- ^ The State of Texas. Business Permit Office, Retrieved 01/29/2024
- ^ Texas Comptroller. Franchise Tax Account Status, Retrieved 02/12/2024
- ^ Texas Department of Insurance. Workers' compensation insurance guide, Retrieved 01/30/2024
Write to Nicole King at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.
Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.
|
|
| ||||||
|
|
|
