How much does it cost to form a Texas LLC or Corporation?
The state has a robust infrastructure and unrivaled connectivity thus helping businesses to launch their products and services to major domestic and international markets. The availability of infrastructure and logistics have been playing a key role in ensuring lower cost to form a Texas LLC or corporation in the state as compared to other states like California, Tennessee, and New York. This guide will provide you with an insight into various aspects of LLC vs Corporation in Texas including choosing a business entity, Pros and Cons of LLC or corporation, new business formation costs, and annual maintenance costs.
Texas LLC or Corporation
Texas is one of the top destinations for startups and entrepreneurs but the most popular business structures are that of a limited liability company and corporation. The overall cost to form Texas Corporation is also low as compared to some of the other states. Depending on the specific needs or requirement, entrepreneurs can opt for several other forms of business like sole proprietorship, general partnership, limited partnership, and limited liability partnership. The formation and related aspects of a new business are governed by the Texas Business Organizations Code (BOC). The annual maintenance cost of Texas Corporation is different from that of Limited Liability Company or any other forms of business.
Which business entity should I choose for Texas business?
As a new business owner, one of the most important aspects is identifying the legal structure for your company. The structure of an entity has a significant impact on several key areas like the cost to form Texas LLC, taxation, legal liability, and ownership control of the entity. The following factors will help you to make an informed choice when it comes to choosing a specific form of business entity.
- Limited Liability Protection: The term limited liability refers to a type of legal structure where the private assets of owners and investors will not be at risk if the business fails to perform. It is considered as one of the biggest advantages and can help reduce the Texas LLC cost per year. In fact, different forms of businesses like a limited liability company (LLC), limited liability partnership (LLP), and even corporations offer this advantage.
- Pass-through entities: A pass through entity is a type of business where there is no double taxation. This simply means that the taxes of an entity will actually get “passed through” to the owner of the entity and hence tax returns will be filed by the owner instead of the business. This ensures the overall cost to form Texas LLC is less than that of a corporation. The businesses that are considered as pass-through entities include sole proprietorship, limited liability companies, and S corporations.
Startup Cost: The new business registration or incorporation fee plays a key role in determining the cost to form a Texas Corporation or LLC. A cost of forming a new business is governed by several factors including:
- Name reservation & renewal
- Annual reports
- Correction and amendments
- Assumed name certificates
- Rent or lease of commercial space
If you consider an LLC vs Corporation in Texas then the startup costs are almost similar for both forms of business although the registration fee for a professional association or limited partnership is higher than that of an LLC or corporation.
Pros and Cons of forming an LLC or Corporation in Texas
The most adopted business structure in the state is that of a limited liability company and a corporation. The overall cost to form a Texas Corporation or an LLC is low as compared to other forms of entities. Of course, there are pros and cons of forming a Texas LLC or a corporation.
A Texas limited liability has several advantages and disadvantages. Here are some of the pros and cons that will help you make an informed choice.
Pros of LLC
- A limited liability company will enjoy the flexibility of being taxed as a partnership, sole proprietor, C corporation, or S corporation
- The Texas LLC cost per year is less as compared to some of the other forms of business entities
- There is less paperwork involved for new business formation
- You can form a single-member LLC (with one person) or multiple-member LLC (several people)
- You can take advantage of flow-through taxation
- Members of a Texas LLC will enjoy limited liability protection against debts or legal issues
Cons of LLC
- Once you become a member of an LLC, you will not be able to pay wages to yourself
- One of the important costs to form a Texas LLC is the franchise tax
- An LLC vs Corporation in Texas reveals that investors would prefer a corporation over an LLC
- In a multi-member LLC, the ownership will be spread across all members
A Texas corporation is one of the most opted for structures but has its own advantages and disadvantages as mentioned below.
Pros of a Corporation
- One of the salient aspects of a corporation is limited liability. Since a corporation is seen as an entity separate from its owners and hence provides protection to them
- If you consider LLC vs Corporation in Texas then a corporation has the upper hand as it attracts investors
- A C Corporation provides employees with stock options and hence a more lucrative work place as compared to other forms of business
- The cost to form a Texas Corporation is lower than some of the other entities in the state
- Corporations enjoy continuity and can exist forever even if the company founder leaves or dies
Cons of a Corporation
- The process to incorporate in Texas is expensive and time consuming involving a lot of paperwork.
- There is a possibility of double taxation where the profit of corporation as well as dividends paid to stockholders may be taxed
- As compared to an LLC, a corporation follows a much more rigid structure and less flexibility
- Owners of corporations are not paid a salary; instead they receive dividends, which are subsequently taxed
Do you want to start a Texas LLC or a corporation?
Texas LLC Cost
A limited liability company is one of the most popular forms of business entities across the U.S. You can form a Single-member LLC (SLLC) or a Multi-member LLC depending on your requirements and to reduce the cost to form a Texas LLC. The type of limited-liability Company you want to form will depend on a variety of factors like ownership, management, personal asset protection, formation, tax treatment, and periodic and annual compliance. One of the salient aspects is that the Texas LLC cost per year is lower than the annual costs in some of the other states like California, Maryland, and Massachusetts.
Cost for forming Texas LLC
If you are planning to start a new business in Texas then a limited liability company is considered as one of the best structures for a startup. When you think about the cost to form a Texas LLC then it includes initial registration and other one-time or annual fees. The Texas LLC cost per year includes:
- You have to file Certificate of formation for a Texas LLC along with a filing fee of $300
- You have to reserve a business name prior to filing Texas LLC registration documents and the fee is $40
These are fixed costs and there are variable Texas LLC costs per year that include franchise tax as well as business license and permits.
Annual maintenance cost for Texas LLC
When you form a new LLC in Texas it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. There is an annual maintenance cost to form a Texas LLC and this helps primarily in keeping the business active. The annual maintenance expenses include:
- Once you have applied for registration or certificate of formation you will require a certified copy of the LLC Certificate of Formation and an additional fee of $30.
- The most important aspect that keeps your Texas business operational is business licenses and permits. This is one of the important aspects of annual maintenance and is seen as Texas LLC cost per year. There are no general business licenses in the state but licenses are required according to the type of business activity. For example: If your business activity is related to Food and Beverage then the fee for a business license is approximately $200 but if you are planning to start a tattoo studio then the business license fee is $927.
- The maintenance cost to form a Texas LLC also includes a fee attached to renewing your business license or permits, which will vary according to the type of business activity.
- If you make any amendments to the certificate of formation then there is a fee of $15
There are several aspects of formation and costs when it comes to LLC vs Corporation in Texas. We, at IncParadise can help you to register an LLC in Texas as we possess the experience and expertise related to new business formation in the state.
Do you want to register a Texas LLC?
Texas Corporation Cost
Entrepreneurs prefer corporations as their startup business model as it is easier to attract investors. A corporation is a legal business entity that has a separate existence from the owners and this gives corporations perpetual existence. There are several other advantages like the cost to form a Texas Corporation is lower as compared to other states like Connecticut and District of Columbia. If you incorporate in Texas, you will also be able to leverage the many business incentive programs the state offers, which play a key role in providing your business with financial assistance.
Cost of forming a Corporation in Texas
If you are planning to incorporate in Texas then it is important that you identify the cost to form a Texas Corporation. The cost includes initial incorporation, which is a one-time cost. The fee that you will incur initially is:
- You have to file Certificate of formation for a Texas corporation along with a filing fee of $300
- If you file a Certificate of correction then there is a fee of $15
- If you make an amendment then the filing fee for a Certificate of amendment for Texas corporation is $150
- You have to reserve a business name and this is a part of the forming cost for a Texas Corporation. The fee is $40
These are fixed costs and there are variable costs to form a Texas Corporation that includes franchise tax as well as business license and permits. It is important to note that if your business is a foreign entity then the fee for foreign registration is $750.
Annual maintenance cost for Texas Corporation
When you file for incorporation in Texas, it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. The compliance can be kept by ensuring annual maintenance cost of Texas Corporation. The maintenance expenses include:
- There will be an additional fee of $30 if you apply for a certified copy of the Certificate of Formation of a profit corporation
- Business licenses and permits are integral to any business including a corporation in Texas. This is a key component of cost to form a Texas Corporation. The state doesn’t have general business licenses but permits and licenses are issued based on the business activity. For example: If you start a Retail Food Establishment in Texas then the licensing or permit fee will depend on the gross annual volume of food sales like the fee is $773 for a volume sale of $150,000 or more. The fee for a mobile food unit or a vehicle-mounted mobile food unit is $258 per unit.
- The annual maintenance cost of Texas Corporation also includes a fee attached to renewing your business license or permits, which will depend on the type of business activity.
The cost to form a Texas Corporation also takes into account other aspects like franchise tax and any amendments made to the business or a change of address, for which, there would be an additional fee. We, at IncParadise can help you to incorporate in Texas with ease and provide guidance pertaining to state compliances and annual maintenance requirements.
Do you want to form a Texas Corporation?
Need any Assistance in Forming Your Texas LLC or Corporation
If you are planning to incorporate in Texas or want to start an LLC then there will be several aspects you need to consider pertaining to the process of new business formation. There are several formation and compliance requirements of the state that you will have to fulfill and this makes the entire process complex. We, at IncParadise can help in making the process simpler by handling your new business formation or incorporation requirements along with the state compliance.
IncParadise is one of the leading business incorporation and registered agent service providers in Texas and we have helped thousands of companies to start their business. We also provide additional services to Texas businesses like getting tax id, foreign qualification, S corporation status, and dissolutions among others.