Texas LLC Fees

[Kyle K.]

This post is meant to be informative in nature, since I found it a little difficult to find all of the answers I was looking for regarding Texas LLCs and I wanted to share my findings on BiggerPockets. Naturally, I will focus on forming a Texas LLC for the purpose of holding investment properties.

Currently (and this seems to change from time to time), the fee to form an LLC in Texas is $300. (https://direct.sos.state.tx.us/help/help-corp.asp?pg=fee ) Of course, when you factor in legal fees, the formation of company articles and the like, you're looking at spending anywhere from $1000-3000 depending upon your lawyer.

That's the easy info. What's the cost of maintaining a Texas LLC? I'm glad you asked.

There are no additional annual filing fees for maintaining a Texas LLC. They are, however, subject to a franchise tax.

However... it is unlikely you will have to actually pay any sort of franchise tax. Take the following snippet from http://www.window.state.tx.us/taxinfo/franchise/faq_rpt_pay.html#rpt_pay2:

16. What are the criteria for filing no tax due reports?

A taxable entity, including a combined group, qualifies to file a No Tax Due Report if it meets one of the criteria below:

* has zero Texas receipts,
* qualifies as a passive entity under TTC 171.0003,
* is a real estate investment trust (REIT) that meets the qualifications specified in TTC 171.0002(c)(4), or
* has total revenue, annualized per 12 month period on which the tax is based, below the no-tax-due threshold amount defined below.

The no-tax-due threshold is:

* $300,000 or less for franchise tax reports originally due on or after January 1, 2008 and before January 1, 2010.
* $1,000,000 or less for franchise tax reports originally due on or after January 1, 2010 and before January 1, 2012.
* $600,000 or less for franchise tax reports originally due on or after January 1, 2012.

Thus, unless the rental properties held by your LLC are generating revenue in excess of $300,000/year, you aren't going to be paying any fees to maintain your LLC. I don't know how this all works in the event you sell property held by the LLC for capital gains, but I'm sure a competent CPA could explain all of that.

Thus, if you are forming a Texas LLC and you live out of state, your only expense could be that for maintaining a 'Registered Agent', which I have found ranging from $100-$300 per year. Not too bad for the purposes of adding an additional layer of liability protection to your portfolio.

[John Jackson]

Good post Kyle.
Couple of quick things to add, is that regardless if your LLC does not have to pay a Franchise Tax, you must still file with the state, although I guess that's a known.
Also, no need to use an attorney, just go directly to the SOS. Another option, is use Lawyer's Aid Service in Austin. They have been my registered agent for 9 years. They can file and be your registered agent. One stop shop.
Costs $120 a year.
Suite 101
408 W. 17th St.
Austin, TX 78701