I started my LLC (Limited Liability Corporation) several years ago and I wish I would have a comprehensive list of steps to help guide me – it’s a pretty tough thing to navigate alone. If you just Google, “forming an LLC”, you are sure to instantly become overwhelmed because of the number of layers and complexity of the information. So here, I’m going to break down forming an LLC or S-Corp in Texas.
As a first consideration. answer this question for yourself. “Do you really need an LLC versus just using a DBA to do business?”
The difference is this. If you establish a DBA (Doing Business As), then you are essentially doing business under your legal name. Nothing really changes as far you other than filing your taxes a little differently at the end of the year to account for any income you brought in under your DBA. Easy enough.
An LLC is different in that you are establishing a different legal entity entirely, of which, you are the CEO (or founder or whatever title you wish to give yourself.) This separation of business entity and your personal identity gives you the benefit of additional legal protection against lawsuits. This is also a benefit come tax season, as your classification is a Corporation, usually theres less need to file miscellaneous 1099 forms.
Since a DBA is just additional income from your small business under your legal identity, it is easier to maintain and requires less form filing (although not much less). An LLC requires several filings with Federal and State offices and also requires you to maintain a Registered Agent on file in case legal action is ever brought against your company. You can serve as your own Registered Agent, but if you would like to keep your home address and other contact information out of public records and searchable to anyone, you should probably opt for one.
If you want to completely separate your personal and small business finances, go with an LLC. If you don’t mind the two blending, go with a DBA.
Steps to take to form your LLC in Texas
Federal Stuff
- Find and hire a Registered Agent. I used LegalZoom to get started, and man, was it over-priced! And after a year they hit me with a $400 fee to remain my Registered Agent. I highly suggest Texas Registered Agent. Cheapest out there and best service in the State!
- File a Certificate of Formation for your LLC with the Secretary of the Treasury
- File an SS-4 form and sign the resulting company agreement from the IRS
- This will result in your Federal EIN which allows you do business (and makes you susceptible to taxation) in the US under your new Company
Texas Stuff
- Use your new EIN to get your Texas Tax ID from the Sectuary of State (this cost $300ish if I remember correctly)
- File for the Texas Sales Permit and Francise Tax Permit from the Comptroller
Think that’s it?
Maintaining your LLC
You have to keep and maintain your Registered Agent on file, so that’s an annual cost you should account for. The one I mentioned before is $38 a year (versus $400 a year for Legalzoom).
You are now responsible for paying sales and franchise tax to the Comptroller. Sales tax is paid either monthly, quarterly, or annually. Id suggest annually, you get hit with a $50 fee if you are ever late, and remembering the quarterly deadlines proves harder than it sounds.
Quarterly due dates in Texas are 1.20, 4.30, 7.20, 10.20
I still don’t fully understand franchise tax, but if your company makes below 100k, then you aren’t required to pay anything, but you do still have to file! The due date for Franchise Tax is 5.17 every year.