Texas LLC vs Nevada LLC

Zachary Copp, Esq. Best State, LLC

Texas LLC vs Nevada LLC: Which State is the Best Choice for You?

When you are starting your own company you have a bunch of decisions to make from what you will call your business to how you will market your product or service and many more.

At the top of that list is what type of corporate structure you will use to protect your business and personal assets and there are many options to choose from with a corporation, partnership, or limited liability company (LLC) being some of the most popular.

If you’re considering an LLC for your business needs, one of the most critical decisions you can make before any others is the state you choose to register your LLC.

With the fees you’ll have to pay and hassle you’ll have to go through to re-organize and incorporate your business should you choose the wrong state the first time, there are a number of factors you’ll need to consider before you can ultimately choose the right state for your needs.

After registering more than 3,000 LLCs in the state of Texas since 2015 and being named a Texas Rising Star Lawyer for 7 consecutive years, here’s what I’ve discovered when it comes to forming an LLC in Texas vs Nevada.

Factors to Consider When Forming an LLC in Texas vs. Nevada

Before you choose which state is best for your business needs, there are many factors to consider and questions you need to answer that will influence your decision one way or another.

You can determine which state is the best choice for your business by considering the following questions:

Since every state has its own fees, regulations, and laws when it comes to setting up an LLC, the answers to those questions are going to be different for someone living in the state of Texas setting up an LLC in Nevada than they are for someone living in Nevada who wants to conduct business in the state of Texas.

So, before you jump the gun and start registering your LLC before you have all of the facts, let’s review some of the pros and cons between registering an LLC in Texas vs Nevada to help you choose the right state for your business and needs.

Initial Filing Fees and Costs for Forming an LLC in Texas vs Nevada

To form an LLC in Texas or Nevada, you’ll need to file your LLC formation paperwork with the state agency that handles new business formation for them to process and issue your registration.

In both states, the Secretary of State’s office is the government agency you’ll contact to register your LLC by mail, fax, or in person and each of them charges different amounts and has different processing times to complete your application.

In Texas, the Secretary of State’s office charges $300 to file the Certification of Formation documents you need to complete when registering your LLC along with an additional $8.10 convenience fee should you choose to pay by credit card or online. You can read more about how much it costs to form an LLC in Texas.

In comparison, the Secretary of State’s office in Nevada only charges $75 to file the same, but you’ll need to submit some additional documents along with it to complete your registration:

  • Articles of Organization = $75
  • State Business License = $200
  • Initial List of Manager or Managing Members = $150

In total, you’ll end up paying $425 to form your LLC in the state of Nevada, so despite any advantages you might get when you consider the other factors we’ll discuss, it costs $125 more to register an LLC in Nevada than it does to register an LLC in Texas.

Ongoing Fees to Maintain an LLC in Texas vs Nevada

Beyond the initial filing fees, most states will charge an annual fee and/or require you to file an annual report to protect you, the owner, from liability for your business debts and obligations.

In the state of Nevada, LLCs are required to pay two separate annual fees that combine for a total cost of $325 ($200 for a business license renewal and $125 for an annual list).

In comparison, Texas does not require LLCs to pay an annual fee. While all businesses must file an annual report regardless, there is no fee to do so and only those who make more than a certain amount ($1.23 million in 2022) have to pay a franchise tax on a yearly basis.

Amount of Time it Takes to Register an LLC in Texas vs Filing an LLC in Nevada

Other than the cost to register and maintain an LLC in each state, one of the other important factors to consider when registering an LLC in Texas vs Nevada is the amount of time it takes to process the paperwork and the different ways you can submit your application.

Processing Time in Texas

In Texas, you can file online, by mail, by fax, or in-person.

It will take about 4 business days to process an LLC that is submitted online (via SOSDirect). Mail and fax filings take significantly longer. It can take up to 2 months to process the paperwork you submit by mail, fax, or in person unless you pay a $25 service fee to expedite the filing and have it processed in no more than 2 weeks.

You can read more about how long it takes to file an LLC in Texas.

Processing Time in Nevada

In comparison, Nevada offers the same filing options by mail, fax, in-person, or online, but the processing times can be much faster than those you’ll find in the state of Texas.

When you file online in Nevada, you can expect a response within a day and although the normal processing times for submissions by mail, fax, or in-person can take up to six weeks, you can cut that turnaround time to just 24 hours when you pay $125 for their expedited service.

So… if you’re willing to pay a little bit extra for the convenience, you can get your LLC registered much faster in Nevada than you can in Texas, but that’s not the only factor we have to consider when choosing which state to form your LLC.

Where Are the LLC’s Owners Located?

As a general rule: If all of the owners of an LLC live in the same state, the LLC should be formed in that state.

One possible exception to this rule would be if the LLC is being formed for the purpose of investing in real estate. In that case, the location of the real estate property is the preferred state to help protect your interests, but let’s review the differences between how Texas and Nevada define “transacting business” in their state.

Where Will the LLC Conduct Business?

As a general rule: If the LLC will conduct business in just one state, the LLC should be formed in that state.

When Should a Nevada LLC Register in Texas

Texas requires any out-of-state LLC that “transacts business” in Texas to register as a foreign LLC in Texas. This involves filing paperwork with the Secretary of State, paying a $750 filing fee, and filing the required annual reports.

State law does not define the term “transacts business.” It does, however, identify certain activities that are NOT examples of “transacting business,” such as the following:

  • Involvement in a lawsuit
  • Holding a management meeting
  • Keeping a bank account
  • Borrowing or loaning money
  • Collecting a debt
  • Engaging in a single business transaction that takes less than 30 days

As a general rule, engaging in regular business activities in Texas requires registration as a foreign LLC. Maintaining a physical presence, such as an office location, almost always requires registration. If you are unsure, you should speak to a business lawyer.

When Should a Texas LLC Register in Nevada

Unlike the laws in many other states, Nevada does not require LLC members or managers to live in the state. As a result, it’s possible to form a Nevada LLC even if none of the owners live in the state of Nevada.

That being said, you will still need to register a Nevada LLC in the state where you live, even if your business exists entirely online. Since you, as the business owner and employee, are located in a particular state, you are considered to be “doing business” in that state and must register your Nevada LLC in your home state and maintain your standing in both states to continue operating.

Out-of-state LLCs that “transact business” in Nevada must register as foreign LLCs. The law regarding what counts as “transacting business” is similar to Texas law, in that it lacks a clear definition. The fee to register an out-of-state LLC in Nevada is $75.

In terms of the ease of registering an LLC as a foreign entity, the cost to register a Texas LLC in Nevada is one-tenth the cost of registering a Nevada LLC in Texas. This gives Texas an advantage as the place to form the LLC.

Texas vs Nevada for Real Estate Investors

As mentioned above, one possible exception to the general rule that a business owner should form an LLC in the state where they live involves real estate investment. If the purpose of an LLC is to invest in real estate, it might be better to form the LLC in the state where the property is located. This is where most of the business activities will occur, after all, although it might still be necessary to register as a foreign LLC in your home state.

Other Factors to Considering When Forming an LLC in Texas vs Nevada

Different states may offer other benefits — or present disadvantages — that you should consider when deciding where to form your LLC.

When comparing a Texas LLC to a Nevada LLC, the advantages and disadvantages are fairly similar. When choosing Texas as the state to form your LLC, some of the additional benefits you can take advantage of include the following:

  • Business-friendly legal environment: Texas laws are generally favorable to business interests.
  • Business governance options: Texas law allows LLCs to use some creative business structures, such as series LLCs.
  • No state income tax: Aside from franchise tax, Texas LLCs do not pay state tax based on income.
  • Employment laws: State employment laws are generally favorable to businesses.

While Nevada offers all of the same advantages as Texas, one additional advantage is the ability to remain anonymous in the public record.

Since Nevada LLCs only have to disclose the names and addresses of members who have management authority in their annual reports, anyone who wants to remain a “silent partner” can do so anonymously in the state of Nevada.

If that happens to be important to you, forming your LLC in Nevada can offer you something you cannot get when forming your LLC in Texas so that might be the tipping point you’re looking for to swing your choice in that direction.

Texas LLC vs Nevada LLC: The Final Verdict

When choosing between Texas and Nevada to form your LLC, there are a number of factors for you to consider before you’re ready to file your formation paperwork with the state office.

While the initial filing fees and on-going costs associated with operating your LLC are both major considerations that will factor into your decision, whether or not the legal environment is business-friendly, the cost to register as a foreign LLC, the turnaround times for filings and many others will ultimately factor into your choice.

If you have real estate investments in Nevada, need to file an LLC quickly, or want to keep some names off the annual reports, the state of Nevada offers some benefits and advantages you simply can’t get by forming in the state of Texas, but other than those your best bet is likely going to be forming your LLC in Texas.