Tax Law and Business Organization Strategy

Costs of Forming and Maintaining Entities

I form and maintain many entities each year for my clients. Since I am located in Texas, I form mostly Texas entities. But I am frequently asked to form entities elsewhere -- mainly Nevada and Delaware. I always assumed that the filing fees and simlar charges made by Nevada and Delaware were less than those in Texas (not counting the cost of maintaining a registered office if you weren't actually located there). But the other day, I was informed that Nevada was going to start strictly enforcing its charges for a Business License. So, I asked one of my paralegals to investigate the various charges of each of these states. You may find the results as interesting as I did. Read on . . .


Texas only charges an initial filing fee for its entities. While that charge is high ($750 for limited partnerships and $300 for all other business entities), That is the only charge that it imposes.

Texas does have a franchise tax for all of its entities. But that tax is imposed based on Texas activitity. That is, you pay it if you have Texas activitity even if you are organized in Nevada or Delaware. And you don't pay it if you don't have Texas income or presence, even if you are organized in Texas.


Nevada charges filing fees for the various types of entities. The basic filing fee charge is $75. However, you can add to that another fee of $125 for your list of officers, managers, members, or partners, depending on what type of entity you have.

Nevada also has a $200 charge for a Business License. Even if you don't do any business in Nevada, you have to obtain and pay for this license.

So, your real cost to organize a Nevada entity is at least $400. And this doesn't count the annual charges. the list of officers, etc., has to be filed annually. Similarly, the cost for the Business License is an annual cost. So, not only does it cost $400 to form a Nevada entity, it costs $325 per year to maintain the entity.


Delaware is a little more complicated since the costs for corporations differs significantly from the cost of other entities. Like Nevada, their initial costs seem to be quite reasonable. The filing fees for a corporation are based on the amount of stock authorized, and begin at $89. Limited partnerships are $200; and limited liabitlity companies are $90.

But Delaware has annual costs that apply even if you don't do anything in Delaware. Corporations must file and annual report and pay $50. In addition, corporations must pay a franchise tax (even if the corporation has no Delaware activities) that ranges from $75 to $180,000. Limited partnerships and LLCs have to pay an annual tax of $250 per year to maintain their existence in Delaware.


Unless your entity is going to have a short life, the lack of annual expenses in Texas makes Texas entities more economical than Nevada or Delaware. This would be true even if your entity is not going to be doing business in Texas.

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Sprouse Shrader Smith PC
701 S. Taylor, Suite 500, Amarillo TX 79101

Phone: 806.468.3300