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How to Start a Small Business in Texas

Do you want to know how to start a small business in Texas? Texas small business formation laws and regulations are not difficult to understand. Much of it is similar to what you find in other states. However, here is a step-by-step guide on how to start a small business in Texas.

Pick a Business Structure

The first thing you want to do is pick the business structure, e.g., LLC, Corporation, DBA, etc. While there are no income taxes in Texas, some forms of businesses treat your personal and business assets separately while others don’t. Think carefully and then pick the business structure.

Register Your Business Name

Sit with the people who are partnering with you for starting the business and discuss a suitable name. While choosing a business name, you should keep it simple to pronounce. You also want your name to be easy as a website name. Do your research to make sure your name does not match with an existing business’ name. Once you have decided the name, get this name registered with the Texas Secretary of State. Sometimes, you can use online resources too to complete the filing process for you. Make sure you have the necessary paperwork to register your business with the secretary of state.

Get Your Tax ID in Texas

Today, it is much easier to obtain your EIN because, in addition to mailing in an SS-4 Form, you can apply online using the Texas Tax ID Number Application. As a business, you are identified with your Tax ID or EIN (employer identification number). While it is only optional for DBAs, you must have one if you are starting an LLC or corporation.

Open Separate Business Accounts

Don’t make the mistake of keeping your personal and business accounts the same. Your business needs to have its credit history when it comes to obtaining a loan in the future or acquiring other services like merchant accounts etc.

Get the Required Permits and Business Licenses

To do business, you need to have a business license. At this point, you will also obtain registration for state taxes because will be paying and accepting sales taxes. Keep in mind that there is no income tax in Texas, so that’s one area you will not have to worry about. However, you have to make sure that you have a financial advisor or some other expert entity by your side at the stage of obtaining permits to complete all the processes error-free.

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Register a Tax ID Number Online

If you are a business owner, you will need a Tax ID for your business as well. This tax ID is also known as EIN-Employer Identification Number. An EIN for your business is more like a social security number for you as an individual – an EIN is a nine-digit number that identifies your business just like a social security number identifies a person. You must obtain an EIN (employer identification number) for your business to be able to perform the following: hiring employees, filing your tax business’ returns, obtaining various business licenses, etc.

Can You Have Multiple Tax IDs?

While your business’ Tax ID and the personal social security number act in the same way for the most part, there is a big difference between the two. In short, it is possible to have multiple Tax IDs if you do not operate as a Sole Proprietor and you own multiple corporations. Though each of these entities must pay their own taxes, the IRS uses their Tax IDs to identify each business separately. Keep in mind that sole proprietorships are not considered legal entities, so you cannot have multiple Tax IDs for these. You can file your personal taxes while the Sole Proprietorship income simply “passes through” to your personal income.

How to Register a Tax ID

Now you can register your Tax ID (EIN) online in addition to registration using traditional methods i.e. mail, phone and fax. Mail and phone are the slowest methods and can easily take up to 2 weeks before you get your tax ID registered. Why you should go for online Tax ID registration is because it is the fastest method to obtain your Tax ID. Using other methods, you can obtain your Tax ID or EIN within two days, but when you apply online, you can obtain your Tax ID within one hour! Another important thing to know is that the IRS application to register your tax ID online is not available 24/7. Normal business hours change with holiday schedules etc. but you can use the official 24/7 Tax ID Application.

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