Texas Tax ID (EIN) Number & Business RegistrationPublished:
Looking to obtain your Tax ID (EIN) Number in Texas? This short guide will walk you through everything you need to know about how to obtain a Tax ID (EIN) Number and how to start a new business in the state of Texas. In Texas, the conditions are impeccable for new entrepreneurs. The population in Texas, especially in major cities, is increasing and projected to reach more than 40 million over the next 25 years. As a result, the state’s economy is thriving, maintaining a high growth rate and a lower-than-average rate of unemployment. Approximately 99.8 percent of Texas businesses are small businesses, which collectively employ about 4.7 million people. Accordingly, the state fosters an environment where entrepreneurs can thrive and learn from one another.
Steps for obtaining a Texas Tax ID & Business Registration:
- Legal Formation of your Texas Business
- Obtain your Federal Tax ID (EIN) Number
- Texas State Tax ID Number
- Texas Licenses & Permits
Before you register your business in Texas or worry about filing taxes, you need to have a solid outline for your business sketched out. The best way to do this is to create a business plan from the ground up, doing research, conducting interviews, and brainstorming until you’ve developed a fleshed-out guide for how to run your business.
You’ll need to cover topics like how you’ll differentiate your business from your competitors and how you’ll make a profit, but one of the most important decisions you’ll need to make is how to legally structure your business. Ultimately, there are four main types of business to choose from:
Sole proprietorships. These business types are notoriously simple, and ideal for an individual business owner working alone who wants to keep things uncomplicated. You’ll pay taxes on any money you make as an individual, but you won’t get any special type of liability protection.
Partnerships. Partnerships work just like sole proprietorships, but with two or more partners involved in the business. You’ll split the costs and profits as you deem appropriate, and file individual tax returns. Again, there’s no liability protection here.
Limited liability companies (LLCs). LLCs are treated as separate legal entities, giving business owners some liability protection. They also report income and losses independently, giving business owners more control over how they file their taxes—but may be subject to additional taxes. In Texas, LLCs aren’t responsible for filing an annual report with the Secretary of State—but they are responsible for filing annual franchise tax reports. Most LLCs will face this state-level tax, payable to the Texas Comptroller of Public Accounts (CPA). This tax will be based on the LLC’s net surplus, but can get complicated with other variables involved.
Corporations (S-corps and C-corps). Corporations are more complicated types of businesses, generally reserved for mid- to large-sized businesses. Like LLCs, they exist as separate legal entities, but they offer their owners and shareholders (100 or fewer in an S-corporation) far more liability protection. They can also raise funds by issuing shares, and are responsible for a variety of annual paperwork. They tend to pay higher taxes on corporate income because of their liability and shareholder advantages. For the most part, Texas tries to keep things as simple as possible for corporations. They impose a franchise tax of 1 percent on all corporate income, making it one of the lowest state rates in the nation.
There are inherent advantages and disadvantages to each type of business, so you’ll need to choose the one that best suits your business’s unique needs.
In most cases, you’re going to need a federal tax ID (EIN) number for your Texas business. No matter what, you’ll need one for your LLC or corporation—that way you can file taxes at the federal level appropriately. But you’ll also need one for a variety of other business functions, including applying for a business bank account and hiring new employees. If you plan on engaging with other parties (including individuals and/or other businesses), it’s a good idea to have a federal tax ID no matter what.
Getting a tax ID isn’t a convoluted process, but it can be confusing. By using our professional Tax ID (EIN) Number Obtainment Service, you can get your business a federal tax ID by the end of the day (or you can Expedite for 1 hour Tax ID obtainment) and you won’t have to do anything, other than give us some basic information. Once you have this unique number string, you can start applying for loans and bank accounts, and (in some cases) beginning business operations.
If you own a business in Texas, you’ll definitely need a Texas State Tax ID Number if you engage in selling tangible property, leasing tangible personal property or selling taxable services in Texas. Aside from these scenarios, there are some fringe cases where you can get by without a Texas state tax ID number, it’s better to err on the side of caution and get a Texas State Tax ID as soon as you form your business.
Texas doesn’t mandate all businesses to have a general permit to operate, but there are numerable industries and types of businesses that do need special licensure or permits to operate. These can exist on the state level or local level, so it’s a good idea to do your research ahead of time and get a firm understanding of which permits you may need—long before you start operating.
Once you have your business legally formed, your federal tax ID number (EIN), your Texas state tax ID number, and all the appropriate local licenses and permits, you should have everything in place to start building your business. Make sure you take advantage of our Tax ID Number obtainment services to make your initial startup process even easier today!