There are a lot of reasons why Texas is a great US state. Not only because of the quality of life but also because it offers a lot of support for its business community. Its economy is the second biggest in the U.S at $1.9 trillion and the state is the first in the country for growth prospects.
In other words, if you want to start a business anywhere in the United States, Texas is certainly one of the best options. But before you can do that, you need to know all of the tips that will allow you to build a successful business in the Lone Star State.
Choose Your Business Idea And Legal Structure
When choosing your business idea, it’s best to take into consideration things like your skills and interest but also resources and if there’s a demand for a certain type of business. Keep in mind that 42% of startups fail because of a lack of market need, so you need to make sure people are interested.
The next step is to choose your legal structure. The type of legal structure you choose depends on what kind of business you want to start, if you’re planning to hire employees, and your opinions on liability.
Here are your choices:
Sole proprietorship
A business where one person owns all the business assets, they are the sole owner and are completely liable for the business. This is the simplest and most common form of legal structure.
General partnership
A business where one or more individuals run completely separated business entities but can satisfy debts and liabilities with each other’s assets.
Limited liability company (LLC)
An unincorporated business entity that offers more flexibility and provides owners with pass-through tax advantages and limited liability.
For-profit corporation
A corporation with centralized management, limited liability, perpetual duration, and very easy transfer of ownership. The corporation owners are stakeholders and the managers are directors.
Obtain Business Insurance
Your business isn’t as safe as you think. At any moment, something can go wrong and cause you to lose your assets and even your entire company. Sometimes it’s a fallout such as a lawsuit, but other times it’s a natural disaster such as a hurricane or a flood.
If you want to make sure that no matter what happens, your business will stay protected, you need to look into business insurance in Texas. This insurance will protect you and keep you from going out of business. Just make sure to explore all the different types of coverage you can get, some of which include general liability insurance and malpractice insurance.
Put In A Request For An Employer Identification Number
An employer identification number, or a business tax identification number, is the number that is used to track all of your business dealings. Think of it as your company’s social security number, and you can use it to open business checking accounts and file all of your employee’s tax withholding.
This number is free to obtain and you can apply for one with the IRS.
Sign Up For A Business Banking Account
Keeping your personal and banking accounts separate is one of the smartest financial moves you can make. That way, no assets from your personal accounts will be used for business purposes.
A business checking account could be beneficial but it also comes with banking fees, so you might want to do some research and find free business banking accounts. And if you’re responsible with your finances and want to build business credit, make sure to take out a business credit card.
Know What Taxes To Expect
The tax you will need to pay in Texas depends on your legal structure:
Sole proprietorship
A sole proprietor only needs to pay federal taxes on business income when they file their personal federal income tax returns.
Partnerships
Partners are required to pay taxes on their income and may be subjected to the state’s franchise tax if their total revenue exceeds a certain amount.
LLCs
All members of an LLC pay the taxes on their share of the profit and just like partnerships, may be subjected to franchise tax depending on their income.
Corporations
The corporation needs to pay the state’s franchise tax regardless of income and all shareholders have to pay federal income tax.
Final Thoughts
Starting a business in Texas can help you get your foot in the door of the world of business as it offers great opportunities and has a lot of potential. If you have a good idea, keep your business safe with insurance, keep up with taxes, and set up a banking account, you won’t have issues finding success.
