For those non-business degree people like me, what are the steps you have to do to set up a small business in Texas? Is it as simple as getting a tax ID and registering with city hall? Thanks in advance for your advice.

What purpose are you using your business for? What does your asset profile look like? You might want a different organization than an LLC. If you just want a simple LLC, here is the schedule of fees. Instructions are probably on this page.


for an LLC, you should either get a lawyer or use something like legalzoom to draft your operating agreement and file your documents and franchise tax clearances.

There is no requirement that one have an entity (LLC, corp., etc.) to be a small business in Texas. You can just run your business as a sole proprietorship.

To form an entity (LLC or corporation) you file a certificate of formation with the Texas Secretary of State with the filing fee. You'll need a federal tax id number to open your bank account...most banks want to see the formation docs (certificate, operating agreement, etc.).

I would recommend having a competent CPA help you decide what type of entity is best for you from a tax perspective (which drives most entity selection from my experience) and hire a competent attorney to discuss with you the formation issues and form the entity. When I was in private practice, I charged a flat fee of $900 (including minute book, state filing fees, etc.) to form an entity.

That's a quick outline that didn't cover everything, but hope that helps.

The business I have in mind is a very low volume side business that I'd run out of my home from a couple websites. My main concern is how I make it official so that I can write off some of the expenses and not have to worry about an IRS audit from the income I'd be generating.

tx, you always have to worry about the irs

I think as long as you can prove any expenses as necessary, don't worry about being audited. Yes, it may be a pain to deal with, but if everything is legit, make the organization of it as simple as possible which may help you save on CPA/legal costs that may negate any tax advantage you would gain with a more complex setup.

I have very little expense ahead of me (website fees, advertising, website developer), and other than that, I have the equipment to do the work for the business already. I guess as long as I keep good records of sales, etc, I should be covered. What do I do about sales tax for in-state buyers? Do I need a tax number from the state?

I don't know about taxation issues, but I would still look at a separate entity to limit your liability in case of a lawsuit from a disgruntled customer, etc.

I would check with a CPA for advice on whether you have to charge sales tax (you can see the Texas Comptroller's website for a start...should be a section on Sales Tax and what goods and services are covered) and the margin tax for Texas companies.

I think the cost of setting up an entity is money well spent for risk management purposes, but with many startups every nickel is tight. Your other big risk management tool is insurance. Make sure you're properly insured for the risks you'll have.

If you do actually set up an entity, run the business through the entity (get a company bank account, etc.). Don't disregard it and just run your company through your personal accounts.

Also, if you're just wanting some paperwork "legitimacy" for your company, file and assumed name certificate (DBA) in the county your doing business in and/or with the Texas Secretary of state.

bttt for more opinions.

I've set up a lot of these. My first piece of advice is to talk to an accountant to make sure you understand the tax ramifications first.

talk to a CPA

you state your intention is to protect yourslef from an audit - however, a single member LLC will be taxed on a schedule C on your personal return. if you are audited for the business, it opens it up for them to audit the rest of your return. of course, if you only deduct legitimate expenses, then there is no problem.

also, if you want to separate yourself "for audit" you might want to consider being an S-Corp (reported on a separate tax return)

The equipment you purchased previously - you have the right to deduct the cost of those under certain perameters. talk to a CPA.

you can set up an LLC by yourself, btw. or an s-corp for that matter.

you will need a sales tax id. you can download an application from the comptroller's website. it will also be a good idea to call the comptrollers office and ask them specific questions about the services you will be providing, so that you will know exactly what is subject to sales tax and what is not. calling them up front will save you from tons of grief - not only in the event of an audit, but in settling disputes with customers as well.

[This message has been edited by gigemhilo (edited 10/23/2008 9:17a).]

tx4guns,

What kind of side business are you working on? I'm just curious, and trying to learn as much as possible from people who have done/are doing the entrepreneur thing. Feel free to email me if you don't want to discuss publicly. tmanAg08@gmail.com

Google my handle and see the #1 result, and I think you can figure it out. It's gun parts related.