1. Business Legal Structure and Name
The initial step is to select a name and legal structure for your business. The legal organization will have significant impact on your taxes and liability, both financially and legally. Contact the Chamber for a list of attorneys who can guide you during this process.
If the name of the business will be other than the owner’s name, a business name must be filed with the Cameron County Clerk’s Office and/or the secretary of state, depending on its legal structure.
All business entities doing business in Cameron County as Sole Proprietorship or Partnership, will need to file an Assumed Name Certificate with the respective county courthouse.
All business entities doing business in the State of Texas as Limited Partnerships, Registered Limited Liability Partnerships, Limited Liability Companies, Corporations, Professional Corporations, Non Profit Corporations, and Professional Associations must submit documentation with the Texas Secretary of State. All corporations must file Articles of Incorporation.
2. Navigating Through the Tax Maze
The specific taxes an organization must pay will vary based on the selected legal structure, the location of the business, the number of hired employees, and other varying factors. A tax accountant should be contacted to verify which taxes are applicable to your organization.
Most businesses are required to pay the following taxes:
One of the first steps when starting a business is to apply for a Federal Taxpayer Identification Number. If you are in a trade or business, your taxpayer ID number is generally your Employer Identification Number (EIN). The EIN should be on all of your business tax returns and on any tax-related documents and statements. Complete form SS-4 to apply for an EIN. Once this form is processed, you will receive your ID number, a federal deposit tax slip, and relevant information about the taxes you will need to pay.
When filing income tax returns as an individual proprietor, a partner in a partnership, or a member of an LLC, you must place your Social Security number and EIN on your personal income tax return (Form 1040); Form 1040 for sole proprietorships, partners, and LLCs; and Form 1120 for corporations. If you have changed the legal form of the organization (i.e., incorporated your individual proprietor business, formed a partnership, or vice versa) you must get a new Employer Identification Number. The same is true if there is a change in ownership of the business (such as the purchase or inheritance of an existing business). You cannot use the former owner’s EIN, even if he or she is your spouse. A new number is required if you terminate an old partnership and begin a new one.
As an employer, you are responsible for withholding and paying certain taxes related to salaries, wages, tips, and other compensation paid to your employees. The most common taxes are the Federal Income Tax, the Federal Insurance Contribution Tax Act (FICA), and the Federal Unemployment Tax Act (FUTA). As the employer, you are liable for regular payments to the government (federal, state, and local) of the various taxes that are withheld from your employees’ compensation. You are subject to severe penalties for non-payment.
A business tax kit is available at the IRS office; this kit includes forms and brochures that will help you comply with federal tax laws and regulations. The kit also contains a Tax Guide for Small Business, which explains step-by-step the taxes for which you may be liable, sample filled-in forms, and other helpful information. Contact the IRS office to request the Business Tax Kit and other publications at 800-829-3676.
The Texas Comptroller of Public Accounts is in charge of the administration and collection of state and local sales taxes from businesses operating in Texas, as well as any franchise taxes owed by Texas corporations. The Brownsville office is located at 1900 N. Expressway, Suite C, Brownsville TX 78520, 956-542-8426.
Some employers must contribute to the State Unemployment Insurance Fund. The agency in charge of collecting all unemployment taxes for workers employed in Texas is the Texas Workforce Commission.
Corporations and Limited Liability Companies organized or doing business in Texas are subject to the Texas Franchise Tax.
When a business owner sells taxable items (tangible personal property or taxable services), he or she must collect state sales or use tax plus the appropriate local sales or use taxes. Sales taxes can reach a maximum of 8.25 percent. The state levies 6.25 percent of the sale’s price on qualifying items. The state also collects sales taxes for the cities and other municipal taxing authorities, which can reach an additional 2.0 percent combined, then rebates money to the local authorities. Depending on the anticipated sales volume for the business, the owner will file sales tax reports quarterly, monthly, or yearly. The Texas Comptroller’s Office will send preprinted report forms to the taxpayer before the due date.
Owners of real property and tangible personal property, located in Texas on the date of assessment, and that is used in generating income, are subject to tax. The tax rate is set by the local (county) taxing unit. Real property includes land and improvements on the land. Tangible personal property includes boats, trailers, inventory, and depreciable tangible personal property, with certain exemptions for inventory. For further information, contact the local County Appraisal District where the business is located.
NOTE: A variety of miscellaneous state and federal taxes, such as the gasoline tax, must be filed in specific situations. The aforementioned tax rates and other tax matters covered are subject to change. It is recommended that you see the IRS office, the Texas Comptroller of Public Accounts office, or your accountant for updated information.
3. Business Licenses and Permits by Business Type
The Texas Secretary of State’s website provides guides and resources for licensing, permits, certifications, and business registrations.
4. Business Employer Requirements
Employers have to comply with Texas Workforce Commission’s labor, safety, and tax obligations at federal and state levels.
The Texas Workers’ Compensation Commission publishes informational resources to help employers become more familiar with the basic workers’ compensation requirements in Texas.
Equal Employment Requirements
Federal and state laws prohibit employment discrimination. The United States Equal Employment Opportunity Commission (EEOC) and the Texas Commission on Human Rights (TCHR) are charged with enforcing fair employment laws, which prohibit discrimination on the basis of race, color, sex, religion, disability, age, or national origin.
The TCHR provides technical assistance and training to employers to facilitate compliance with laws prohibiting employment discrimination. The TCHR has jurisdiction for investigating employment complaints in Texas.
Americans with Disabilities Act Requirements
The Occupational Safety and Health Administration (OSHA) provides information on how your business should comply with the Americans with Disabilities Act (ADA). The ADA provides protection for people with disabilities in the areas of employment, public services and transportation, public accommodation, and telecommunications.
Wage and Labor Requirements
The Texas Workforce Commission is charged with investigating and notifying appropriate county and/or district attorneys regarding all labor law violations. The Labor Law Department is charged with the enforcement of state and federal labor laws as well as the prosecution of offenders of these laws. State statutes include the Pay Day and Child Labor laws.
The Texas Drug-Free Workplace Initiative provides information Texas employers with 15 employees or more, who maintain workers’ compensation coverage. Employers must comply with certain drug-free workplace requirements and are also subject to federal regulations. These federal regulations include the Drug-Free Workplace Act of 1988 and U.S. Department of Transportation regulations requiring drug and alcohol testing.