Tax laws

Texas Business Tax Laws – Why They’re Attractive:

For a decade, Texas has led the charge in the United States in terms of job creation, economic development and business formation. About 3 million small businesses have been established in the Lone Star State, making it a hotspot for entrepreneurial talent and new business establishments.

With so many entrepreneurs moving to Texas from states like New York or California to reestablish their current business or to start a brand new business, it pays to better understand the business laws associated with Texas. Different states have different laws relating to taxes and other regulations. Here is a simple breakdown of Texas tax laws and what is required of entrepreneurs when setting up a new business there.

Why Choose Texas

Many factors combine to make Texas one of the best business climates in the United States. Having the 2nd largest economy in the nation gives so many new business owners hope that Texas could lead to a world of success.

The state allows anyone inside or outside the country to start a physical or digital business through Limited Liability Companies (LLCs). Both citizens and non-citizens have the opportunity to enter the booming market. LLCs have their own advantage of having a simple formation process and giving members and owners more protection and flexibility.

By having relatively low rental costs and tax burdens, Texas allows entrepreneurs and their businesses to succeed with more income. The location is also perfect as the state is full of many job opportunities and employment industries. Starting any kind of business there means entrepreneurs need to have an understanding of the Texas Limited Liability Law and tax laws created by the state.

Texas Tax Laws

The nature of businesses in Texas can greatly influence the type of tax and the amount of tax that will need to be paid, so it is crucial to take these separate factors into account when reviewing the tax regulations imposed by the state. .

Sales tax

Simply put, it is the tax on certain goods and services sold by the business. If a business transaction involves the sale of a physical product, the business will need to have a seller’s permit, allowing sales tax to be obtained.

Employer tax

When hiring employees, contractors must ensure that they register their business for unemployment insurance tax on behalf of the employees working for the specific Texas business.

Annual report and franchise tax

In Texas, businesses must file an annual return and franchise tax online at the Texas Comptroller website. The amount of tax paid depends on the income of the Texas LLC.

Those earning less than $1,130,000 will not pay tax and will therefore have to file a “No Tax Due Return”. Income over $1,130,000 means progressive tax must be paid, which differs depending on the amount of final income.

The due date for these reports is May 15 of each year. Late filings result in a $50 penalty, late tax payments result in a 5% penalty. It is always better to deposit and pay on time to avoid any type of penalty that could harm the business.

Corporation tax

Texas is valued by many for its tax laws, and the fact that income tax is not imposed on corporations is a significant advantage. S corporations are also not taxed. With these corporate tax advantages, Texas seals the deal with many established and upcoming companies, making it a central hub for development and growth.


With the current tax laws and regulations in Texas, the nation will continue to grow and prosper. After going through this simple breakdown, entrepreneurs can have a clearer mind when setting up their business because a good understanding will be created. Paying the right taxes on time is crucial to maintaining a good corporate image, whether for an LLC, S Corp or any other type of corporation.

Many websites such as TRUiC are available to educate entrepreneurs on tax regulations and types of business entities. Going through all of these resources will ensure that one is fully equipped to establish and maintain a potentially successful business that adheres to rules and regulations. Tax rules and laws can be difficult to understand, but it doesn’t have to be, especially in Texas.

Content provided in partnership with Site Trail.