New Business Tax Checklist
Step-by-step tax checklist for starting a business in Texas. Entity selection, EIN application, state registration, accounting setup, and first-year tax obligations.
Starting a business is exciting. The tax side? Less so. But getting your tax foundation right from day one saves thousands in the long run and prevents headaches that can take months (and real dollars) to untangle later. This checklist walks you through everything a new Texas business needs to handle on the tax and compliance front—from choosing the right entity to filing your first return. Think of it as the boring-but-critical stuff your future self will thank you for.
Step 1: Choose Your Entity Type
Your entity choice determines how you're taxed, your liability protection, and your administrative burden. Here's the honest breakdown:
| Entity | Best For | Tax Treatment |
|---|---|---|
| Sole Proprietorship | Testing a business idea, minimal revenue | Schedule C; all profit taxed as SE income |
| Single-Member LLC | Most new businesses (liability protection) | Same as sole prop unless you elect otherwise |
| LLC + S-Corp Election | Profitable businesses ($50K+ net income) | Salary + distributions; SE tax savings |
| Partnership / Multi-Member LLC | Two or more owners | Pass-through; K-1s to each partner |
| C-Corporation | Seeking investors, retained earnings strategy | 21% flat rate; double taxation on distributions |
Not sure? Use our Entity Comparison Calculator to model the tax impact of each option for your specific income level.
Step 2: Federal & State Registration
Once you've chosen your entity, here's what to register:
Federal:
- EIN (Employer Identification Number) — Apply free at irs.gov. You get it instantly online. Required for bank accounts, hiring, and tax filings.
- Form 2553 (S-Corp Election) — If electing S-Corp, file within 75 days of formation or by March 15 for calendar-year entities.
Texas State:
- TX Secretary of State — File certificate of formation for LLCs/corps ($300 LLC, $300 corp)
- TX Comptroller — Register for franchise tax reporting (all entities with TX nexus)
- Sales Tax Permit — Required if selling taxable goods or services (free to obtain)
- TX Workforce Commission — Register if you'll have employees (unemployment insurance)
Step 3: Accounting & Bookkeeping Setup
Getting this right from the start is the single best thing you can do for your tax situation. Seriously.
- Open a separate business bank account — Mixing personal and business finances is the #1 mistake new business owners make. It creates accounting nightmares and can jeopardize your liability protection.
- Get a business credit card — Separate from personal. Makes expense tracking automatic.
- Choose accounting software — QuickBooks Online or Xero for most small businesses. Wave (free) for very simple operations.
- Set up a chart of accounts — Categorize income and expenses to match your tax return schedules.
- Track mileage from day one — Use an app (MileIQ, Stride). Reconstructing mileage later is nearly impossible.
- Keep receipts for everything — Digital is fine. Snap photos of paper receipts immediately.
Step 4: First-Year Tax Obligations
New businesses face several tax obligations that catch people off guard:
| Obligation | What / When |
|---|---|
| Estimated Tax Payments | Due quarterly (Apr 15, Jun 15, Sep 15, Jan 15). Required if you'll owe $1,000+. |
| Self-Employment Tax | 15.3% on net earnings (Social Security + Medicare). On top of income tax. |
| TX Franchise Tax | Annual report due May 15. No tax due if revenue under $2.47M, but you still must file. |
| Sales Tax (if applicable) | Monthly or quarterly returns to TX Comptroller |
| Payroll Taxes (if employees) | Withholding deposits (monthly/semi-weekly) + quarterly Form 941 |
| 1099 Reporting | Issue 1099-NEC to contractors paid $600+ by January 31 |
Don't have income yet? You may still need to file returns (especially the TX franchise tax report). We help new businesses navigate what's required.
Common First-Year Deductions
New businesses get several valuable deductions:
- Startup Costs — Deduct up to $5,000 in the first year (research, training, setup costs before launch). The rest amortizes over 180 months.
- Home Office — Dedicated space? Deduct a portion of rent/mortgage, utilities, and insurance. Simplified method: $5/sq ft up to 300 sq ft.
- Equipment & Software — Section 179 lets you deduct equipment purchases immediately (up to $1.22M). Computers, furniture, tools—all qualify.
- Vehicle Expenses — Standard mileage rate ($0.67/mile in 2024) or actual expenses. Track from your first business mile.
- Professional Services — CPA fees, legal costs for formation, business consulting.
- Insurance — Liability, professional, and health insurance (self-employed health insurance deduction).
When to Consider S-Corp Election
One of the most common questions we get: "When should I elect S-Corp?"
| Factor | Guidance |
|---|---|
| Net Income Threshold | Generally beneficial above $50,000-$60,000 net profit |
| Added Costs | Payroll processing ($30-100/mo), additional tax prep ($400-800) |
| Election Deadline | Within 75 days of formation, or by March 15 for existing LLCs |
| SE Tax Savings | At $100K net income, S-Corp can save $5,000-$8,000/year |
Use our Entity Comparison Calculator to see the numbers for your situation.
Pro Tips
Separate Finances Immediately
Open a dedicated business bank account before your first transaction. Commingling personal and business funds is the most common and most expensive mistake new business owners make.
Don't Skip Estimated Taxes
New business owners are often shocked by their first tax bill. Self-employment tax alone is 15.3%. Start quarterly payments right away, even if you're guessing at the amount.
Consult a CPA Before Choosing Your Entity
The entity you choose on day one affects your taxes for years. A 30-minute consultation can save you thousands in the long run. We offer free initial consultations for new businesses.
Frequently Asked Questions
Need Help With Your Taxes?
Our DFW CPAs specialize in helping individuals and businesses minimize their tax burden. Schedule a free consultation to discuss your specific situation.