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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:

EntityBest ForTax Treatment
Sole ProprietorshipTesting a business idea, minimal revenueSchedule C; all profit taxed as SE income
Single-Member LLCMost new businesses (liability protection)Same as sole prop unless you elect otherwise
LLC + S-Corp ElectionBusinesses with steady profitSalary + distributions; SE tax savings
Partnership / Multi-Member LLCTwo or more ownersPass-through; K-1s to each partner
C-CorporationSeeking investors, retained earnings strategy21% 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:

ObligationWhat / When
Estimated Tax PaymentsDue quarterly (Apr 15, Jun 15, Sep 15, Jan 15). Required if you'll owe $1,000+.
Self-Employment Tax15.3% on net earnings (Social Security + Medicare). On top of income tax.
TX Franchise TaxAnnual report due May 15. No tax due if revenue is $2.65M or less, 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 ReportingIssue 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 (72.5¢ a mile for January–June 2026, 76¢ from July 1) 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?"

FactorGuidance
Net Income ThresholdNo single break-even number; it depends on profit, salary and running costs
Added CostsPayroll processing ($30-100/mo), additional tax prep ($400-800)
Election DeadlineWithin 75 days of formation, or by March 15 for existing LLCs
Self-employment taxCan be lower on profit above a reasonable salary; the S-Corp calculator gives an illustrative estimate

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 short conversation before you choose is worth having. We offer a discovery call for new businesses.

Frequently Asked Questions

Should I form an LLC or S-Corp for my new business?
Start with an LLC for the liability protection, then look at S-Corp taxation once profit is steady. An LLC is a legal structure (state level), while S-Corp is a tax election (federal level)—you can have both. The LLC protects your personal assets, and the S-Corp election can lower self-employment tax on income above your reasonable salary. There's no rush to elect S-Corp on day one; you can add it later. There's no single break-even number. It depends on your profit, the salary you can defend and what the S-Corp costs to run. At lower profit, payroll and the extra return can cost more than the payroll-tax difference. Try your numbers in the calculator, then talk it through with Krystal.
Do I need to make estimated tax payments in my first year?
If you expect to owe more than $1,000 in tax for the year, yes. Since you had no prior-year tax liability from this business, you don't technically have a safe harbor obligation—but you should still pay. The alternative is a massive tax bill in April, potentially with underpayment penalties. A good rule of thumb: set aside 25-30% of net profit each month for taxes, and send quarterly payments. Start with your best estimate and adjust as you get real revenue data.
What's the difference between an EIN and a sales tax permit?
An EIN (Employer Identification Number) is your federal tax ID, issued by the IRS. You need it for tax filings, hiring employees, and opening business bank accounts. It's free and you get it instantly at irs.gov. A sales tax permit is a Texas state registration from the Comptroller's office, required if you sell taxable goods or certain services. It authorizes you to collect sales tax from customers and remit it to the state. Not every business needs a sales tax permit, but every business entity needs an EIN.
How do I know if I need to collect sales tax in Texas?
Texas requires sales tax collection on tangible personal property (physical goods) and certain services (data processing, security, janitorial, etc.). Most professional services (consulting, accounting, legal) are not taxable. If you sell online, you may have nexus in other states requiring collection there too. The Texas Comptroller's website lists taxable and exempt items. When in doubt, apply for a permit—it's free, and it's far better to have one and not need it than to be collecting without one.
Can I deduct expenses from before I officially launched?
Yes. The IRS allows you to deduct up to $5,000 in startup costs in your first year—things like market research, travel to scope out locations, training, and professional fees incurred before you opened for business. Costs above $5,000 are amortized over 180 months (15 years). Organizational costs (legal fees for forming your entity, state filing fees) have a separate $5,000 first-year deduction. Keep receipts for everything from the moment you start planning your business.

Need Help With Your Taxes?

Book a free 15-minute discovery call. Krystal calls you to talk through fit and scope.

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