You may be surprised to learn that you can start a business in Texas without having legal status. This is a great option for many immigrants, because it eliminates the legal problems involved with seeking employment from an already established business.
Before you start your business, the best thing you can do is consult with a reputable Certified Public Accountant (CPA). CPAs are experts in business and tax issues, and they can help you make sure your business starts off on the right foot. That said, here are a few key steps involved in getting your business up and running:
Step 1: Obtain a federal Individual Taxpayer Identification Number (ITIN).
An ITIN is an identification number issued by the IRS that allows you to pay taxes. ITINs are issued regardless of immigration status. The most common way of obtaining an ITIN is to file IRS Form W-7 along with your annual federal income tax return (Form 1040, 1040A, 1040EZ, whichever you use). Click here to learn more about obtaining an ITIN.
Step 2: File your business formation documents.
To do business in Texas the right way, you should have a formal corporate structure for your business. Doing this protects you personally under the law, and often allows for more business opportunities and tax advantages. A limited liability company (LLC) is one good option for a small business structure. To form a Texas LLC, you need to file a Form 205 with the Texas Secretary of State. The filing fee is $300. Click here to learn more about forming a Texas LLC.
Step 3: Apply for a federal Employer Identification Number (EIN)
If you want to have employees, you need an EIN. An EIN is a nine digit number assigned by the IRS which is used for tax filing and reporting purposes. As an employer, you will be responsible for withholding income tax and payroll taxes (like Social Security and Medicare) from your employees’ paychecks. Having an EIN will help you do this. To obtain an EIN, you need to file Form SS-4 with the IRS. If you have an ITIN number, you can use this as your identification number in box 7b of the SS-4. Click here to see the instructions for the SS-4, and here to see the SS-4 itself.
Step 4: Create an account with the Texas Workforce Commission (TWC)
As an employer, you have to report a number of things to the TWC on a regular basis, including changes in your employees (hirings, firings, re-hirings, etc.) and your employees’ quarterly wages. You must also pay unemployment insurance tax to the TWC. Click here to see some frequently asked questions about the TWC.
Step 5: Create a business banking account
Many immigrants think they cannot open a bank account without a social security number, but that is not the case! You can open a simple personal banking account with two forms of ID, such as a valid passport, identification card (ex: Mexican “matricula” card), a Mexican federal voter registration card, or even certain credit cards. To form a business banking account, you just need two forms of ID and your State of Texas business formation documents.
Again, it is very important that in forming your business you have the assistance of a reliable CPA. The CPA can help you out with the more complicated tax and reporting issues involved with your business. However, with hard work and careful attention, any immigrant can open a lawful and successful business in Texas.