Do you want to start a business in El Paso Texas but you don’t know how? If YES, here are the legal requirements for starting a business in El Paso TX.
El Paso is known as the largest metro area on the U.S./Mexican border and it is located at the farthest western tip of the Texas state. The region constitutes the largest binational metropolitan area in the Western Hemisphere, with 80.4 percent of its population being Hispanic.
The region is has long seen a robust population growth with 675,297 residents and counting — a 19 percent increase from 2000.
This region is indeed a favourable place to start a business because Labor, energy, state and local taxes, and office rents in El Paso are all below the U.S. average. The region also has a mixture of both the educated workforce and skilled labourers.
The University of Texas at El Paso is a big presence in the community and serves as an incubator for many small businesses, especially those in tech. The region also has an unemployment rate that is normal with the national average, 4.5 percent, but with home prices being affordable – at $160,049, this would not present any problems for anyone wishing to make a home in the region.
With its proximity to the Mexican city, El Paso draws visitors and shoppers from neighbourhood Mexico. That’s why being able to speak both English and Spanish is a huge asset for local business owners in the region. If you are thinking of starting a business in El Paso, we are going to walk you through the requirements, as well as how you can start up your business.
Requirements for Starting a Business in El Paso TX
- Business Plan
- Legal Structure and Legal Formation
- Certificate of Formation
- EIN Number
- State Tax ID
- Local Business Licenses and Permits
- Business Bank Account
How to Start a Business in El Paso TX
Starting a business in El Paso almost follows the same procedure as starting a business in the state of Texas, but with small variations. These are the procedures;
Create a Business Plan
A business plan is one of the first things to do when intending to start a business in El Paso, or anywhere else for that matter. This document is a roadmap of your business’ future. What this document does is to lay out the next 3-5 years of success and how you intend to achieve it.
A proper business plan should describe your business goals, the strategies involved, potential problems coupled with solutions for each, organizational structuring of your business and budget forecasting. If you can put together a detailed business plan, you increase your chances of getting business funding (but that’s a story for another time).
Determine Legal Structure and Legal Formation
One of the most important decisions you make when starting a new business in El Paso TX is choosing a legal structure. Each type of business has its pros and cons. It is generally a best practice to study each in detail and compare against your business priorities.
For example: How risk averse are you and your partners? How would you prefer your business be taxed? Get familiar with the requirements for starting a small business. By making this decision, you have taken a huge leap towards starting your business.
3. Incorporate the Business
As soon as you have chosen your legal structure, you have to go ahead to incorporate the business. The overall cost to incorporate a business in El Paso depends on several factors. A certificate of formation for an El Paso for-profit corporation, for instance, has a $300 filing fee.
El Paso nonprofit corporations, however, only have to pay a $25 fee. You have to find the state business website so you can get the correct fees you should pay based on your legal structure.
4. File for Your Certificate of Formation
Before you can form your corporation in El Paso, you need to file for a certificate of incorporation. An El Paso corporation is created by filing a Certificate of Formation.
To complete this certificate, you will need to provide several pieces of information, including the name of your organization, its mission, and the names of at least two directors. You should as well provide every other information that is required of you, if not, your application would be invalid.
5. Obtain an EIN Number
An EIN, commonly known as a Tax ID, stands for Employer Identification Number and acts as the unique identifying number for a business similar to how a Social Security Number is used as a unique ID number for an individual.
The IRS uses EINs to identify businesses for tax purposes. When speaking about how to start a business in El Paso TX, you should be aware that you’re going to need a Tax ID (EIN) in order to perform many actions, such as opening a small business bank account, hiring employees, etc. This should be your next port of call.
6. Register for State Taxes and your State Tax ID
One of the primary requirements for starting a business is registering with your state. Registering a business with your Secretary of State is a step prior to obtaining your State Tax ID. Different from the Federal Tax ID, states have their own State Tax ID.
This is a unique number assigned to a business or organization by the state where the business operated. It is primarily used for paying state taxes and hiring employees. Although each state has its own unique process for State Tax ID obtainment, most states enable you to get your State Tax ID the same day you apply.
7. Apply for Local Business Licenses and Permits
There are a variety of local permits and licenses which may be mandatory to your business if you are situated in El Paso.
Whether it’s a tax registration from your local Office of Finance or a required permit for the sale of alcohol, you are likely required to show proof of your EIN Number to complete these applications. Note that you cannot operate any business in El Paso with out a local business license.
8. Open a Business Bank Account
Having a bank account is essential to starting a new business. This monumental step in your path to success is typically very straight forward but there are common road blocks in the banking process.
When opening your business bank account in El Paso TX, don’t get stuck at the bank searching for required documents – bring your state’s Incorporation documents, your EIN (Tax ID) Number, and all partners who’s names you wish to include on the bank account must be present as well.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk if your business ever gets sued.
In business law, this is referred to as piercing your corporate veil. Opening a business bank account separates your personal assets from your company’s assets, which is necessary for personal asset protection. It also makes accounting and tax filing easier.
9. Set Up Accounting
An accounting system helps you track the performance of your business and simplifies annual tax filings. Quality accounting software lets you download your bank and credit card transactions, making accounting fast and easy.
Most business owners understand they have to file taxes from the get-go. Why wait until the end of the year to handle one of the most important pieces of your business? Avoid unnecessary costs for late payments, late filings and other fees from the IRS.
Handle or hire an accountant to handle your tax responsibilities early. An accountant will help you understand which items you need to provide in order to file on time, such as your Profits & Loss Statement, your business’ EIN Number and other required information.
10. Obtain Insurance
As a business, you will not be allowed to function in El Paso without carrying the appropriate insurance. Many industries will require various types of insurance for specific actions to take place. For example: truck drivers need mandatory auto insurance in order to make deliveries on the company’s behalf.
Now that you are starting a new business, it is in your best interest to get informed about your insurance options and be familiar with the regulations that apply to your specific type of business.
11. Hire Employees
Hiring your first employee is a milestone for any business, essentially opening the door to more profits and frees up time for owners to focus on high-level priorities. But before the interview process begins, make sure you have everything you need in order to legally hire an employee. You’ll need to obtain an EIN Number and supply your new employee with the appropriate paperwork from the IRS.
12. Define Your Brand
The strongest and most memorable businesses are built on a solid brand. Before you even start your business, think of the brand you want it to carry. When developing your brand, think about what your business stands for. What are the core values will drive your business?
Customers and clients are looking for companies that have a compelling brand, as much as they are shopping for high-quality products and services. Your business name is the cornerstone of good branding and a successful business. You should nurture it to growth.