Starting a Veteran-Owned Business in Texas
Just two years ago, the Texas Legislature passed Senate Bill 1049, making it much less expensive for our veterans to come back home and pursue their dreams of being small business owners. Whether you have recently served or have been a proud veteran for decades, the new law presents an opportunity to incorporate a business in Texas with exemption from certain initial filing fees and five years of Texas franchise tax. The bill was passed in 2015, went into effect on January 1, 2016, and is set to expire in 2020. This is the perfect time for Texas veterans to become Texas entrepreneurs.
Here are the most basic requirements to be eligible for the waived fees and franchise tax:
- The proposed new business entity must be 100% veteran-owned. Multiple veterans may jointly own the business, but non-veterans cannot hold ownership interests;
- Each veteran owner of the business must have been honorably discharged from a branch of the military;
- The veteran(s) must present proof of this status; and
- The business must be formed on or after January 1, 2016.
Although the opportunity to waive significant start-up costs associated with forming a new business is a great advantage, it is also true that the process for forming a veteran-owned business is slightly more complicated than a typical Texas business. Under most circumstances, the Texas Secretary of State (SOS) allows formation of entities, including limited partnerships, corporations, and limited liability companies, through its online portal known as SOSDirect. However, veterans face some paperwork hurdles in forming their exempted entities. Not only will additional documents need to be sent to SOS in order to form a veteran-owned business, but these documents must be mailed or faxed and the process cannot be completed online. The attorneys at Mejias Lindsay PLLC will help you step-by-step through the process to ensure a smooth start to your venture. Here is a guide to the general steps to forming your business:
- Choose an entity type for your business, such as corporation, limited partnership, limited liability company, etc.;
- Fill out the appropriate certificate of formation and confirm name availability for your business;
- Submit your DD214 to the Texas Veterans Commission, which will send back a letter confirming your veteran status that will need to be sent to the SOS;
- Complete Form 05-904, which is available from the Texas Comptroller of Public Accounts and which includes a unique identification number from the Texas Veterans Commission;
- Have an attorney draft articles of incorporation, a partnership agreement, or an operating agreement for your business—depending upon the type of entity you have selected; and
- Mail or fax two copies of your certificate of formation, one copy of your Form 05-904, and one copy of your letter from the Texas Veterans Commission to the SOS office in Austin, Texas, where it will be processed.
Formation under these rules can take up to two or three weeks when including time to receive the appropriate letter from the Texas Veterans Commission. However, the money a veteran can save just on filing fees alone is quite significant. Texas filing fees start at $300 for corporations and limited liability companies, and go up to $750 for limited partnerships. On top of that, veterans who file for their business any time before 2020 will enjoy five years of waiver from Texas franchise taxes. It’s easy to see why right now is the perfect time to start a business.
Unfortunately, many veterans have started businesses since January 1, 2016, without knowing that there is an opportunity to waive their filing fees and become exempt from five years of Texas franchise tax. If you are a qualifying veteran who started a business between January 1, 2016, and now, we can help you to recover the filing fees you paid but did not owe. In the process, you will also become eligible for the Texas franchise tax exemption for five years from the date you filed for your business.
Contact the Attorneys at Mejias Lindsay PLLC
The attorneys at Mejias Lindsay PLLC are waiting to help you on your journey to becoming a Texas small business owner. From choice of entity, to drafting your letter to the Texas Veterans Commission, to sending it all in to Austin, we will advise you every step of the way. Starting a business is a big step with important considerations. In addition to assisting you in formation of your entity, our attorneys will help you to file any DBAs (“doing business as”) in counties where you operate; can aid you in forming your LLC as a Texas Series LLC; and will draft your entity documents. From all of the attorneys at Mejias Lindsay PLLC, we thank you for your past service and humbly look forward to helping you in the future.