Incorporating Veteran-Owned Businesses in Texas
There is great news for Texas veterans who want to be business owners. Back in 2015, the Texas legislature passed Senate Bill 1049, which allows qualifying Texas veterans who have been honorably discharged to incorporate their businesses in Texas with waived filing fees and exemption from franchise taxes for their first five years. The bill went into effect on January 1, 2016, and expires on January 1, 2020. So, right now is the perfect time for veterans to pursue their entrepreneurial goals and take advantage of a significant savings in fees and taxes for their businesses.
The most basic requirements of eligibility are that the business be 100% owned by one or more qualifying veterans, and that the business be formed on or after January 1, 2016. Already filed your business since that date but didn’t know about the opportunity to waive filing fees? You can receive a refund of the filing fee already paid by sending in a Verification of Veteran’s Honorable Discharge and Certification of New Veteran-Owned Business to the Texas Secretary of State and receive a refund in the mail. Remember, your business must have been newly formed on or after January 1, 2016.
Qualifying for the wavier of fees and Texas franchise tax is a more complicated process than normal. Typically, to form a business, it is possible to file online through the Texas Secretary of State’s SOSDirect online portal and pay the filing fee. For instance, filing for a normal LLC requires filling out Form 205 (Certificate of Formation) and sending it through SOSDirect with payment of a $300 filing fee. Now, veterans can file an LLC or another business entity without paying the filing fee, but unfortunately they cannot use the relatively easy SOSDirect portal to do this. Instead, they must jump through a series of hurdles, including obtaining a letter from the Texas Veterans Commission to prove they are eligible. Even though the process is more complicated, a veteran can save significantly on fees and taxes by using this new route to business formation.
This process is more complicated, and many law firms charge additional legal fees so that veteran clients can earn these waivers; however, the Lynch Law Firm does not.
The general steps to form a certified Veteran-Owned Business that is exempt from the filing fee and the Texas franchise tax for the first five years is as follows:
Choose the appropriate entity for your business (corporation, limited liability company, limited partnership, etc.);
Run a search for the same or similar names through SOSDirect, to decrease the chances that your filing will be rejected based on similarity;
Obtain a letter of verification from the Texas Veterans Commission that contains a unique ID number for tax purposes;
Fill out Form 05-904 from the Texas Comptroller of Public Accounts and include your unique ID number from your Texas Veterans Commission verification letter;
Fill out an appropriate Certificate of Formation for your entity;
Send the Texas Secretary of State Office two copies of your Certificate of Formation, one copy of your verification letter from the Texas Veterans Commission, and your Form 05-904 from the Texas Comptroller’s Office.
The Lynch Law Firm is familiar with this veteran-specific process and knows how to get your business entity formed as quickly as possible. Certain steps in the process, such as waiting for the verification letter to arrive from the Texas Veterans Commission, can take a week or two. Overall, the process of forming a Veteran-Owned Business generally takes two to three weeks before confirmation is received from the Texas Secretary of State. In addition, we can help you with important considerations such as choice of entity, name restrictions on veteran-owned entities, drafting your letter to the Texas Veterans Commission, and coordinating the entire process. We will also draft the operating agreement, partnership agreement, or articles of incorporation which will set the private terms by which your business operates.
To find out more about starting your own Veteran-Owned Business in Texas, contact Natalie Lynch today. She will make sure your business gets off on the right foot, and that you are able to take advantage of the tax and costs savings you deserve. The Lynch Law Firm thanks you for your business and for your service to our country!
Cite this article: Lynch, N. (2017). Incorporating Veteran-Owned Businesses in Texas. Available: https://www.lynchlf.com/blog/incorporating-veteran-owned-businesses-in-texas/