Summary of What This Blog Covers:
- Why an LLC protects your assets and supports growth
- The importance of an EIN for business credibility
- Why a separate business bank account is essential
- When an S-Corp election can save you on taxes
If you’re doing business in Texas whether that’s selling products, offering services, managing clients, or collecting income in any form, it’s time to stop pretending your Cash App is a business bank account.
Real talk: Venmo isn’t a business structure. PayPal isn’t a tax plan. And having your personal and business money in one account is like storing your savings in a cereal box. It might work for now, but the day it doesn’t? It really doesn’t.
So, what do you actually need to run a legit business in Texas? It’s not as complicated as it sounds. In fact, there are three essential pieces that form the core of any real business:
- LLC
- EIN
- Business Bank Account
Let’s break each one down. Why it matters, how to do it right, and how to avoid the mistakes that cost entrepreneurs thousands in back taxes, legal risk, and missed deductions.
Step 1: Forming an LLC (aka: Putting the Suit on Your Side Hustle)
First up. Your legal armor.
An LLC, or Limited Liability Company, gives your business structure, legitimacy, and protection. You can operate as a sole proprietor without one, but here’s the catch: if anything goes wrong, your personal assets are on the hook.
With an LLC, your business becomes its own legal entity. That means:
- You can open contracts in your business’s name
- You get separation between personal and business liability
- You can build business credit
- You unlock tax-saving structures (hello, S-Corp election)
In Texas, forming an LLC is refreshingly straightforward:
- File a Certificate of Formation with the Texas Secretary of State
- Pay the $300 filing fee (worth every penny)
- Choose a unique business name
- Appoint a Registered Agent (someone who can accept legal docs. This can be you or a service.)
- Draft an Operating Agreement (especially if you have partners)
Insider Tip: Even if you’re a one-person show, an Operating Agreement is still smart. It formalizes how your business operates, and banks or potential investors may request it.
Need help? A CPA in Austin, Texas can handle all this for you. Accurately, efficiently, and without you spending four hours googling legal terms.
Step 2: Getting an EIN (Not Optional, Definitely Necessary)
Next up is your EIN, or Employer Identification Number. Think of it as your business’s Social Security number. It’s how the IRS identifies your business when it’s time to file taxes, hire employees, or open a bank account.
Even if you’re a solo entrepreneur with no employees, you still need an EIN if:
- You formed an LLC
- You want to hire contractors and issue 1099 forms
- You’re applying for business credit
- You want to avoid putting your personal SSN on W9s (because privacy matters)
- You plan to open a business bank account (which you absolutely should)
Good news: it’s free to apply for an EIN through the IRS website. But here’s the kicker: mess up your entity classification during setup, and you could end up on the wrong tax path for years.
That’s why many smart business owners hand this off to a tax preparer near you or a licensed CPA certified public accountant who knows exactly what options to select, how to set it up properly for S-Corp potential, and how to align everything with your tax goals.
Step 3: Opening a Business Bank Account (And Why It’s Non-Negotiable)
Let me guess: you’ve got money from clients hitting your personal checking account, maybe some subscriptions coming out of your business credit card, and receipts shoved into a glovebox or Google Drive.
No judgment. But if you’re serious about running a real business, this needs to change.
A separate business bank account isn’t just best practice. It’s essential to:
- Keep your LLC liability protection valid
- Track income and expenses cleanly
- Avoid IRS red flags for co-mingling funds
- Simplify tax preparation services near you (and make your CPA love you)
- Build business credit and professionalism
To open a business bank account in Texas, you’ll typically need:
- Your LLC’s Certificate of Formation
- Your EIN
- Your Operating Agreement
- A valid form of ID
Many banks now offer online setup, and if you’re working with a CPA in Austin, Texas, we’ll help you choose a bank that integrates with QuickBooks, FreshBooks, or whatever software you use.
Pro Tip: Connecting your bank to software like QuickBooks Self-Employed or Zohobooks makes tracking deductions for mileage, meals, and subscriptions automatic. Which makes year-end tax filing a whole lot easier.
Step 4: Should You Elect S-Corp Status? Let’s Get Fancy
Now let’s spice things up.
Once your LLC is earning at least $50K in net income, it might make sense to elect S-Corporation status. It’s not a new business entity. It’s a tax classification that can save you serious money on self-employment tax.
Here’s the deal:
- Normally, you pay self-employment tax (15.3%) on all your income
- With an S-Corp, you pay that tax only on your salary
- The rest of your income? It’s taxed as distributions not subject to self-employment tax
But S-Corp isn’t free money. There’s structure involved:
- You have to run payroll (yes, even for yourself)
- You must pay yourself a “reasonable” salary
- You file Form 1120S, issue W2s, and make sure everything’s up to IRS standards
It’s powerful, but also complex. The DIY route here is risky. Work with a licensed CPA near you, and they’ll assess whether you’re ready, what your tax savings will be, and how to set everything up properly so you can keep more of what you earn legally.
Why All of This Matters Now More Than Ever
Look, the IRS isn’t getting more lenient. The rules around 1099-K reporting, FBAR filing, contractor classification, and franchise tax are only getting stricter.
That $600 from PayPal? That 1099 NEC form from your biggest client? It’s being reported and if you’re not tracking it properly or filing it through the right channels, you’re leaving yourself open to penalties, audits, and overpaid taxes.
DIY is no longer a savvy shortcut. It’s a liability.
Smart business owners don’t just “get by” at tax time. They plan ahead, they stay organized, and they work with a CPA in Austin, Texas who sees the big picture. Legal, financial, and tax.
Recap: What You Need to Run a Legit Business in Texas
Let’s wrap this up with a checklist. If you’ve got a business or even just the beginnings of one, here’s what you need:
- LLC registered with the Texas Secretary of State
- EIN issued by the IRS
- Business bank account that keeps money separate and clean
- Accounting software (and a strategy behind it)
- A go-to tax advisor near you who helps you think beyond April 15
It’s not about making it harder. It’s about making it smarter. Cleaner books, stronger protections, better compliance and more money in your pocket at the end of the year.
Let Insogna Help You Build Your Business on a Solid Foundation
We’re not just number crunchers. We’re your go-to strategy team Combining legal insight, tax strategy, and real business acumen to help you grow with confidence.
We’ll:
- Set up your LLC and EIN
- Help you open the right bank account
- Advise on bookkeeping systems
- Manage your 1099 tax form reporting
- Handle franchise tax and self-employment tax filings
- Guide you through S-Corp elections and long-term planning
- Be your year-round partner in building a real, compliant, tax-smart business
Schedule your discovery session today with Insogna.
Let’s build the business you’ve been dreaming about. The right way, from day one.