In January of 2016, Texas legislature passed Senate Bill 1049. This is good news for our veteran entrepreneurs.
SB 1049 is in effect to assist veterans in forming a business with two benefits one is by waiving some of the fees associated with forming the business. The other is by waving franchise tax fees for the first five years of operations.
The requirements for an eligible veteran-owned business are as follows; the entity must be organized in Texas on or after January 1, 2016, the entity must be owned by a person or persons being an honorably discharged veteran from a branch of the U.S. Armed Services, the business must be 100 percent owned by a veteran or veterans.
In order to apply for this exemption, there are a few steps to take prior to completing the entity formation documents. The veteran must submit a request along with a copy of their DD-214 to the Texas Veterans Commission. This request will return a letter of verification of the Veteran’s Honorable Discharge if applicable. The Veteran will also need to complete a Certification of New Veteran – Owned Business form. This is provided by the Texas State Comptroller’s office also known as Form 05-904.
Once the veteran has the above-mentioned forms to certify the business owner’s veteran status, they can proceed with filing the appropriate entity formation with the Texas Secretary of State. The entire process usually takes about 4 weeks. Each office processes the paperwork as they receive requests so the timeline can vary depending on the volume of the requests through each office.
If you have already established your business and you meet the guidelines above, then we have good news. If you established your business after January 1, 2016, you may apply to certify your veteran status and receive the benefits of veteran ownership. If the Texas Veterans Commission provides you with a letter verifying your honorable discharge then you can apply to have any filing fees refunded to you.
The other benefit of SB1049 to Veterans is that Veteran-owned businesses that meet the above-mentioned guidelines are not subject to Franchise Tax for its initial five year period.
The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas. As the business owner you are still responsible for filing the “Texas Franchise Tax No Tax Due Report” also known as Form 05-163.
As a veteran entrepreneur, if you are unsure of what entity to file, would like assistance filing as a new veteran business, or would like assistance filing as an existing veteran business as mentioned above, please visit with an SBDC Business Advisor for no-cost business assistance.
“Business Tips” was written by Dezaray Johnson, Certified Business Advisor, of Angelo State University’s Small Business Development Center. For more information on the topic of this article or the services of the ASU · SBDC, contact her at Dezaray.Johnson@angelo.edu.