Small Business

HI Kevin!

I always recommend starting off as an LLC because the default tax status for a single member LLC is a sole proprietorship. An LLC is a legal entity, then tax status is secondary. The reason to start off as an LLC is ease of transition to partnership or S Corp should your needs change.

Hi Sirish-

Generally states do not tax non-resident business revenues unless your sales values exceed a certain amount or your transaction value exceeds a certain amount. Each state will vary in their filing requirements. If you would like to do some consulting with me on this, let me know and I can advise you on next steps! Thanks, Jackie

My Answer:

Hello, from San Antonio, Texas. First, I want to say congratulations on the business venture.

To answer your first question, if your question is strictly about applying for the Texas sales tax permit, you do not need a Tax ID (employer identification number or EIN). You can apply for a Texas sales tax permit, as a sole proprietor. When you apply for the Texas sales tax permit, Texas will assign you an 11 digit Texas Taxpayer Number.

To answer your second question, if you are going to operating the food truck in Texas (so the income will be generated in Texas), you definitely need the sales tax permit in Texas. You won’t be doing any sales in Oklahoma, so you probably don’t need an Oklahoma sales tax permit.

To answer your third question, you do not need an EIN (what I assume you’re calling a Tax ID) yet. However, the moment you hire any employees, you must have an EIN. Also, you may want to consider getting an EIN, even if you don’t need it. Why? Because if you don’t have an EIN, you’re going to be giving out your SSN to everyone. That definitely increases the risk of identity theft for you.

If you found this helpful, I would really appreciate if you could leave a Google review for me (Adam Dickreiter) by following this link https://g.page/adam-dickreiter-cpa-pllc/review?gm or doing a Google search for my name.

If we receive a positive Google review, my company will donate $10.00 to San Antonio Youth Literacy.

If you need a CPA or a bookkeeper, I am a CPA, and I also have a separate bookkeeping company (whose website address is www.bookkeepingsolutionssa.com). We have quite a bit of knowledge about sales tax, as we file sales tax reports for many clients and we are even engaged from time-to-time by companies (who are not even regular clients) to represent them with sales tax audits, as Texas loves to go after businesses for sales tax.

Adam Dickreiter, CPA

You both can be right. In my opinion, the answer depends how the practice purchase/sale is structured. If you are buying the assets of the practice, then you are right, you need to get a new EIN for your LLC that is buying the practice. On the other hand, if you are buying the seller’s LLC, then you can keep the same EIN that currently belongs to the seller.

Just to let you know, if you are investing the big bucks to purchase a practice, you need to have an attorney and a CPA in your corner, to look out for your best interests. If you don’t, you could easily find yourself in a situation where you are saving a few dollars by not paying professional fees, but you could be losing much, much more because you didn’t do things right or overlooked something.

As a certified public accountant (CPA), I am available to help on a consulting basis now and an ongoing basis going forward for taxes, bookkeeping, etc.

if you found this free advice helpful, please leave me a review, either through Google (search for Adam Dickreiter or by using the following link https://g.page/adam-dickreiter-cpa-pllc/review?gm) or through this website (CPAdirectory).

As a CPA, I came across this website and joined just last week, and I just came across your question.

To provide a complete and accurate answer, one would need to know more details about your situation.

First, how many owners have there been for the LLC from 2017 to 2020? Second, if this a situation where the LLC is owned by a married couple? Third, did you ever make any election to determine how the LLC would be taxed for federal income tax purposes? Its classification (disregarded entity, partnership, C corporation, S corporation) for federal income tax purposes would determine whether or not you should have been filing separate federal income tax returns for this LLC.

Besides considering federal income tax returns, you would need to consider state income tax returns or annual reports (depending on the state in which the LLC was created, as you did not provide that detail). It is often the case that returns or reports need to be filed with a state each year, even if it was inactive and even if you are required to file a federal income tax return.

So, yes, there very well could be penalties involved for not filing. However, more needs to be known to make that determination.

Feel free to contact me if you wish to engage me to help you.

As a CPA, I came across this website and joined just last week, and I just came across your question.

Unfortunately, no, you will not be able to avoid the tax on capital gains. As you know, as long as you own the stock, you don’t pay any tax on unrealized gains. When you sell stock, you realize gains and pay tax. There is not an exception to that rule, just because you’re using the proceeds to purchase assets for a business.

Trying to think outside the box, even if you could contribute the stock to a business of yours and manage to get tax-free treatment on the contribution of the stock to the business, you’d still run into the same problem when the business tried to sell the stock to get the money to purchase assets. In that case, the business would have to either pay tax itself (at its marginal tax rate) on the capital gains or pass the gains to you and you’d have to pay the tax (depending on how the business was structured for federal income tax purposes).

It’s great that you’re trying to be proactive and find a way to save taxes, but I don’t think it’s a go this time.

Even though you cannot avoid the tax on the capital gains, you should consider depreciation on the assets your purchase for the business. That might help offset some of the tax on your gains. Just a thought.

I wish you the best in your endeavors.