How do you managetax presence risk in Texas.
Teamed employs your Texas team under its own entity, so your company carries no payroll tax presence or franchise tax filing obligation there.
At a glance
What creates tax presence in Texas
Texas has no personal income tax, but it does levy a franchise tax on entities doing business in the state, calculated on margin, with a minimum tax of $0. Registering an entity with the Texas Secretary of State carries a formation fee. Hiring staff without registering anything locally is the exposure most companies overlook.
- Minimum franchise tax
- $0
- Franchise tax basis
- margin
- Formation / registration fee
- $300
The mechanism
Why hiring in Texas can create a tax footprint
When a company puts employees on the ground in Texas, doing real work, signing contracts, holding inventory, or directing sales, tax authorities can treat that as the company doing business in the state. That triggers registration duties even if the parent company never opens an office. The franchise tax applies to entities doing business in Texas and is calculated on margin, so once you're registered, you're inside that regime whether or not tax is owed.
The risk is not usually the tax bill itself, since the minimum franchise tax is $0 for many smaller filers. The real cost is administrative: registering as a foreign entity, keeping a registered agent, and filing on schedule every year, indefinitely, for as long as that presence exists.
The entity path
What registering your own entity involves
If you choose to set up your own Texas entity, the Texas Secretary of State charges a formation or registration fee. That's a one-time cost of formation, separate from the ongoing franchise tax filing obligation that follows once you're registered and doing business in the state.
Entity formation makes sense when you plan a long-term, sizeable Texas presence and want direct control over payroll, benefits, and local hiring. It makes less sense as a way to test the market or hire two or three people quickly.
The EOR path
How Teamed removes the exposure
Teamed employs your Texas-based staff under its own registered entity. Your company pays Teamed, Teamed pays the employee, and the franchise tax registration, filings, and registered-agent upkeep sit with Teamed, not you. You get people working in Texas without opening a tax presence there yourself.
This matters most in the early stage, when you don't yet know if Texas will be a two-person outpost or a two-hundred-person hub. Using Teamed buys you time to find out before you commit to a filing obligation you'll carry indefinitely.
Before you commit
Sometimes an employer of record is the better fit
An employer of record is sometimes the better answer, not a lesser one, when your Texas headcount is small or still changing, or when you're testing whether the market is worth a permanent commitment. Talk to a member of the team about your specific plans, or run the numbers through the crossover calculator, since the right call depends on salaries and how long you intend to stay.
Contractors, employer of record and your own entity all run on one platform at Teamed, so moving between them later does not mean changing provider or re-onboarding anybody. Real HR and legal experts handle the work rather than a ticket queue.
Talk to a member of the team and we will tell you plainly which one suits where you are. If you would rather look at the numbers yourself first, the crossover calculator models it on local salaries and employer costs rather than on a headcount rule of thumb.
Who carries it
Your own entity, when it's time. We set it up, migrate you in, and hand it back intact.
Global Entity and Employment Operations, which we call GEMO, is how Teamed forms your company, registers it for tax and payroll, runs it month to month and keeps its filings current, across 100+ countries. You stay the employer. We do the work behind it.
In Texas that means we handle the entity formation and franchise tax registration, keep the filings current, and then transfer the entity to you cleanly once you're ready to run it yourself. This is our Global Entity and Employment Operations service, which we call GEMO, available across 100+ countries.
They set up our EU entity and moved hires across without missing a payroll.
Questions
Texas tax presence FAQs
Does hiring one employee in Texas create a tax filing obligation?
It can, if that person's work counts as the company doing business in Texas. Once that threshold is crossed, entity registration and franchise tax filings generally follow, even if no tax is ultimately owed.
Is the Texas franchise tax based on profit?
No, it's calculated on margin rather than net profit, which is a different base than most states use for corporate income tax. The minimum franchise tax is $0, so many smaller entities owe nothing despite still needing to file.
What does it cost to register an entity in Texas?
The Texas Secretary of State charges a formation or registration fee. That covers formation itself, not the ongoing franchise tax filings that follow once the entity is doing business in the state.
Can an EOR avoid the need to register in Texas at all?
Yes, that's the core mechanism. Teamed's own Texas-registered entity employs your staff, so the registration and franchise tax filing sit with Teamed rather than with your company.
When should we set up our own Texas entity instead of using an EOR?
Once your Texas presence is large, stable, and clearly long-term, direct entity ownership usually makes more sense. Run your headcount and salary numbers through the crossover calculator, or talk to the team, to see where that point sits for you.
Where these figures come from
Sources
Figures on this page come from the Texas Comptroller for franchise tax details and the Texas Secretary of State for formation and registration fees.
Looking for a job in Permanent Establishment Risk yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.