If you've started selling your homemade jewelry online or running personal training sessions out of your garage, you've likely formed a sole proprietorship already—and you're not alone. When an individual starts a business (sells goods or services) and they haven't filed any legal documents with their state officially registering the business, then they've automatically created a sole proprietorship.
A sole proprietorship is low maintenance. It doesn't typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business's debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can't pay.
In Texas, you can establish a sole proprietorship without filing any legal documents with the Texas state government. Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business:
For more information, read our article on how to start a business in Texas.
In Texas, a sole proprietor can use their own legal name or a trade name—also sometimes known as an "assumed business name" or "doing business as" (DBA)—to conduct business. If you plan to use an assumed name or trade name for your business, it can't be the same name as any other company currently registered with the state.
It's also a good idea to choose a name that's not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. So, if you use a name that's the same as or too similar to someone else's trademark and you both provide similar goods or services, then you could be infringing on their trademark. If you find a competitor company already exists with a similar name, then it's best to choose another name.
For instance, if you sell electronics under the name Television Central and another electronics shop across town is called Television Central Station, then you should choose a different name.
To make sure your business name is available, you should run a search in the following government databases:
For more information, read our FAQ on how to choose and register a business name.
If you use a business name that's different from your legal name, Texas requires you to register your assumed business name with the county clerk in the county where you plan to do business. (Tex. Bus. & Com. Code § 71.054 (2023).)
For example, suppose Jackson Teller runs a candy shop called Morrow Candies. Because Jackson's business name, Morrow Candies, isn't the same as his legal name, he'll need to register his business name.
To file your assumed business name you must fill out an Assumed Name Certificate available from the county clerk's office and mail it to the county clerk at the address listed in the application. Forms and fees differ by county but fees are usually less than $20.
Depending on your business activities, you could need to apply for business or professional licenses. Texas provides a free comprehensive guide to every license and permit a business might need. You should contact each designated agency for specific guidance on which permits, certifications, registrations, and authorizations your business might need.
You might also need to comply with local regulations, building permits, and zoning laws. Check with your city and county governments for more information.
Sole proprietors who wish to have employees need to obtain an EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. You can register for an EIN online with the IRS.
Sole proprietors without employees aren't required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.
In Texas, businesses are required to report taxes and file various employee reports. You might need to use your EIN when registering your business to report taxes through the Texas Comptroller of Public Accounts.
You should consider taking the following additional steps once you've started your sole proprietorship:
To find out how to form a sole proprietorship in any other state, see our 50-state guide to establishing a sole proprietorship.
You might not need to submit paperwork to start a sole proprietorship in Texas. But your specific circumstances could require you to file forms at the state and local level and comply with various rules and regulations. As a business owner, it's important to understand what steps you need to take to legally start and operate your sole proprietorship.
If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. They can help you register your business name, file your taxes, and obtain licenses and permits.
Need help? Start here.