Here’s an overview of the key steps you’ll need to take to start your own business in Texas.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Texas Secretary of State (SOS). You can check for available names by doing a name search on the SOSDirect website. You can reserve an available name for 120 days by filing anApplication for Reservation or Renewal of Reservation of an Entity Name form with the Texas SOS. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Texas and How to Form a Corporation in Texas for more information.
Is your business is a sole proprietorship or partnership that uses a business name that is different from the name of the business owner (for a sole proprietorship) or names of the individual partners (for a partnership)? If so, you must register an assumed business name with the county clerk in the county where you will do business.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Tax Registration. If you will be selling goods in Texas, you must apply for a sales tax permit with the Comptroller of Public Accounts (CPA). More generally, any business operating in Texas should register with the CPA. You can register online or on paper.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Regulatory licenses and permits. These cover areas such as:
You can find guidance on state licenses and permit from the SOS Guides and Resources webpage. Many business licenses and permits in Texas are issued at the city or county level. For information about these local licenses and permits, check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. The Texas Department of Licensing and Regulation handles licensing for a certain specialized professions and industries. Businesses that provide professional services generally must apply for a Certificate of Authority through the Secretary of State. You can file the application through the SOSDirect website.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Because Texas does not have a personal income tax, owners of some forms of business will not owe state tax on their business income. See Texas State Business Income Tax for more information on state business taxes in Texas.
Sole proprietorships. Sole proprietors pay federal taxes on business income as part of their personal federal income tax returns.
Partnerships. Partners pay federal taxes on partnership income. In addition, most Texas partnerships are subject to the state’s franchise tax, but only owe the tax if total revenue exceeds a certain amount. Limited liability partnerships (LLPs) and certain limited partnerships (LPs) must file an annual report with the SOS.
LLCs. Members pay federal taxes on their share of LLC income on federal tax returns. LLCs themselves are subject to the state’s franchise tax, but only owe the tax if total revenue exceeds a certain amount. Unlike other states, Texas does not require LLCs to file an annual report. See Texas LLC Annual Report and Tax Requirements for more information.
Corporations. A shareholder-employee with a salary must pay federal income tax on his or her personal federal tax return. The corporation itself is subject to the state’s franchise tax.
Apart from Texas taxes, there are federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.