How to Start a Business in Texas


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Start a Business in Texas

Starting your own business in Texas is one of the most exciting and profitable things you can experience. But where do you begin? There are numerous strategies to establish a business, each with important factors to consider. If you wish to start a business in Texas, there are many things that you should consider. Doing business in Texas, popularly known as The Lone Star State, will give you many opportunities because of the current estimated population, which consists of 30,345,487. Considering the large numbers, you will cater to a lot of customers.

Follow our in-depth guide on how to start a business in Texas. We will help you remove the doubt from the process and explore your chances of success. It will start from defining your business idea to establishing, launching, and expanding your business. And we will guide you every step of the way.

How to Start a Business in Texas?

To form a business in Texas, you must follow a few steps that include creating a business plan, choosing a business entity type, determining your Texas business costs, naming your business, registering a business, and lastly, marketing your Texas business. Starting a business is not something you can do overnight. The processing, planning, and preparation take a lot of time. If you want to start a business in Texas, you must have everything ready beforehand.

Continue reading to learn more about the procedure as a whole and what new small business owners should keep in mind as they carry out each phase.

Step 1: Create a Business Plan

The first thing you need to start your business is a solid plan. In creating a business plan, you should consider many things when you are in the decision-making phase. Your business plan in Texas is a road map for your successful business.

A business plan should consider the detailed purpose of your business. You should know what product or service you will serve in Texas. A purposeful business plan is important because that plays a key role in knowing how your business will make a profit. If the purpose of the business plan is vague and not aligned with what service you are giving, it will affect the business you are forming. Make sure to be SMART (specific, measurable, achievable, realistic, and in a certain timeframe) with your business goals. Also, researching your competitor’s service is a great deal to knowing what strategy you will form for your Texas business. And lastly, you should include the funding of your business.

A business plan should be created before you start a business. Without it, you have nothing but a blank slate. This document will help you understand the key parts of your business and the plan for success. Regarding the potential funding for your business in Texas, you can avail of business loans in bank and investor funding.

You can continue working on the legal structure of your business once you have the whole plan in your possession. You may create an LLC for your business legally. You can check other business guides shared by the LLCBuddy Editorial Team.

Step 2: Choose a Business Entity in Texas

A business entity refers to a legal structure formed to conduct business activities. It is a separate and distinct organization recognized by the law, which possesses rights, responsibilities, and liabilities distinct from its owners or members. Choosing a business entity for your Texas business is significant.

You must decide on a business entity structure while beginning your own business. The form of company entity you choose will significantly impact how well your personal assets are protected, how much tax you pay, and how much paperwork you have to deal with. You should consider forming a business entity in Texas through having Sole Proprietorship, LLC, LLP, and Corporation.

Sole Proprietorships

A sole proprietorship is a simple and common type of business structure where an individual owns, operates, and manages the entire business. It is the easiest and least expensive form of business organization to establish and maintain. One of the most appealing aspects of a sole proprietorship is the owner’s direct control over all aspects of the business.

A key characteristic of a sole proprietorship is that the owner and the business are considered a single legal entity. This means that all profits, losses, assets, and liabilities are the owner’s personal responsibility. Although this can lead to increased risk exposure, it allows the owner to control their business operations completely.

Consider a sole proprietorship if you want to start a business in Texas by yourself. For legal and tax reasons, the owner and the business are regarded as one and the same. The business owner takes on liability for the business. Therefore, the owner is liable for all business debts in the event that the company fails.

Limited Liability Company

A Limited Liability Company, also known as an LLC, is a business structure ideal for entrepreneurs and start-ups. It is perfect for start-ups and aspiring entrepreneurs since it has limited liability issues for a company. The Texas LLC is mainly used for the legal structure of a business between two or more companies that share management and profits. It also protects its owners from liabilities, debts, and responsibilities that may cause them in the future.

LLCs offer pass-through taxation, meaning that the profits and losses flow through to the members’ personal tax returns, avoiding double taxation that corporations may experience. Additionally, LLCs have fewer formal requirements and administrative burdens compared to corporations. Read Texas classification of LLC tax to get more information about tax.

Another advantage of an LLC is the flexibility in the management structure. Members can choose to manage the company themselves or appoint managers to oversee the business operations. This allows for customization based on the unique needs and preferences of the owners.

Limited Liability Partnership

Limited Liability Partnerships (LLPs) are a unique business structure combining partnerships and corporations’ elements. An LLP offers limited liability protection to its partners, meaning that each partner is only responsible for their actions and debts rather than jointly and severally liable for the entire partnership’s obligations.

This structure is particularly popular among professional service providers such as lawyers, accountants, and architects, as it allows them to maintain the collaborative nature of a partnership while enjoying the liability protection typically associated with corporations.

In an LLP, each partner’s income is subject to self-employment taxes, and the profits and losses are passed through to the partners’ personal income tax returns, similar to a general partnership. This pass-through taxation avoids the double taxation issue faced by some corporations.

Corporation

Forming a Texas corporation reduces your personal liability for business debts as an LLC does. A corporation can be taxed as an S-corporation (S-Corp) or a C-corporation (C-Corp). If a small corporation satisfies certain Internal Revenue Service (IRS) standards, then S-corporation status is available, providing pass-through taxation. However, most larger businesses and startups seeking venture financing are taxed as C-corps.

Step 3: Determine your Texas Business Costs

In Texas, you should determine the business costs that you will form. You should consider paying the Certificate of Formation fee for LLCs, Certificate of Formation – For Profit Corporation fees for corporations, business licenses fee, office supplies and equipment, payroll, office rent, utilities, transportation, and taxes.

Usually, filing an initial Texas Certificate of Formation fee costs $300, while the annual fee costs $0 because it is not mandatory in Texas. Read about the overall cost of LLC registration in Texas cost to know more about Texas LLC cost. If you wish to know more about how much it costs to form an LLC, you should look up and be guided by the LLC formation costs. For a corporation, you must pay the $300 for filing online, by mail, in person filing, or by Fax. Besides, you need to pay taxes as a corporation.

Step 4: Name Your Business in Texas

Naming your business doesn’t take a lot of time. With the help of Texas LLC name search, you can acquire a name for your business. If you form an LLC in Texas, you must follow the below rules while naming your business-

  • The name should not be confused with a government entity.
  • The name should be unique.
  • The name should be available to use.
  • Any other business does not use the name.
  • The new name must include “LLC” if it is a limited liability company.

In Texas, if you do not wish to file your business right away but want to hold the name that you have decided on, then you can reserve your business name for 120 days. You must file a name reservation application in the Texas Secretary of State to keep the name. There is a complete guide on LLC name guidelines for you to have a proper LLC business name.

Step 5: Register Your Business in Texas

In order to register a business in Texas, you need to file it with the Texas Secretary of State. Before that, you must have a Texas Registered Agent for your business. The Registered Agent is a person who is responsible for receiving important legal documents on your behalf.

Get the Texas Registered Agent

You must get your Texas Registered Agent before you file your business. The person should be eligible to conduct business in Texas. Also, they must be aged above 18 years. You can be your own registered agent. However, that will not be a wise decision. Appointing a professional will be much more beneficial for your business than doing it on your own.

Apply For Texas Formation Document

After you have a Registered Agent, you need to file the Texas formation document. If you are filing an LLC in Texas, you must file the Certificate of Formation and if you want to have a corporation structure, you need to file the Texas Certificate of Formation – For Profit Corporation.

Request For an EIN

In addition to the paperwork, you should apply for an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website. You can obtain the EIN for free from IRS.

The application of an EIN in Texas can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone (for International Applicants)– International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your LLC the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 6: Apply for Business License and Permit

Obtaining a business license and operating permit is necessary to run any business in Texas. Before launching your new business, you should request any required business license or permission. Most Texas businesses need licenses or permits to operate. Federal, state, and local governments may all require businesses to have licenses and permits. The business license fee depends on the type of license you are applying for. You must contact Texas Secretary of State for more details.

Step 7: Get a Bank Account

Your business dealings in Texas might be simpler with a US business bank account because it boosts your company’s legitimacy and liquidity. Most banks demand an EIN to create a business bank account for firms other than sole proprietorships. Also, keeping separate finances helps you avoid combining personal and professional finances.

Step 8: Market your Business in Texas

Now that your Texas business is already registered, you can market it with an ideal marketing plan. An ideal marketing plan can help a start-up business to become known. Making a comprehensive social media network like META, Facebook, Instagram, Twitter, and YouTube falls within this category. While creating an SEO campaign for your company website, you may also look at specialized communities on Facebook and LinkedIn.

Important Information

Do you need to have Business Insurance?

Your company needs insurance even if it’s a home-based business or you don’t have employees. Depending on your business planning and the risks you face, you may require different types of insurance. As your business expands, you might require more than one type of insurance. If you have employees, you are typically legally required to carry workers’ compensation insurance. You must contact Texas Department of Insurance to ensure what type of insurance is required for your business.

What is the most profitable type of business?

The most profitable type of business will vary depending on a number of factors, including your industry, location, target market, and business strategy. However, some companies, such as those that provide expensive products and other services, tend to be more profitable than others. If you’re unsure about the kind of business to launch, think about your abilities and interests and the demands of your target market to guide your decision on an effective business.

FAQs

What steps do I need to take to start a business in Texas?
To start a business in Texas, you’ll need to register with the Texas Secretary of State, obtain any necessary licenses or permits, create a business plan, select a business structure, open a business bank account, and file the necessary tax forms.
Are there any special regulations I need to follow to start a business in Texas?
Depending on the type of business you are starting, you may need to follow special regulations. For example, businesses that sell food, liquor, or fire arms, require special permits.
What is the Texas Business Tax Certificate?
The Texas Business Tax Certificate is a form that businesses in Texas must complete for the purpose of registering with the state for tax purposes.
Do I need a business license to start a business in Texas?
Depending on the type of business you are starting, you may need to obtain a business license. You should check with your local government to determine what type of license is required.
How much does it cost to register a business in Texas?
The cost to register a business in Texas varies depending on the type of business you are registering. The cost to file a Certificate of Formation with the Texas Secretary of State is $300.
What type of business structure should I choose in Texas?
The type of business structure you choose in Texas will depend on your specific business needs. Common business structures in Texas include sole proprietorships, partnerships, corporations, and limited liability companies.
What is the Texas franchise tax?
The Texas franchise tax is a tax imposed on businesses operating in Texas. The amount of the tax is based on the type of business structure and the amount of revenue generated by the business.
What types of businesses can I start in Texas?
Texas has a wide variety of business opportunities available, ranging from sole proprietorships, partnerships, and limited liability companies (LLCs) to corporations, cooperatives, and non-profits.
What types of business taxes are due in Texas?
The type of business taxes applicable to your business will depend on the type of business entity you choose to form. Generally, all business entities must pay federal income tax, as well as state taxes such as the Franchise Tax, and may also be subject to additional taxes depending on their business activities.
What are the requirements for registering a business in Texas?
Generally, businesses in Texas must complete the registration process with the Texas Secretary of State, comply with any relevant regulations, obtain an Employer Identification Number (EIN) from the IRS, register with the Texas Comptroller of Public Accounts, and obtain any necessary permits or licenses.
What are the costs associated with starting a business in Texas?
The costs associated with starting a business in Texas will depend on the type of business entity you choose to form. Generally, it will include the cost of filing fees to register with the Texas Secretary of State, the cost of obtaining an Employer Identification Number (EIN) from the IRS, and any applicable fees or taxes associated with the type of business you are forming.
What type of business structure should I choose for my Texas business?
It depends on the specific needs of your business. In Texas, the most common types of business structures include sole proprietorships, partnerships, limited liability companies (LLCs), corporations, and non-profit organizations.
Where do I register my business name in Texas?
You can register your business name with the Texas Secretary of State.
How do I obtain a license and/or permit for my business in Texas?
Depending on your type of business, you may need to obtain a license and/or permit from the Texas Department of Licensing and Regulation.
How do I get an Employer Identification Number (EIN) for my Texas business?
You can apply for an EIN online with the Internal Revenue Service.
Are there any specific regulations I need to follow to operate my business in Texas?
Yes, all businesses in Texas must follow state and local regulations. You should do research to determine which regulations apply to your specific business.
What is required to start a business in Texas?
In order to start a business in Texas, you must obtain the necessary licenses and permits, register your business name with the Secretary of State, and pay the appropriate taxes. You may also need to obtain a federal Employer Identification Number (EIN) from the IRS.
What are the steps for registering a business in Texas?
The steps for registering a business in Texas include selecting a business structure, obtaining a federal Employer Identification Number (EIN), registering your business name with the Secretary of State, obtaining the necessary licenses and permits, filing the Articles of Organization (for LLCs), and paying the appropriate taxes.
What forms do I need to file in Texas to start a business?
Depending on the type of business you are forming, you may need to file the appropriate Articles of Organization (for LLCs), Articles of Incorporation (for Corporations), or a basic Assumed Name Certificate (for a Sole Proprietorship or Partnership).
Are there any tax considerations when starting a business in Texas?
Yes. Depending on the type of business you are forming, you may need to register for and pay the appropriate taxes, including state sales tax, federal income tax, and local taxes.
What resources are available to help me start a business in Texas?
The Texas Secretary of State has a wealth of resources available to help you start your business, including information on licenses and permits, business registration, taxes, and other important topics. Additionally, the Texas Economic Development website has helpful information on how to start a business in the state.
What are the tax implications of starting a business in Texas?
Depending on the type of business you are operating and the type of taxes you are liable to pay, Texas has several taxes that may apply to your business. These taxes include sales and use taxes, franchise taxes, state and local business income taxes, and other taxes.
Do I need to register my business name in Texas?
Yes, you will need to register your business name in Texas with the Secretary of State in order to operate legally.
What is the process for closing a business in Texas?
The process for closing a business in Texas includes filing a Certificate of Termination with the Texas Secretary of State, closing out any existing tax accounts with the Texas Comptroller of Public Accounts, and notifying the Texas Workforce Commission.
What is the cost of starting a business in Texas?
The cost of starting a business in Texas will vary depending on the type of business you are starting and the type of taxes you are liable to pay. Generally, the start-up costs will include registering your business with the Secretary of State and obtaining a federal employer identification number (EIN). You may also need to obtain any necessary business licenses or permits from the Texas Comptroller of Public Accounts and/or the Texas Department of Licensing and Regulation.
What are the benefits of starting a business in Texas?
The benefits of starting a business in Texas include the state’s business-friendly environment, lower cost of living, access to a skilled and educated workforce, and a low tax rate.
What is the Texas Franchise Tax?
The Texas Franchise Tax is a tax imposed on most businesses operating in Texas and is based on a company’s total margin or net worth.
Are there any grants available for small businesses in Texas?
Yes, there are grants available for small businesses in Texas, including grants from the U.S. Small Business Administration, the Texas Department of Agriculture, and the Texas Comptroller of Public Accounts.
What is the Texas Sales and Use Tax?
The Texas Sales and Use Tax is a tax imposed on the sale and purchase of taxable items and services in Texas, and is collected by the Texas Comptroller of Public Accounts.
What specific requirements do I need to start a business in Texas?
To start a business in Texas, you will need to file for a Certificate of Formation with the Texas Secretary of State, obtain necessary permits and licenses, register with the Texas Comptroller for taxes, and obtain a Federal Employer Identification Number (EIN).
What type of taxes do I need to pay in Texas?
Depending on the type of business you have, you may need to pay state, federal and local taxes. The Texas Comptroller of Public Accounts collects state sales taxes and franchise taxes, while the Internal Revenue Service collects federal income taxes. You may also need to pay local taxes, such as property taxes and business license fees.
What types of business insurance do I need in Texas?
Depending on the nature of your business, you may need to purchase various types of insurance, such as liability insurance, workers’ compensation insurance, and property insurance. Additionally, you may need to obtain a surety bond to comply with certain regulations.

Also Read

Why Start Business Texas is So Important

Why Start Business Texas is So Important

Businesses are the backbone of any economy, generating employment, boosting innovation, and driving economic growth. Among the many regions that embrace the entrepreneurial spirit, Texas stands out as an exceptional destination for new entrepreneurs and existing businesses alike. With its favorable business climate and dynamic market, starting a business in Texas can prove to be a game-changer. Today, we delve into why the “Start Business Texas” movement is of utmost importance and how it can ensure the growth and prosperity of both individual entities and the state as a whole.

One of the most compelling reasons for the importance of starting a business in Texas is its business-friendly environment. The state is renowned for its low taxes and minimal government regulation, creating a favorable ecosystem for entrepreneurs to thrive. In fact, Texas is regularly ranked as one of the top states for business-friendly policies, attracting companies from across the nation. This allure arises from the belief that entrepreneurs and business owners can operate freely, unburdened by excessive red tape, and instead focus on developing innovative products and providing excellent services.

Furthermore, the geographical diversity of Texas contributes significantly to its importance as a hub for establishing a business. Spanning nearly 270,000 square miles, Texas offers limitless opportunities across sectors such as energy, technology, healthcare, and agriculture. This vast expanse brings with it access to diverse landscapes, extensive transportation networks, and a wide array of regional markets. In such a unique setting, entrepreneurs can tap into various markets, adapting their products and services to cater to the needs of different regions. This wide range of opportunities enables businesses to expand their reach and maximize their potential market share.

Moreover, Texas boasts a workforce known for its rugged work ethic and innovation, making it an ideal location for startups and established businesses looking to grow. The great state is home to some of the nation’s top universities, ensuring a steady influx of skilled professionals primed for business success. Additionally, Texas prides itself on being the driving force behind job creation, presenting a wealth of opportunities for job seekers. This virtuous cycle of a skilled workforce combined with a high demand for employment contributes significantly to the overall prosperity of the state and those businesses that establish themselves here.

The importance of starting a business in Texas extends beyond the confines of individual company success. It also has far-reaching economic implications not just locally, but globally as well. Texas has long been renowned as a global leader in industries such as energy, technology, and manufacturing. By actively encouraging new businesses and startups, Texas can continue to solidify its global reputation and shape the future of these industries. It becomes a magnet for investment, thus creating more job opportunities, fostering creativity, and attracting talent from all corners of the world. Successful businesses in Texas can set an example for other regions, making it an influencer and leader in entrepreneurial spirit and innovation.

In conclusion, the Start Business Texas movement is of utmost importance due to the exceptional business-friendly environment, vast geographical diversity, and a motivated workforce that Texas has always offered. By embracing entrepreneurship and the values it stands for, Texas not only empowers individuals and businesses but positions itself as a catalyst for economic growth, regional development, and global influence. Whether someone is starting a small business or opening up the latest tech startup, doing so in Texas ensures access to a supportive ecosystem that provides countless opportunities to succeed and thrive. So, let us stand firm and continue championing the spirit of entrepreneurship as Texas leads the way into a future brimming with possibilities.

Conclusion

In conclusion, embarking on the entrepreneurial journey of starting a business in Texas, also known as The Lone Star State, requires thorough research, planning, and dedication. Understanding the local business landscape, choosing the right structure, and complying with all regulatory requirements are essential steps to ensuring your venture’s success. This article has provided valuable insights and guidance for aspiring entrepreneurs looking to seize the opportunities present in Texas’s dynamic economy. By leveraging available resources and approaching the process with diligence and determination, you can lay the foundation for a thriving and prosperous business in Texas.


About Author & Editorial Staff

Steve Goldstein, founder of LLCBuddy, is a specialist in corporate formations, dedicated to guiding entrepreneurs and small business owners through the LLC process. LLCBuddy provides a wealth of streamlined resources such as guides, articles, and FAQs, making LLC establishment seamless. The diligent editorial staff makes sure content is accurate, up-to-date information on topics like state-specific requirements, registered agents, and compliance. Steve's enthusiasm for entrepreneurship makes LLCBuddy an essential and trustworthy resource for launching and running an LLC.

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