Do you have a great business idea, but you’re not quite sure how to get from the idea phase into owning and operating your own business in Texas? You’ve come to the right place! There are many important aspects to running a company, and like any other state, Texas has its own rules and regulations to consider.
In this guide to starting a business in Texas, we’ll discuss all the relevant details to business ownership in this state. By the time you’re done reading, we think you’ll have a strong grasp on the necessary steps involved.
How to Start a Business in Texas (in 10 Steps)
1) Create a Business Plan
The first step to creating any business in any state is to plan what products and services you’ll sell, set your operational budget, and figure out how you want to market your company.
Your business plan doesn’t have to be fancy at all, you just need to make sure you spend enough time considering these important aspects before you actually launch your business. To get started, SBA.gov has a great free tool.
2) Choose a Name
The name of your business is an extremely important attribute because it’s often how you make your first impression to potential customers.
Depending on whether you choose to form a corporation or a limited liability company, there are some legal aspects as well (for example, an LLC must include “LLC” or “limited liability company” in the business name, and a corporation must include “incorporated,” “corporation,” “Inc.,” or “Corp.”).
Beyond the basic legalities, you should focus on clearly identifying what your company does in your business name. You can also consider incorporating your values into your business name, like using the word “green” to denote environmental friendliness.
Something You Love
Finally, choose a name that you personally like and take pride in, and one that both sounds good when spoken aloud and looks good on paper.
One big piece of advice we have for naming a business is that you shouldn’t get too focused on one idea until you either form your company or reserve the name.
In Texas, you can run a taxable entity search to determine if your desired business name is available in the state. If you need additional time to file your registration paperwork, you can also reserve your name by filing the Application for Reservation of Entity Name with the Secretary of State’s office. The fee to reserve a name is $40, and the name will be reserved for a period of 120 days.
3) Decide on a Registered Agent
According to the Texas Secretary of State, “the Texas Business Organizations Code (‘BOC’) requires every domestic or foreign filing entity to maintain a registered agent and office in Texas.”
Business owners, officers, and LLC members can serve as the registered agent, as long as they have a physical address in the state. However, a business entity cannot serve as its own registered agent in Texas.
This position is vital to any Texas business because without a registered agent, you could lose your good standing with the state, see your business dissolved by the state, or even remain unaware of a lawsuit progressing against your company.
While the Secretary of State’s office does not provide a list of commercial registered agents, there are numerous companies throughout the state that can provide this service.
Rocket Tip: We recommend designating an online service to handle these requirements. This eliminates junk mail and keeps your personal and/or business address off public record. ZenBusiness and IncFile both offer a free registered agent service when you use them to form a business online.
4) Choose a Structure and Form Your Business
If you’re just operating a sole proprietorship or general partnership, you don’t need this step (or several of the others in this guide, including selecting a registered agent), because those business structures don’t require any sort of formal formation process.
This leaves two main options: the corporation and the limited liability company.
The LLC is the more common option, partially because it’s much simpler. There’s not much paperwork involved, and the maintenance requirements basically amount to an annual report. Furthermore, LLC owners still receive the personal asset protection that makes a corporation so attractive as a business type in the first place. For more specific information about starting an LLC, check out our full article on the topic.
For some entrepreneurs, the corporation is the better choice. There’s far more effort involved both in forming one and in maintaining it with the state of Texas, but for larger businesses they’re usually the better option, as they allow for more growth and investment than LLCs generally do.
If you would like to know more, check out our “LLC vs Corporation: What Is the Difference?” article. No matter which business structure you choose to form, you can find all the relevant forms on the Iowa Secretary of State’s website or have a professional business formation website do it for you.
5) Take Care of Tax Obligations
The vast majority of businesses operating in Texas will need a federal tax ID number (EIN), which can be acquired from the IRS.
On the state level, there are a variety of tax registration requirements that may or may not apply to your company, depending on the nature of your business. These include taxes like crude oil tax, sales and use tax, oyster sales tax, mixed beverage tax, fireworks tax, property tax, etc.
Thankfully, Texas makes this part relatively easy. You can find a wealth of information related to business tax requirements and the process for filing taxes on the Texas Comptroller’s website.
Keep in mind that your city and/or county may have taxation requirements as well, so make sure to check with them to make sure you aren’t missing anything.
Here are some business resources for each of the largest cities in Texas:
6) Acquire Business Licenses and Permits
Some states have statewide business licenses that every company needs to acquire, but Texas does not.
Still, there are hundreds of state-level, industry-specific licenses and permits ― from barbering to midwives ― that may apply to your company depending on the nature of your business. To search through the full database of business licenses and permits, you should reference the Texas Department of Licensing & Registration website.
Much like with taxation issues, there’s also the matter of local licenses to consider. You can learn more about county-level occupational licenses right here.
7) Obtain Required Insurance Policies
In order to operate a business with employees in the state of Texas, you are legally required to obtain workers’ compensation insurance. Though not mandatory, Texas small businesses can also choose whether or not provide health insurance to their employees.
You can learn more about these insurance types and how they apply to Texas businesses by visiting the Department of Insurance website.
It is the employer’s responsibility to get these policies to protect your employees, regardless of what line of business you’re in. Of course, it’s probably a good idea to acquire industry-specific policies to protect your company in other ways, but unemployment and workers’ comp are the ones strictly required by law.
8) Open a Business Bank Account
Whether you start a limited liability company or a corporation, you’ll need to keep your business and personal assets separated.
This is where opening a business bank account comes in. While having a separate checking account for your company isn’t a legal requirement, it makes separating your assets considerably easier, and we always advise that any business owner does so.
9) Develop a Business Website
In this day and age, even strictly local businesses should have a website, because the internet is your first point of contact for many of your customers. Your site doesn’t need to be fancy, but you should put some thought into your domain name, and make sure it’s something memorable and easy to type without misspellings.
If you’re not comfortable designing a site yourself ― and if you also don’t have the budget to hire a professional designer ― there are plenty of website builder tools that can help you put together a solid website. WordPress and Weebly are very easy to use.
10) Don’t Be Afraid to Ask for Help
If you run into problems with any of the steps outlined in this guide, remember that you can always find help.
In this state, the Texas Small Business Development Center exists solely to (in their own words) “provide confidential business consulting — at no cost to you — and affordable training to help you at every stage of your business development.” With over 60 locations across Texas, the SBDC is ready and willing to help if you need assistance.
Another excellent resource is the Texas chapter of the U.S. Small Business Administration. Their website has information regarding small business events, business resources, press releases, SBA programs, and more.
While there are several vital steps in the process of starting a business in Texas, taken individually these steps aren’t terribly complex.
It can seem overwhelming if you consider the entire process all at once, but if you break down these steps and take care of them one at a time, they’re all quite manageable. Keep in mind that you don’t need to go it alone with the DIY option ― if this process becomes overwhelming, or if you simply don’t have the time and energy to devote to these steps ― assistance is available.