Starting Your Business in Texas | A Step-by-Step Guide

There are numerous factors to consider if you want to start an LLC in Texas. Doing business in Texas, also known as The Lone Star State, will provide you with numerous opportunities due to the current estimated population of 30,345,487. Given the large number of customers, you must cater to many.

Starting your own business is one of the most exciting and profitable things you can do in Texas. But where do you start? There are numerous business establishment strategies, each with important factors to consider. Follow our comprehensive guide on How to Start a Business in Texas. We will assist you in removing doubt from the process and investigate your success chances. It will begin with defining your business idea and progress to establishing, launching, and expanding your business. Webinarcare Editorial Team will help you every step of the way.

Steps in Starting a Business in Texas?

To form a business in Texas, you must follow a few steps that include creating a business plan, choosing business entity type, determining your Texas business costs, naming your business, registering a business, and lastly, marketing your Texas business.

Please continue reading to learn more about the overall procedure and what new small business owners should keep in mind as they complete each step.

Step 1: Creating a Business Plan

When developing a business plan, many factors should be considered during the decision-making process. Your business plan in Texas serves as a road map for your company’s success.

A business plan should take into account the specific goals of your company. You should know the product or service you will provide in Texas. A well-thought-out business plan is essential for determining how your company will make a profit. If the purpose of the business plan is ambiguous and unrelated to the service you provide, it will impact the business you are forming. Make sure your business goals are SMART (specific, measurable, achievable, realistic, and time-bound). Also, researching your competitors’ services will help you determine your strategy for your state business. Finally, you should consider your company’s funding.

When starting a business, you should write a business plan. You are left with nothing but a blank slate without it. With this article’s assistance, you can better comprehend your business’s essential components and success strategy. You can apply for Texas Small Business Loans from banks and investor funding to help support your company in the state.

Once you have the entire plan in your hands, you can work on the legal framework of your company. Legally, you can form an LLC for your ideal business.

Step 2: Choose a Business Entity in Texas

Selecting a business entity for your Texas company. When starting your own business, you must choose a business structure. How well your personal assets are secured, how much tax you pay, and how much paperwork you have to deal with will all be significantly impacted by the type of corporate entity you choose. Consider setting up a corporation, LLC, LLP, or sole proprietorship as your business entity in Texas.

Sole Proprietorships

Consider a sole proprietorship if you want to start a business in Texas by yourself. A sole proprietorship is the simplest business structure in which a single individual owns and operates the entire business. The owner and the business are considered the same legal entity in a sole proprietorship. There is no legal distinction between the owner and the business, meaning that the owner has complete control over the business operations, profits, and losses.

Sole proprietorships are best suited for Texas small businesses with low risks and for individuals who want to maintain complete control over their business without the complexities of establishing a separate legal entity.

Limited Liability Company

A Limited Liability Company (LLC) is a business structure that combines features of both partnerships and corporations, offering limited liability protection to its owners (called members) while allowing flexibility in management and taxation. An LLC is a separate legal entity from its owners, meaning the members are not personally liable for the business’s debts, obligations, or liabilities.

It is a popular choice for small to medium-sized businesses that want the liability protection of a corporation while maintaining management flexibility and simpler tax treatment. It’s essential to consult with a legal or financial professional to determine if an LLC is the best choice for your specific business situation.

Limited Liability Partnership

A Limited Liability Partnership (LLP) is comparable to an LLC. However, it is usually used by licensed business professionals like attorneys or accountants. A partnership agreement is necessary for this kind of business entity.

Corporation

Forming a Corporation reduces your personal liability for business debts as an LLC does. A corporation is a legal entity that is separate and distinct from its owners, known as shareholders. It is created under the laws of the state it is incorporated in and is considered a separate “person” under the law. The corporation can enter into contracts, own property, sue and be sued, and pay taxes separately from its owners.

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.

To choose the right business structure in Texas, consider personal liability protection, taxation, management flexibility, administrative requirements, and setup costs. Consult a legal or financial professional to help you make the best decision.

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, business licenses fee, office supplies and equipment, payroll, rent, utilities, transportation, and taxes.

Usually, filing an initial Texas Certificate of Formation fee costs $300, while the LLC annual fee costs $0 because it is not mandatory in Texas.

In terms of filing Texas Certificate of Formation – For Profit Corporation, the costs usually range up to $300 for filing online, by mail, in person filing, or by Fax If you file it offline or by mail, you can Send the form by mail to or drop it off in person at Secretary of State, P.O. Box 13697, Austin, TX 78711-3697. Or Fax it to (512) 463 – 5709.

Step 4: Name your Business in Texas

Naming your business doesn’t take a lot of time. With the help of Texas Business 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. You must file a name reservation application in the Texas Secretary of State to keep the name.

If the business name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $40 and mail name reservation fee of $40. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by two methods, by mail and in person., which costs around Varies by county. In addition, the DBA’s validity in Texas is ten years, which you can file in Texas Secretary of State.

You can check out How to File a DBA in Texas for clearer understanding.

Step 5: Register Texas Business

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.

You can serve as your own Registered Agent, or you can appoint a friend or family member, or you can check the Professional Registered Agent Services in Texas.

Apply For Certificate of Formation

After you have a Registered Agent, you need to file the Texas Certificate of Formation, if you want to have an LLC structure, or you need to file the Texas Certificate of Formation – For Profit Corporation if you want to have a Corporation.

Request For an EIN

In addition to the paperwork, your Registered Agent 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 the 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 four 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 several ways. It will give your LLC the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 6: Apply for Business License and Permit

Texas Business Licenses and operating permits are necessary to run any business in Texas. Before launching your new business, 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. It can start from $25 till going up to $100+. However, in Texas, the business license fee ranges from $50 – $300.

Step 7: Obtain 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. Opening a separate bank account for your Texas business is essential for maintaining a clear separation between your personal and business finances.

You can check out the Best Banks in Texas, which offers the best fees, services, and convenience for your business needs.

Step 8: Market your Business in Texas

Now that your Texas business is 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.

FAQs

What types of businesses are popular in Texas?

Restaurants, retail stores, real estate agencies, and oil and gas companies are popular businesses in Texas.

What are the taxation laws for businesses in Texas?

Texas has no state income tax for businesses, but does impose a franchise tax on some business types.

What is a certificate of formation and how do I get one for my business in Texas?

A certificate of formation is a document that is filed with the Texas Secretary of State to formally establish a Texas business entity. You can file online or mail in the form.

How long does it take to get a business license in Texas?

The process can vary depending on the type of business and its location, but it generally takes about two weeks for the state to process a license application.

What kind of insurance do I need to start a business in Texas?

Insurance can vary depending on the type of business, but generally, businesses in Texas are required to have workers’ compensation insurance, and liability insurance is recommended.

What are the eligibility requirements for getting a small business loan in Texas?

Generally, you need to have a solid business plan, good credit, and proof of the ability to repay the loan.

Should I consider a franchise for my business in Texas?

Franchises can be a good option for people who don’t have a lot of experience starting their own business, but it is important to do thorough research before committing.

What business grants are available in Texas?

There are a variety of business grants available in Texas, ranging from low-interest loans to grants for renewable energy projects.

What is the sales tax rate for businesses in Texas?

The sales tax rate in Texas is 6.25%, with a few cities also adding on their own local sales tax.

What are the zoning laws for new businesses in Texas?

Zoning laws can vary depending on the location, but it is generally best to check with your local zoning department to see what is allowed in your particular area.

How do I renew my business license in Texas?

You can renew your Texas business license online or through the mail with the Texas Secretary of State.

How do I legally take on a partner for my Texas business?

You can create a partnership agreement with an attorney or use online legal services to ensure the partnership is legally binding.

How do I protect my intellectual property in Texas?

You can register patents, trademarks, or copyrights with the U.S. Patent and Trademark Office to protect your intellectual property.

What is the average cost for starting a business in Texas?

The cost can vary depending on the type of business and its size, but most businesses in Texas report starting with less than $5,000.

Is there a limit to the number of employees in a small business in Texas?

Texas does not have a limit on the number of employees a small business can have, and many successful businesses employ hundreds or even thousands of employees.

Can I start a home-based business in Texas?

Yes, as long as you follow all applicable zoning laws and licensing requirements.

What resources are available for small businesses in Texas?

The Small Business Development Center, SCORE, and the Women’s Business Center are just a few of the resources available to help support small businesses in Texas.

What is the Registered Agent and how do I find one for my Texas business?

A Registered Agent is a person or entity appointed by a company to receive legal documents on behalf of the business. Some businesses choose to designate a professional service as their registered agent.

How do I register a DBA for my Texas business?

You can register a DBA (doing business as) online or through the mail with the Texas Secretary of State.

How much does an LLC cost in Texas?

The cost to form an LLC in Texas is $300 plus a $1 convenience fee if filing online.

What is the Texas Business Council and how can it help my business?

The Texas Business Council is a resource for businesses in Texas, providing information about relevant policies and regulations and facilitating communication with state officials.

What is the difference between a sole proprietorship and a general partnership in Texas?

A sole proprietorship is a business owned and operated by one person, while a general partnership is owned by two or more people and follows a set of predetermined rules agreed upon by the partners.

Can I start a non-profit in Texas?

Yes, Texas has specific laws and regulations for non-profit organizations, but forming a non-profit can be a rewarding way to contribute to your community.

What are my business insurance options in Texas?

Business insurance options in Texas include property and liability insurance, workers’ compensation insurance, and health insurance for employees.

Do I need a business bank account in Texas?

A business bank account is important for separating your personal finances from those of your business and can help streamline accounting and tax preparation.

How do I handle and pay for payroll taxes in Texas?

Employers in Texas are required to withhold income taxes for employees, pay unemployment taxes, and contribute to Social Security and Medicare.

Can I get a business loan with bad credit in Texas?

Bad credit can make it more difficult to get approved for a business loan in Texas, but it is possible. Consider working on improving your credit score before applying for a loan.

What is the process for dissolving a business in Texas?

To dissolve a Texas business, you must first pay off any debt or liabilities, file a Certificate of Termination with the Texas Secretary of State, and cancel any active permits or licenses.

What is the Texas Economic Development Corporation and how can it help my business?

The Texas Economic Development Corporation is a nonprofit organization that promotes business growth in Texas and provides assistance to businesses looking to relocate or expand in the state.

What are the legal requirements for starting a business in Texas?

Legal requirements may vary by business type, but many require registration with the Texas Secretary of State and obtaining state and local permits and licenses.

Do I need to register my business name in Texas?

Yes, businesses operating under a name that is different from the legal name of the owner must register with the Texas Secretary of State.

How do I choose the right business structure for my Texas business?

Business owners must consider factors like liability, taxes, and managerial control when choosing a legal structure, such as a sole proprietorship, partnership, or corporation.

Is it more expensive to start a business in Texas than in other states?

Texas is often ranked as one of the most affordable states in which to start a business.

How can I access capital to start my Texas business?

Texas has multiple financing options, such as SBA loans, angel investors, and venture capitalists.

What taxes will I need to pay if I start a business in Texas?

Businesses in Texas pay state taxes, including sales tax and franchise taxes.

How can I find good employees for my Texas business?

Many regional workforce boards and staffing agencies can help connect businesses with job seekers.

What advantages are there to doing business in Texas?

Texas has a robust and diversified economy, a business-friendly climate, and a low cost of living.

Can I run my Texas business from home?

Many businesses can be run from a home office. However, local zoning and business regulations may apply.

Where can I get help writing a Texas business plan?

SCORE and the Texas Workforce Commission provide business plan templates and free consultations.

Do I need to register for Texas sales tax if I only sell online?

Businesses selling goods or services to Texans must register for Texas sales tax.

What resources are available for Texas minority-owned businesses?

The Texas Minority Business Assistance Resources program provides networking and assistance services.

Where can I find information on Texas small business grants?

The Texas Economic Development Corporation provides information on state and local business incentives.

How many employees can my Texas business legally have?

Most Texas business owners are not limited on the number of employees they may have.

What type of license do I need to open a food business in Texas?

Restaurants and food trucks are required to obtain permits and comply with local health and safety regulations.

What types of insurance should I get for my Texas business?

Business owners may need to obtain liability insurance, worker’s compensation, and property insurance.

How should I price my goods or services in Texas?

Texas businesses must balance cost, demand, and competition when determining pricing.

Can I get grants to start a small business in Texas?

Yes, Texas offers various grant programs to qualifying businesses.

Where can I find Texas-specific business regulations?

The Texas Secretary of State and the Small Business Administration provide guidance on state and federal regulations.

Can Texas businesses receive tax incentives for creating jobs?

Yes, Texas offers tax incentives to businesses that create and maintain jobs in the state.

Are there penalties for hiring undocumented workers in Texas?

Federal and state penalties apply to businesses that hire workers without legal documentation.

How can I estimate my Texas business’s start-up costs?

Business owners should consider expenses like office space, equipment, and initial inventory when creating a start-up budget.

Is it expensive to obtain a business license in Texas?

License fees in Texas vary by business type and can range from a few hundred dollars to several thousand.

Are there tax incentives for businesses that relocate or expand their operations to Texas?

Texas offers tax abatement programs to qualifying businesses that relocate or expand their operations within the state.

Does my Texas business need to provide workers’ compensation insurance?

Most Texas employers are not required to provide workers’ compensation insurance unless they are in certain high-risk industries.

Is there Texas-specific guidance on naming my business?

Business names should not be deceptively similar to existing business or entity names and may require approval by the Texas Secretary of State.

Can I renew my Texas business registration online?

Yes, businesses can renew their registration online with the Texas Secretary of State.

Where can I find free business development training in Texas?

The Texas Economic Development Corporation offers webinars and other resources for business owners.

Conclusion

In conclusion, starting a business in Texas has unique advantages and challenges. The Lone Star State offers a large and diverse market, access to skilled talent, and numerous networking opportunities, making it an attractive location for entrepreneurs. However, business owners must also contend with a high cost of living, intense competition, and potentially complex regulations.

Ultimately, whether starting a business in Texas is the right decision depends on the entrepreneur’s specific needs, goals, and industry. It is crucial to conduct thorough research and consider factors such as taxes, regulations, workforce availability, and target market when choosing a location for a new business. By carefully weighing the pros and cons, entrepreneurs can make informed decisions and set themselves up for success in the competitive Texas business landscape.