How to Start a Construction Company in Texas | Essential Guide

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Texas Construction Company

Starting a construction company in Texas can be lucrative and rewarding for anyone with the right skills, resources, and determination. With a strong demand for quality construction services and a consistently growing population of x (2024 data), there is always room for new Limited Liability Companies to thrive in this industry. However, starting a construction company is a challenging task and requires careful planning, dedication, and hard work.

In this article, Webinarcare Editorial Team will discuss the necessary steps to Start a Construction Company in Texas and provide valuable tips for ensuring your success in this competitive industry.

How to Start a Construction Company in Texas

What is a Construction Company?

A construction company in Texas is a business that specializes in the planning, design, and execution of construction projects. These projects can range from residential homes to commercial buildings and infrastructure projects such as roads, bridges, and utility systems. Texas construction companies must adhere to local building codes, regulations, and licensing requirements to ensure their projects are safe, efficient, and compliant with state standards.

Texas construction companies often offer various services, including general contracting, design-build, and specialized construction services. They collaborate with various stakeholders, such as architects, engineers, developers, and property owners, to bring projects to life. By employing skilled tradespeople, project managers, and other professionals, construction companies in Texas work to deliver high-quality, durable structures that meet their client’s needs and contribute to their community’s development and growth.

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It is suggested that you speak with a legal professional before you begin setting up a construction company. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in Texas.

– WEBINARCARE EDITORIAL TEAM

How to Start a Construction Company in Texas

To launch a construction business, you must follow the guidelines that include researching the construction industry, developing a business plan, registering your business, securing funding, purchasing equipment and material, hiring a skilled team, and marketing your construction company.

Step 1: Research the Construction Industry

Before diving into starting your construction company, it’s essential to understand the local construction industry in Texas. Research your area’s market trends, major players, and potential competition. This will help you identify gaps in the market that your company can fill and allow you to make informed decisions about the types of services you want to offer.

Some key areas to research include:

  • Types of construction projects in demand (residential, commercial, etc.)
  • The average cost of construction projects in your area
  • Local building codes and regulations
  • Key stakeholders in the industry (architects, developers, etc.)
  • Licensing and certification requirements for contractors in Texas

Step 2: Develop a Business Plan

A well-thought-out business plan is crucial for the success of any new business, including a construction company. Your business plan will act as a roadmap for your company’s growth and development, helping you make informed decisions and keep your business on track.

Some key elements to include in your construction company business plan are:

  • Company Overview: Describe your company’s mission, vision, and goals. Include the legal structure of your business (LLC, corporation, sole proprietorship, etc.) and your company’s name and location.
  • Market Analysis: Summarize your research on the local construction industry, including the target market, competition, and growth opportunities.
  • Services Offered: Clearly define the types of construction services your company will offer, such as general contracting, design-build, or specialized construction services.
  • Marketing and Sales Strategy: Outline how to attract and retain clients and your strategies for generating leads and closing sales.
  • Management and Organization: Detail the roles and responsibilities of your management team and any key personnel you plan to hire.
  • Financial Projections: Provide a realistic estimate of your company’s financial performance over the next few years, including projected income, expenses, and profits.

Step 3: Choose a Business Name

Selecting a name for your Texas construction company is essential to forming. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on Texas Business Name Search for you to have a proper Texas construction business name. 

In Texas, if you do not wish to file your construction business company right away but want to hold the name that you have decided on, then you can reserve your Texas construction business name for 120 days. You must file a name reservation application with the Texas Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for Texas DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA every ten years, which costs varies by county.

You can check the availability of your desired business name by searching the Texas Comptroller of Public Accounts Taxable Entity Search‘s website.

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Step 4: Register Your Construction Company

Register your business with the appropriate government agencies before officially starting your construction company in Texas and obtain any necessary licenses and permits. 

Hire a Registered Agent

A Registered Agent is a person or entity responsible for receiving legal documents and official notices for your construction business. The qualifications of a Registered Agent vary depending on the jurisdiction, but generally, they must meet the following criteria:

  • Age: The Registered Agent must be at least 18 years old.
  • Residency: The Registered Agent must reside where the company is registered or authorized to do business in that state. In some jurisdictions, a domestic corporation or limited liability company (LLC) can act as its Registered Agent if it has a physical address in Texas.
  • Physical Address: The Registered Agent must have a physical street address, not just a post office box, where the company is registered. This is where they will receive official correspondence and legal documents on behalf of the company.
  • Availability: The Registered Agent must be available during normal business hours (9 a.m. to 5 p.m., Monday through Friday) to receive and sign official correspondence and legal documents.
  • Good Standing: If the Registered Agent is a business entity, it must be in good standing with the state and not be in default, suspended, or revoked.
  • Compliance: The Registered Agent should know Texas requirements and deadlines for the company, such as Annual Reports and Texas franchise tax filings, and ensure that the company stays compliant. 

You can serve as your Registered Agent, appoint a friend or family member, or hire a Professional Texas Registered Agent Services.

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File For Certificate of Formation or Certificate of Formation – For Profit Corporation

If you form an LLC for your construction company, you must file the Texas Certificate of Formation, which costs $300. However, you must file the Certificate of Formation – For Profit Corporation if you form Texas Corporation for your construction company. The Certificate of Formation – For Profit Corporation filing fee costs $300 for filing online, by mail, in person filing, or by Fax. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site.  
  • Offline Filing: 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

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Create an Operating Agreement

Operating Agreement is a document that contains all of your company’s organizational details. Drafting an operating agreement in Texas is optional. Yet, having one as an internal document is strongly advised. 

Recommended: Creating an Operating Agreement is like having a personal legal guide at hand; it’s efficient, thorough, and ensures the smooth and compliant operation of your business. With LegalZoom’s operating agreement, it will protect your rights as an owner, keeping misunderstandings at bay and your business on the path to success. That’s why we recommend using –

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Obtain an Employer Identification Number

You must first obtain Texas Employer identification number (EIN) from the IRS if you will open a bank account or hire an employee for your Texas construction company. 

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 the 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-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.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

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Step 5: Obtain the Necessary Licenses and Permits

Starting a construction company in Texas requires several licenses and permits. Some of the most common licenses and permits you’ll need include the following:

  • Business License: Your local city or county government may require Texas Business License. The business license fee in Texas ranges from $50 – $300.
  • Contractor’s License: A contractor’s license is required in most states for construction businesses that perform specific types of work, such as general contracting, electrical, plumbing, HVAC, or other specialized trades. Requirements for obtaining a contractor’s license may include passing an exam, providing proof of experience, and obtaining bonding and insurance.
  • Building Permits: Construction projects typically require permits issued by the Texas building department. Building permits ensure the construction project complies with local building codes and regulations.
  • Occupational Licenses: Some states may require occupational licenses for specific types of work, such as asbestos abatement, lead paint removal, or the installation of fire protection systems. Check with your state’s licensing board to determine if any special licenses are required for the work your construction company will perform.
  • Texas Sales Tax Permit: A sales tax permit from the Texas Comptroller of Public Accounts allows you to collect sales tax. Currently, the Texas sales tax rate is 6.25%.
  • Environmental Permits: Depending on the nature of your construction projects, you may need to obtain environmental permits, such as stormwater discharge or air quality permits.

Step 6: Secure Funding

Starting a construction company requires significant capital to cover equipment, materials, and labor costs. To secure funding for your Texas business, you must explore various financing options and determine the best fit for your needs.

When seeking funding, be prepared to present your business plan and financial projections to potential lenders or investors. This will demonstrate your commitment to your company’s success and help build their confidence in your ability to repay the loan or generate a return on their investment.

However, consider applying for your construction company’s Texas Small Business Loans.

Step 7: Purchase Equipment and Materials

Once you have secured funding for your Texas construction company, you must purchase the necessary equipment and materials to begin operations. This may include items such as:

  • Construction vehicles (trucks, excavators, etc.)
  • Power tools and hand tools
  • Safety equipment (hard hats, safety goggles, etc.)
  • Building materials (lumber, concrete, etc.)
  • Office equipment and supplies (computers, printers, etc.)

Invest in high-quality equipment and materials, as this will help you deliver exceptional results to your clients and build a strong reputation in the industry. Consider purchasing insurance for your equipment, as this can help protect your investment in the case of theft, damage, or accidents.

Step 8: Hire a Skilled Team

Your Texas construction company’s success will largely depend on your team’s skills and expertise. Hire individuals with experience and knowledge in the construction industry to build a strong workforce. This may include:

  • Project managers
  • Construction laborers
  • Skilled tradespeople (electricians, plumbers, etc.)
  • Architects or engineers
  • Administrative staff (accountants, receptionists, etc.)

In addition to hiring qualified employees, invest in ongoing training and development programs to help your team stay current on industry trends, technologies, and best practices. This will improve the quality of your services and help you attract and retain top talent in the competitive construction industry.

Step 9: Market Your Construction Company

You must develop a comprehensive marketing strategy to attract clients and grow your Texas construction company. This may include building a professional website that showcases your services, portfolio, and testimonials from satisfied clients; creating and distributing print materials, such as brochures, business cards, and direct mail advertisements; networking with industry professionals, such as architects, developers, and real estate agents, to generate leads and referrals, and utilizing social media and digital marketing strategies to reach a wider audience and drive traffic to your website.

By consistently promoting your Texas construction company and showcasing your expertise and quality work, you can build a strong reputation in the Texas construction industry and attract a steady stream of new clients.

Benefits of Forming a Construction Company

Forming a Construction LLC is best for a start-up company since it offers the following advantages.

Limited Liability Protection

LLC provides limited liability protection to its owners, also known as members. This means that the personal assets of the LLC members are separate from the company’s debts and liabilities. In the construction industry, where accidents, property damage, and contractual disputes occur, limited liability protection is crucial to protect business owners’ assets.

Pass-through Taxation

An LLC typically offers pass-through taxation, meaning the company’s profits and losses are reported on the owner’s tax returns. This avoids the double taxation corporations may face, where the company and its shareholders are taxed separately. Pass-through taxation can lead to potential tax savings for the Texas construction company’s owners.

Flexibility in Management

LLCs have a more flexible management structure than corporations. They do not require a board of directors, and the owners can choose how to manage the company through member or manager management. This flexibility allows Texas construction companies to adapt their management structure as needed.

Simpler Record-Keeping and Compliance

LLCs still require formalities; they typically have fewer record-keeping and reporting requirements than corporations. This can save time and resources for Texas construction companies, allowing them to focus on their core business operations.

Credibility

Forming an LLC can provide the Texas construction company with increased credibility and professionalism in the eyes of clients, vendors, and financial institutions. This can be beneficial in securing contracts and building a positive reputation in the industry.

FAQs

How do I register my construction company in Texas?
You should register your construction company with the Texas Secretary of State.
What is the difference between a sole proprietorship and a corporation in Texas?
A sole proprietorship is an unincorporated business owned by one person, while a corporation is a separate legal entity.
What is required to start a construction business in Texas?
You need to obtain a contractor’s license and register your construction business with the Texas Secretary of State.
How much does it cost to start a construction business in Texas?
The cost varies, but you’ll typically need to invest in things like equipment, insurance, and a vehicle to get started.
Do I need insurance for my construction business in Texas?
Yes, you’ll need both liability insurance and workers’ compensation insurance to protect your construction company.
What’s the best structure for my construction company in Texas?
It’s about weighing the benefits and drawbacks of a sole proprietorship, LLC, and corporation to determine the best fit for your construction business.
What is a construction bonding company in Texas?
A construction bonding company in Texas provides surety bonds for contractors working on various construction projects.
What is a trade license in Texas for construction?
A trade license in Texas is required for anyone performing electrical, HVAC, and plumbing work in Texas.
How much do construction licenses cost in Texas?
Licensing fees in Texas may vary but expect to pay around $300-$500.
What’s the best location for my construction company in Texas?
Consider factors like population density, accessibility, competition, and the state’s regulations when choosing a location for your construction business.
How do I find clients for my construction company in Texas?
Utilize referral networks, advertise your business online, and market your construction skills through a branded website.
Are there any certifications required for a general contractor working in Texas?
Although the State doesn’t require certifications, general contractors need professional credentials such as a contractor’s license and bonding.
What is the difference between contracting and subcontracting in Texas?
A contractor in Texas has a contract with property owners or developers where work or services are set for a specific price. however, a subcontractor works for a contractor that directly deals with property owners or developers.
Where can I get a construction contract in Texas?
You can look online for standard forms or hire a construction attorney in Texas to custom-design one that suits your business.
What is the Texas Property Code?
The Texas Property Code is the law book that deals with the rights, obligations, and liabilities of property owners, renters, and rehabilitation of homes.
Do I need to have a legal separation between my business and personal finances in Texas?
Yes, in order to protect your assets from business liabilities, you may need to file for legal separation.
What is the difference between voluntary and involuntary liquidation of a construction company in Texas?
Voluntary liquidation of a company is when the company itself chooses to wrap its business operations up. Similarly, an involuntary liquidation of a company is when the company must go under because of court order or financial instability.
What is the purpose of the Texas Department of Licensing and Regulation?
The purpose of the Texas Department of Licensing and Regulation is to regulate businesses and titles that pose risks to the public; such as a construction business.
How can I obtain the proper insurance coverage for my construction business?
You can reach out to an insurance agent to determine the necessary coverage while meeting the minimum liability requirements in Texas.
How can I finance my Texas construction business?
Some funding options include a small business loan, accessing retirement funds or personal savings, or applying for grants or registration fees.
How can I keep my construction business thriving in Texas?
Provide excellent customer service, obtain reliable materials, demonstrate expertise, stay up-to-date with current trends in construction technology, and maintain a good reputation.
Should I use an attorney to start my construction company in Texas?
While not a requirement, consultation with an established and experienced construction litigation attorney in Texas is recommended.
Are there any grants available for small construction businesses in Texas?
Yes, there are several grants available through both the national and federal government to help small business owners get started.
What qualifications are needed for bonded and insured construction professionals in Texas?
In order to provide quality and secure service to end-users or taxpayers, construction professionals should possess modicum credentials or a degree from an accredited construction management program and several years of related experience.
Can I operate a construction business as a side job in Texas?
Using a sole proprietorship, a person may be able to operate a side job, so long as their construction business in Texas is deemed a part-time occupation.
What are some common licenses that a construction company in Texas might need?
Licenses may vary according to your line of expertise but some common ones include building construction general, roofing specialty, electrical licenses, foundation construction, cross-connection control, or plumbing, gas and HVAC, and wastewater certifications.
What are the initial steps when planning for a construction company in Texas?
The best way to start a construction company is by researching the niche market, establish goals, obtain funding, get you required licensing/insurance, layout a company routine of execution for startup/ground-launch quarter and acquire knowledgeable team members and techniques.
What is the first thing to do when starting a construction company in Texas?
Start by drafting a formal business plan for your proposed construction business, outlining your mission statement and expected finances, to oragnize and prioritize the importance of the company.
What information do I need to register for tax purposes when starting a construction company in Texas?
You’ll need your tax identification number (TIN-EIN), your business structure, details for your company’s mailing and operating addresses, and verify liability coverage.
What are the requirements for becoming a licensed contractor in Texas?
To become a licensed contractor in Texas, you’ll need to meet certain education and experience requirements and pass a qualifying exam.
Do I need to be a licensed contractor in Texas to start a construction company?
No, you don’t need to be a licensed contractor to start a construction company in Texas, but having a license may enhance your credibility and increase opportunities.
What type of business formation is best for a construction company in Texas?
A limited liability company (LLC) is a popular choice for a construction company in Texas because it provides personal liability protection for the company’s owners.
How do I obtain insurance for my construction company in Texas?
You can obtain insurance for your construction company in Texas from various insurance providers that offer general liability insurance, workers’ compensation insurance, and more.
What permits do I need to obtain for construction projects in Texas?
You’ll need to obtain permits for construction projects in Texas based on the type and scope of work. Contact your local building department for requirements.
Are there any environmental regulations that I need to be aware of when starting a construction company in Texas?
Yes, Texas has extensive environmental regulations that may impact your construction projects. Consult with state agencies and environmental consultants for more information.
What are the tax implications of starting a construction company in Texas?
Texas has no state income tax, but you’ll need to pay state franchise taxes and collect and remit sales tax on construction projects.
How can I differentiate my construction company from competitors in Texas?
You can differentiate your construction company from competitors in Texas by offering high-quality workmanship, exceptional customer service, and competitive pricing.
How do I set my prices for construction services in Texas?
You’ll need to evaluate your costs and pricing strategy to set competitive prices for construction services in Texas.
What equipment do I need to start a construction company in Texas?
You’ll need a range of tools and equipment to start a construction company in Texas, such as excavators, bulldozers, backhoes, and more.
How do I find skilled labor for my construction company in Texas?
You can find skilled labor for your construction company in Texas by posting job listings, partnering with staffing agencies, and networking with local training schools.
Are there any additional licensing requirements for construction work in Texas?
Texas may have additional licensing requirements for certain types of construction work, such as electrical and plumbing.
What is the biggest challenge facing construction companies in Texas?
One of the biggest challenges facing construction companies in Texas is dealing with rapidly changing economic and regulatory landscapes.
How do I become certified as a minority-owned business in Texas?
You can become certified as a minority-owned business in Texas through the Texas Comptroller’s office or Department of Transportation.
What requirements do I need to meet for the Texas Bonding Program?
To participate in the Texas Bonding Program, you’ll need to be a certified business, meet certain criteria, and submit an application to the program.
How do I stay updated on changes to Texas construction regulations?
You can stay updated on changes to Texas construction regulations by regularly checking for updates on relevant government websites and joining industry associations.
What are the benefits of joining a construction industry association in Texas?
Joining a construction industry association in Texas can provide you with access to networking, training, and educational resources.
Is there a demand for green construction businesses in Texas?
Yes, there is a growing demand for green construction businesses in Texas due to increased awareness of the benefits of sustainable and eco-friendly practices.
How do I get bonded in Texas?
You can get bonded in Texas by working with a surety bond provider that offers various types of construction surety bonds, such as bid bonds, performance bonds, and payment bonds.
What types of construction projects are most in demand in Texas?
Texas has high demand for various types of construction projects, such as commercial, residential, infrastructure, and more.
How do I register my construction company as a foreign entity in Texas?
To register your construction company as a foreign entity in Texas, you’ll need to file an application for registration with the Texas Secretary of State.
What types of insurance do I need for my Texas construction company?
You’ll need various types of insurance for your Texas construction company, such as general liability, workers’ compensation, and construction surety bonds.
What are the rules for hiring employees in Texas?
Texas follows federal laws for hiring employees, such as verifying eligibility to work and paying minimum wage and overtime.
Can foreign-owned companies operate in Texas construction?
Yes, foreign-owned companies can legally operate in Texas construction, but they must meet certain licensing and other requirements.
How do I obtain small business certifications in Texas?
You can obtain small business certifications in Texas from various state and federal agencies that offer such programs to provide opportunities and incentives for small businesses.
What are the requirements for hiring subcontractors in Texas?
When hiring subcontractors in Texas, you’ll need to ensure they are licensed and insured for the type of work they’re performing. Also, have a written contract in place with them.

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Conclusion

Starting a construction company in Texas can be challenging yet rewarding for those prepared to invest the time, effort, and resources necessary for success. By following the steps outlined in this article and dedicating yourself to providing exceptional service and quality work, you can create a thriving construction business that stands out in the competitive Texas market.

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