Starting a business in Texas involves more than choosing a name and opening a bank account. Owners may need to register a legal entity, appoint a registered agent, obtain tax permits, and meet city or county rules. The requirements depend on the business structure, location, industry, and whether it hires employees. This guide explains the main legal steps to start a business in Texas and points to official resources for checking current requirements.
Choose a Business Structure
The business structure affects personal liability, taxes, management, and the paperwork required to form and maintain the business. Common choices in Texas include a sole proprietorship, partnership, limited liability company (LLC), and corporation. The right option depends on the owners’ circumstances; legal and tax professionals can help assess complex situations.
- Sole proprietorship: A business owned by one person that is not formed as a separate legal entity. It is relatively simple to start, but the owner generally remains personally responsible for business debts and legal claims.
- General partnership: A business owned by two or more people. Partners may have personal liability for partnership obligations. A written partnership agreement can define duties, decision-making, and how profits or disputes are handled.
- Limited liability company: An LLC is formed under state law and can separate owners’ personal assets from many business liabilities, provided the company is properly operated. Its federal tax treatment depends on ownership and elections.
- Corporation: A corporation is a separate legal entity with formal governance requirements. It may suit businesses seeking outside investment or a particular tax structure, but it typically requires more administrative work.
Liability protection is not absolute. Personal guarantees, a person’s own misconduct, unpaid trust taxes, or failure to keep business and personal affairs separate can create personal exposure. Structure also does not replace appropriate insurance.
Choose and Check a Business Name
Before filing formation documents, check whether the proposed name is distinguishable in the Texas Secretary of State’s records and whether it follows the naming rules for the selected entity. A state filing does not automatically provide trademark protection or guarantee that a matching website domain or social media handle is available. Search federal trademarks through the U.S. Patent and Trademark Office and check relevant domains separately.
A business operating under a name different from its legal name may need to file an assumed name certificate, often called a DBA. Filing depends on the business structure and where it operates. Texas entities generally file assumed name certificates with the Secretary of State; sole proprietors and certain partnerships generally file with the county clerk in the county where they conduct business. Confirm the applicable filing office and current requirements before submitting paperwork. An assumed name filing does not create a separate legal entity or grant exclusive rights to the name.
Register the Business With Texas
Texas does not require every business to form an entity with the Secretary of State. A sole proprietor using the owner’s legal name, for example, generally does not file entity formation documents with the state. LLCs and corporations, however, must file the appropriate formation document before operating as a Texas entity. Partnerships may also have state filing options or requirements based on their chosen form.
An LLC is typically formed by filing a Certificate of Formation (Form 205). A for-profit corporation generally files a Certificate of Formation (Form 201). Fees and filing instructions can change, so owners should consult the current forms and fee schedule on the Texas Secretary of State’s business organization forms page. Formation documents establish the entity; they do not replace local permits, tax registrations, or professional licenses.
Appoint a Registered Agent
A Texas filing entity must designate a registered agent and registered office in Texas. The agent receives legal notices and official documents on the business’s behalf. The registered office must be a physical street address where the agent can be reached during normal business hours; a post office box alone is not sufficient. The agent must consent to the appointment. The owner, another eligible person, or a commercial registered-agent service may serve, subject to state requirements.
Prepare Internal Records
An LLC should adopt an operating agreement that explains ownership, management, distributions, and procedures for changes or disputes. Texas does not generally require an LLC to file its operating agreement with the Secretary of State, but maintaining one can clarify how the company works. Corporations should prepare bylaws, issue and record shares, and maintain required governance records. These documents should match the business’s actual arrangements.
Get a Federal Employer Identification Number
An Employer Identification Number (EIN) is a federal tax ID issued by the Internal Revenue Service. A business generally needs one if it has employees, operates as a partnership or corporation, or meets other IRS criteria. Some single-owner businesses without employees may not be required to obtain an EIN, but banks, vendors, or payment services may request one. The IRS issues EINs directly at no charge; owners should avoid paid services that imply a fee is required. Apply through the IRS EIN application page.
Register for Texas Taxes
Tax registration depends on what the business sells, how it is organized, and whether it has employees. The Texas Comptroller of Public Accounts is the main state agency for sales and use tax and franchise tax matters. A business should review the Comptroller’s guidance rather than assuming that entity formation automatically completes tax registration.
Sales and Use Tax
A business that sells or leases taxable goods or performs taxable services in Texas generally must obtain a sales tax permit before making taxable sales. There is no fee for the permit, but sellers have collection, filing, payment, and recordkeeping responsibilities. Tax treatment depends on the item or service, and sales made online may raise additional questions about where the seller must collect tax. Check the Texas Comptroller’s sales tax permit guidance for registration rules and current instructions.
Texas Franchise Tax
Many taxable entities formed or doing business in Texas are subject to the state franchise tax system. Whether tax is due depends on the applicable revenue threshold, tax year, and entity circumstances. Reporting requirements can also differ: an entity below the no-tax-due threshold may not owe tax, but it may still have to file other required information, such as a Public Information Report or Ownership Information Report. Thresholds and filing rules change, so businesses should use the Comptroller’s current franchise tax information and filing calendar.
Federal and Employment Taxes
Businesses may have federal income, self-employment, payroll, or excise tax obligations depending on their structure and activities. Employers generally must withhold and deposit federal payroll taxes, file required returns, and provide wage statements. The IRS’s small-business tax center explains federal requirements. A tax professional can help establish a suitable bookkeeping and filing system, especially when the business has employees, multiple owners, or sales in more than one state.
Check Licenses, Permits, and Local Rules
Texas does not have one general state business license that every company must obtain. Instead, licensing depends on the type of work. Certain occupations and industries—including healthcare, construction trades, food service, cosmetology, and financial services—may require a state-issued license, registration, inspection, or permit. Use the state’s Texas license and permit resources and the relevant agency’s official instructions to identify applicable rules.
Local requirements can apply even when no statewide license is needed. A city or county may regulate zoning, building occupancy, fire safety, signage, food handling, home-based businesses, or local sales. Before signing a lease or operating from a residence, contact the appropriate local offices and verify that the location and proposed use are allowed. A permit for one location or activity may not cover another.
Open a Business Bank Account and Set Up Records
Separating business and personal finances helps maintain clearer records and supports the distinction between an owner and an entity. Banks commonly request formation documents, an EIN, and identification for owners or authorized signers. Requirements vary by institution. Before opening an account, the business should also establish how it will approve payments, track expenses, issue invoices, and preserve receipts.
Bookkeeping should capture income, expenses, payroll, sales tax collected, loans, and owner contributions or distributions. Texas and federal rules may require records to be retained for specific periods. Good records make tax filings easier and help the business respond to audits, loan applications, or ownership changes. The accounting method and recordkeeping process should be consistent with the business’s tax and operational needs.
Understand Hiring and Workplace Requirements
Employers must verify each new hire’s identity and work authorization using Form I-9 and complete federal tax forms such as Form W-4. They must also report new hires to the Texas Employer New Hire Reporting Program, generally within 20 calendar days of the employee’s start date. Employers should confirm current deadlines and submission methods with the Texas Workforce Commission.
A business with employees may need to register for a Texas unemployment tax account and report wages to the Texas Workforce Commission. Whether it is liable for unemployment tax depends on factors such as the number of employees and wages paid. Employers must also follow applicable wage-and-hour, anti-discrimination, workplace safety, and recordkeeping laws. Federal requirements can apply alongside Texas law.
Texas generally allows private employers to choose whether to carry workers’ compensation insurance, but that choice carries important consequences. Employers that do not subscribe must meet state notice and reporting obligations and may face different rules in workplace injury lawsuits. Some contracts or industries may require coverage. Owners should review the Texas Department of Insurance workers’ compensation guidance and consult an insurance professional before deciding.
Plan for Ongoing Compliance
Starting a business in Texas is not a one-time filing. Owners should calendar recurring obligations and update state and local agencies when required. Common items include:
- Filing applicable franchise tax reports and information reports with the Texas Comptroller.
- Keeping the registered agent and registered office current with the Secretary of State.
- Renewing professional licenses, permits, insurance policies, and local registrations.
- Filing sales tax returns and remitting collected tax on the assigned schedule.
- Maintaining corporate or LLC records and documenting major decisions.
- Submitting payroll, unemployment, and employment reports when required.
Deadlines and reporting rules depend on the business and can change. Official notices should be reviewed promptly, and business contact information should remain current so important correspondence is not missed.
Practical Order of Operations
- Define the business activity, ownership, location, and likely licensing needs.
- Select a structure and check the proposed name, including trademark and domain searches.
- File formation documents if creating an LLC, corporation, or other state-registered entity.
- Appoint a registered agent and prepare the company’s internal agreements and records.
- Apply for an EIN and register for applicable Texas and federal taxes.
- Confirm state, county, and city permits before beginning regulated work or occupying a location.
- Set up banking, bookkeeping, insurance, and employment systems before hiring or taking taxable sales.
For official forms and current instructions, start with the Texas Secretary of State, the Texas Comptroller, the IRS, and the agencies that regulate the specific business activity. Requirements vary, so a checklist should be tailored to the company’s structure, industry, and location.