Last updated October 12, 2020
Starting a Business in Texas
There are 7 steps to starting a business in Texas:
- Choose a name for your Texas business
- Choose the right type of business entity
- Register your business with the Texas Secretary of State
- Get your EIN Number (Federal Tax ID Number)
- Open a business bank account
- Register for taxes with the Texas Comptroller
- Get a business license or permit (if required)
We’ll show you how to complete each step below. We will also give you some tips to make starting your business in Texas easier.
Step 1: Choose a name for your Texas business
Choosing a name for your Texas business is not something you want to rush. We recommend taking some time to choose a name people will remember and positively associate with your business.
To make sure your business is worth remembering, you may want to choose a name that:
- rhymes or contains alliteration (ex: Piggly Wiggly, Dunkin’ Donuts)
- speaks about the benefits of your business
- you can say with pride
- is easy to pronounce
- has a positive connotation
- and ideally, is available as a “.com” domain name
By the way, the first bullet point above refers to the phonological loop. Your brain can better remember words that rhyme and sound similar. For additional business name tips, check out how to choose a good business name.
After you’ve thought of a few business names, you should search them on the state’s website to make sure they are unique (referred to as being “distinguishable”) from existing businesses registered in the state: Texas Taxable Entity Search
How to find a good domain name:
Finding a good domain name nowadays is not always easy. To help you out, we recommend using Lean Domain Search. Just enter one or two key terms relevant to your business, and the tool will come up with a list of domain names that are not only available, but are also easy to spell and remember.
(note: there are more tips on domain names and websites at the bottom of this page)
Step 2: Choose your business structure
Next, you’ll need to decide the type of legal structure for your Texas business.
The most common are:
- Sole Proprietorship
- Limited Liability Company (LLC)
A Sole Proprietorship in Texas happens when you operate your business as yourself. There is no separate legal entity created. The law treats you and your business as one person. You are responsible and personally liable for all business activities and any wrongdoing.
A Texas Partnership is similar to a Sole Proprietorship, but just with 2 or more people. And like a Sole Proprietorship, a Partnership isn’t a separate legal entity and the partners are responsible and personally liable for any business activity and wrongdoing.
A Texas Corporation is a more complex legal structure that requires a board of directors, corporate officers, and shareholders. And while a Corporation is a separate legal entity, they don’t usually work for most small business owners because they face double taxation. Corporations are most commonly used by larger companies that are looking to raise capital investment, take the company public, or have large healthcare expenses (for their employees). The most common types of companies that form Corporations are high-growth technology and startup companies.
A Texas LLC is a “hybrid” legal entity that combines the benefits of a Corporation and a Sole Proprietorship/Partnership.
A Texas LLC is a separate legal entity (like a Corporation) and it provides personal liability protection for the owners. If an LLC is sued, the owner’s personal assets — like their home, cars, and bank accounts — are protected. And like a Sole Proprietorship, an LLC has pass-through taxation with the IRS (so there’s no double taxation).
A Texas LLC is the most popular option and a good choice for people who want to run a business for two reasons:
- personal liability protection (your personal assets are kept safe)
- no double taxation with the IRS
Unlike a Sole Proprietorship (and a Partnership), your Texas LLC’s assets are separate and distinct from your personal assets. In the event your LLC gets sued, your personal assets are protected.
And unlike a Corporation, your Texas LLC is not subject to double taxation. Instead, your LLC’s profits will “flow through” to your personal tax return.
For more pros and cons on the above business entities, please see LLC vs Sole Proprietorship vs Corporation.
If you want to form an LLC in Texas, we have instructions here: forming an LLC in Texas
If you want to form a Corporation in Texas, you can file the paperwork yourself or you can hire a filing company. We recommend using Northwest Registered Agent.
Step 3: Register your business with the Texas Secretary of State
You may need to file business formation documents with the Texas Secretary of State.
All of the state’s forms and links to online filings can be found here: Texas Secretary of State forms
The cost to form a Texas LLC is $300.
The filing form is called the “Certificate of Formation – Limited Liability Company” (Form 205). It can be filed by mail or it can be filed online via SOSDirect.
The cost to form a Texas Corporation is $300.
The filing form is called the “Certificate of Formation – For-Profit Corporation” (Form 201). It can also be filed by mail or it can be filed online via SOSDirect.
Texas Sole Proprietorship or Partnership:
Unlike a Texas LLC and a Corporation, if you choose to operate your business as a Sole Proprietorship or a Partnership, you don’t have to file any formation documents with the Texas Secretary of State.
A Sole Proprietorship “begins” the moment you start; meaning, there’s nothing you need to do.
The same thing applies with a Partnership, however, it’s best practice to sign a partnership agreement with your business partner.
Texas Assumed Name (DBA):
If you would like for your Sole Proprietorship or Partnership to operate under a name besides the name of the owner(s), you’ll need to register a DBA, which is called an Assumed Name in Texas.
If you’re going to operate as a Sole Proprietorship or a Partnership, you’ll need to file your Assumed Name Certificate in the county where you’re doing business. You’ll need to contact your County Clerk’s office for the form and instructions.
If you’re going to form an LLC or Corporation, you don’t have to file an Assumed Name Certificate unless you’d like to. We recommend reading do I need to file a DBA?
If your Texas LLC or Corporation does decide to file an Assumed Name, you have to file Form 503 with the Texas Secretary of State and you also have to file in any counties where you’re doing business. You’ll need to contact the County Clerk’s office for forms and instructions.
Texas Secretary of State
If you have any questions about registering a business in Texas, you can contact the Texas Secretary of State:
If you have any questions about registering an Assumed Name, you can contact the Texas Secretary of State at 512-463-9760.
Step 4: Get an EIN Number
An EIN Number is also known as an Employer Identification Number (EIN) or Federal Tax ID Number (FEIN). It is used by the IRS to identify your Texas business for tax purposes.
Think of your EIN Number as the “social security number” for your Texas business.
The EIN Number for your Texas business will be used to open a bank account, file taxes, and handle employee payroll (if applicable).
You can get an EIN for your Texas business by mail, fax, or online. Getting your EIN online is the fastest option, since it only takes about 15 minutes to complete the application.
You can access the IRS application here: IRS EIN Online
For instructions on how to complete the online EIN application for a Texas LLC, please see this page: Texas LLC EIN Number
Note: If you have an LLC or Corporation, make sure it is approved before applying for an EIN Number.
Step 5: Open a business bank account
A business bank account (and a business debit/credit card) for your Texas business is important because:
- it keeps your personal assets separate from your business assets
- it makes accounting and finances easier to manage
One of the main reasons courts are able to “pierce the corporate veil” is due to the commingling of assets. This is when business and personal finances are mixed together.
Keeping the assets of your Texas business separate from your personal assets will make accounting and documenting expenses a lot easier as well.
If you are going to form a Texas LLC, you can learn how to open a bank account here: LLC business bank account
Your bank will provide you with a debit card after the account is open. You can also get a business credit card if you’d like.
Step 6: Register for taxes with the Texas Comptroller
Franchise Tax is a fee for the privilege of doing business in the state of Texas.
If you are forming a Texas LLC or a Corporation, you will need to file a Franchise Tax Report and a Public Information Report every year. Over 90% of businesses don’t pay any tax, but they still have filing requirements. You can register for Franchise Tax via WebFile.
If you’re forming a Texas LLC we have more detailed information here: Texas LLC Franchise Tax
Sales and use tax:
If your Texas business sells or leases tangible personal property in Texas (or sells taxable services in Texas), then you need to register for sales and use tax. This can also be done online via WebFile.
Other taxes: Depending on where your business is located and what industry you’re in, your Texas business may be responsible for other taxes. We recommend speaking with an accountant to make sure you file everything properly (federal, state, and local).
Step 7: Business license and/or permits
After starting your Texas business, you may need to obtain a business license and/or permit.
Business license and/or permit requirements are determined based on where you are doing business and the industry you’re in.
Texas.gov: Texas.gov provides a directory of business licenses and permits. Once on the site:
- Click on “WORK” (this will take you to the section showing an initial list of licenses and permits)
- Click on “More Work Services” to view the full directory of licenses and permits
Some examples are acupuncturists, barbers, cosmetology, and food manufacturers.
Texas Department of Licensing and Regulation:
The Texas Department of Licensing and Regulation (TLDR) offers online licensing and renewal services for various professions and occupations.
Texas Commission on Environmental Quality (TCEQ):
The Texas Commission on Environmental Quality (TCEQ) also provides a list of permits and licenses you might need.
If you need help making sure you obtain the proper licenses and/or permits for your Texas business, we recommend using IncFile.
After Your Texas Business is Started…
1. Meet with a Local Texas Business Expert for Free Counseling
Getting advice from others who’ve been there can be helpful in your entrepreneurial journey.
Here are some great organizations in Texas:
- Texas Small Business Development Center
- Texas Small Business Association
- Texas Economic Development
- Start a Business by the Official Texas Economic Development Corporation
2. Start a Website
Having a website these days is very helpful for a Texas small business. It gives your company a professional feel and allows people to learn about your products and services.
Building a website can seem like a complicated process. And, it will be if you don’t have the right information.
However, I’ve built over 130 websites and used to teach people how to use WordPress to build their website. WordPress (which is free) is the tool I use and recommend. It can be used to build simple websites or it can be used to build more complicated websites, like eCommerce websites.
There are 4 components to starting a website:
- Domain registrar
- Website hosting
- WordPress theme
Let’s use the “housing analogy”:
The domain registrar is where you purchase your domain name. Think of this as the label on the mailbox or your street address.
A website hosting company is where all the code, images, graphics, and text are stored that gets provided to the world. Think of this as the foundation of your home. It gives you the ability to build on top of it and display information to others.
WordPress is a CMS (content management system) which makes it easier to build a website. Rather than constructing your home from scratch, think of WordPress as a prefabricated home where you can easily resize rooms, move walls, and have complete flexibility in design and customization. WordPress – or the prefabricated home – “sits on top of” your foundation (the website hosting).
A WordPress theme is a “design skin” that sits on top of the WordPress CMS. If the WordPress CMS is the prefabricated home, think of the theme as all the interior decorations and painting. There are free WordPress themes, but I recommend against them for various technical reasons. Instead, I recommend using a premium WordPress theme. The difference between a free WordPress theme and a premium one is the difference between an amateur designer and a world-class professional designer.
Here are some links and prices to get you started:
Domain registrar: I recommend NameSilo.com which is $10 per year (per domain name). This is the service we use as it includes domain privacy for free to keep your address and phone number off those public record websites. It’ll also help prevent those annoying telemarketing phone calls!
Website hosting: SiteGround.com ($10 per month)
WordPress: This is automatically included (again, for free) with nearly every hosting company these days. After you sign up with SiteGround, just call them to help you install it. They’ll walk you through the steps.
WordPress theme: ThemeForest.net (one-time fee of $40 to $60 for a WordPress theme)
Note 1: Make sure you’re using the “wordpress.org” self-hosted version. Not the “wordpress.com” version, which is stripped down and comes with limitations on how much you can customize your website.
Note 2: If you need help selecting a theme from ThemeForest, here is an explanatory video I made:
3. Design a Logo and Get Business Cards
Designing a logo doesn’t have to be too complicated.
We recommend starting off with a “words only” logo to keep things simple (no need for any fancy graphics). You can choose the font family and color yourself, or get help from 99 Designs. A cheaper option is to use Fiverr.
For some great tips on using a tagline with your logo, check out Neville Medhora’s article, however, we recommend not even using a tagline (to start) in order to keep things simple. Besides, most people don’t really pay too much attention to a company’s tagline anyway.
And for business cards, I like using Moo.com.
4. Get a Business Phone Number
Instead of giving out/publishing your actual cell phone number (or home telephone number), it might be a good idea to get a “virtual business number” for your Texas business. You’ll be able to customize the number so it forwards to your cell phone.
Our favorite company is Phone.com. They have the cheapest plans and the best customer support.
You can get a local Texas telephone number or you can get a 1-800 number for your business. Phone.com lets you easily setup call forwarding to any number you like, create pre-recorded messages, and you can get your voicemails delivered to your email.
You can also check out Sonetel. Sonetel is cheaper, but Phone.com’s support is easier to work with and they have faster response times.
Getting a separate phone number for your Texas business is a good idea if you’d like to keep your actual phone number off of those annoying “public record” websites (and stop the spam phone calls).
I hope this guide has been helpful for you.