How to Start a Business in Texas
- Texas Business Facts and Environment
- Step 1: Decide on a Business Structure
- Step 2: Pick a Business Name
- Step 3: Register the Business
- Step 4: Obtain Your Federal Employer Identification Number
- Step 5: Open Company Bank and Credit Accounts
- Step 6: Set-up An Accounting System
- Step 7: Obtain Licenses and Permits
- Step 8: Hire Employees (if applicable)
- Step 9: Obtain Business Insurance
- Step 10: Systemize and Organize
- Step 11: Branding and Marketing
- Step 12: Annual and Ongoing Requirements
- Important Texas Contacts
Texas Business Facts and Environment
TX Business Facts
The “Lone Star State” earned its nickname as a reminder of its struggle for independence from Mexico. It is the second-most populous state in the US, with approximately 29 million people.
Houston is the largest city in Texas, with about 2.3 million people. It is the fourth largest in the United States.
Six different flags have flown over Texas during its history.
Texas produces more crude oil than any other state.
Texas is the birthplace of Dr. Pepper, created by pharmacist Charles Alderton in 1885.
Texas Business Statistics
Texas is home to over a dozen companies on the Fortune 100 “Best companies to work for” list. Small Business make up over 45% of all jobs in The Lone Star State.
Major Companies in Texas
Exxon Mobil, AT&T, Texas Instruments, American Airlines Group, GameStop, Alliance Data Systems, Tenet Healthcare and others all find their homes here.
Texas Startup Environment
The tech boom continues in Austin and Dallas, and other major corporations are also moving to Texas, such as Tesla, HP and Oracle.
Step 1: Decide on a Business Structure
There are 3 basic options: a DBA, a Corporation or an LLC. Click here to learn more about business entities.
- A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
- A Corporation is a separate entity (provides liability protection to the owners) that has a structure that includes shareholders, directors and officers. More complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.).
- An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity but provides very easy management (doesn’t require directors or officers) and taxation. Has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.
Step 2: Pick a Business Name
Picking a business name is easier said than done – many legal and business problems can arise from picking the wrong name (you can always change it later but the less times you have to do that, the better).
- Make sure you’ve covered the basics: unique, easy to understand/pronounce (practice saying it out loud: “Thanks for calling XYZ”) and can survive over time (“DVD World” is not timely). Here are some of our tips on business identity including logo and trademarks.
- Search the web for your proposed name. Search Google, Bing and DuckDuckGo as a “first sweep” for any potential conflicts, especially in your state or local jurisdiction. NOTE: If you intend to operate nationally or even internationally it will be even more important that your name be unique. This should cover many cases where a company name is being used but not officially trademarked (see next tip).
- Do a trademark search with the US Patent and Trademark Office (USPTO). This will be a very good indicator if you’re name will have any conflicts. There’s an art to trademark searches (trademark specialists will charge you handsomely to do a thorough search) but in our experience if you can use google at a fairly advanced level you can reasonably clear a name yourself.
TIP: search misspellings, plurals, variations of spelling, sound-alikes and other versions of your chosen name to be sure it’s not already registered.
- Make sure your company name choice is available by searching Texas’s Department of State: Division of Corporations business name database. Note: Make sure to search variations of spelling, plurals and misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
Step 3: Register the Business
Each state has it’s own requirements for registering a business. Now that you’ve chosen a business structure and picked your business name, here are the requirements to register your business in Texas.
How to form an LLC in Texas
- Hire a professional Registered Agent.
- File the “Articles of Organization” with the Texas Division of Corporations.
- Optional: Elect S-Corporation status with the IRS by filing IRS Form 2553. Yes, even an LLC can choose to be taxed as an S-Corporation (or even a C-Corporation).
TIP: Speak to your tax advisor about this important issue because it adds complexity to your LLC most people would rather avoid. - Hold an Organizational Meeting to take contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more (yes, even for 1 person LLCs).
How to Incorporate in Texas
- File the “Articles of Incorporation” with the Texas Division of Corporations.
- Hire a professional Registered Agent.
- Optional: Corporations can elect S-Corporation status with the IRS by filing IRS Form 2553. Click here to learn more about S-Corporations.
- Hold an Organizational Meeting to properly organize the corporation, take contributions from the shareholders, elect directors and officers, issues stock, adopts the Corporate Bylaws and more.
Considerations when Incorporating or forming an LLC in Texas
- The Texas Division of Corporations could take anywhere from 2-3 business days for e-filing to 3 to 5 days for mail filings to process the paperwork. This may increase during peak periods.
TIP: Check our order form to see how long Colorado is currently taking to process regular and expedited orders. - A Registered Agent is required for every Texas Corporation and LLC. The chosen registered agent must have a physical street address in Texas. A professional Registered Agent who will provide their address and forward any important documents to you. This is convenient if you have to move, since you won’t have to file forms or pay fees, (just update your address with your agent).
How to File a DBA in Texas
DBA’s in Texas are filed with the County in which the business is located.
- Check your business name by calling the County Recorder or visiting their website (search for “YOURCOUNTY county recorder” should find it).
- Apply online with SOSDirect. Here is information on filing for a name in Texas.
- File the forms with the County. Some counties require the form to be notarized.
Ready to Start Now? Let Us Do The Work
Sure, you could do all the steps above or you could spend 5-10 minutes on our order form and let us take care of it while you work on more important things.
- Learn more about our business formation service
- Read our verified reviews and 100% Satisfaction Guarantee
- Contact our friendly support team if you have any questions
Step 4: Obtain Your Federal Employer Identification Number
Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.
To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.
TIP: We will obtain your EIN for you if you we form your company.
Step 5: Open Company Bank and Credit Accounts
To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork b) your EIN c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).
Top Business Banks in Texas:
- Amegy Bank
- Bank of America
- BBVA Compass Bank
- Branch Banking and Trust
- First National Bank of Texas
- Comerica Bank
- Capital One
TIP: Our business formation service includes a free banking resolution for your use.
Step 6: Set-up An Accounting System
Setup your Accounting and Record-keeping system and learn about the taxes your new company is responsible for paying.
Company documents generally are required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. All Tax and Corporate Filings should be kept for at least 3 years. View our “Accounting & Financial Management” section for help with setting up an accounting system and purchasing accounting software.
Step 7: Obtain Licenses and Permits
Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).
The Go Big in Texas website is a great business portal with information covering revenues, services, and business licensing in Texas.
TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.
Step 8: Hire Employees (if applicable)
If you intend to hire yourself or others as a full or part-time employee of your company, then you may have to register with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both). View our “Employees & Payroll” section for help with hiring employees and processing payroll.
Step 9: Obtain Business Insurance
There are many types of insurance for businesses but they are usually packaged as “General Business Insurance” or a “Business Owner’s Policy”. This can cover everything from product liability to company vehicles. A decent policy can run as little as $300/year and offers a great extra level of protection. Click here to view our preferred provider of business insurance online.
Step 10: Systemize and Organize
Prepare the business as if someone needed to take it over and run it for you. This means have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Basically, try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business. View our “Manage Your Company” section for help with systemizing and automating your business.
Step 11: Branding and Marketing
Now that you’ve set-up the company for success, you need to get the word out. Create a marketing plan for your products and services that targets your ideal customer. View our “Marketing & Sales” section for help for more information.
Step 12: Annual and Ongoing Requirements
DBA: Your Fictitious Business Name should be valid for 5 years (unless you change company name or other information listed on the FBN) at which point you’ll need to renew it with the county.
LLC: Unlike most states, Texas does not require LLCs to file annual reports. They must file annual tax franchise reports with the CPA instead
Corporation: Every year you’ll need to file the “Statement of Information” or Annual report which updates the state on your business address and other things. There is a $400 late fee for all for-profit corporations who do not make the May 1 deadline.
Franchise Taxes: Texas corporations are required to file an annual report with the Texas Comptroller of Public Accounts, due May 15 every year (or the next business day, if May 15 falls on a holiday). There is a $50 penalty for a late filing of a franchise tax, which is calculated as a percentage of the company’s net income for that year.
Important Texas Contacts
Texas State Taxation Departments
Texas Department of Licensing and Regulation
Texas State Labor and Employment Departments
Texas Department of Economic Development
Texas Startup Resources
1. Texas Small Business Administration
Small Business Administration (SBA) Texas State District Office
2. SCORE Mentors
SCORE is made up of active and retired business people who volunteer their time to support startup businesses. From coaching to funding resources, finding a local SCORE mentor can save precious time and money.
- Texas Business Portal
- Texas Small Business Development Center
- Texas Workforce Commission
- Tax Information For Texas Businesses
3. Texas State Legal Statutes:
- Texas Business Corporation Act
- Texas State Limited Liability Companies – the specific act that applies to Texas State LLCs
- Texas State Businesses and Professions – includes regulations on topics such as business and professions codes.
4. Texas State Chambers of Commerce
5. Angel.co Texas State Startups
6. Texas Business News
7. Texas State Small Business Development Center
