Starting a Business in Texas

Starting a business in Texas is a terrific opportunity to be your own boss and take on new challenges in the business world. Thousands of Texas-based businesses use Shopify to power their stores, so even though Texas is renowned as the Lonestar State, you won’t be alone as a company owner.

The process of launching a business was broken down into seven main parts. Before starting a business, it is recommended to get the advice of a competent tax adviser, accountant, and/or attorney to be certain that all legal requirements are met.

How Can I Start a Business in Texas?

In Texas, you may start a business in as little as 24 hours. However, there are a few ways that make it easier. If you’re an alone owner and live in Texas, you can start doing business right away. That can be a terrific way to get your business started, but there are a few things to consider:

  • As a sole proprietor, you are fully in charge of your firm and have no legal safeguards.
  • This also implies that your assets may be in danger in the event of legal action.
  • If you don’t live in Texas now, you’ll need an official street address to do business there
  • If you’re a sole owner, your company is known as you. You’ll need to apply for a DBA if you wish to use a different name.

There’s no reason to be concerned if that doesn’t sound like you. We’ll show you how you can create a Texas business swiftly and easily.

How Much Time Does It Take to Start a Business in Texas?

The Texas Secretary of State now states that LLC creation is delayed in certain conditions. You should expect the formation to be authorized within 22–25 working days if you file by fax or mail without paying a charge for accelerated processing. However, if you register your LLC online, it can be approved in as little as four days.

You are responsible for the remainder of the business creation procedure. Many of the processes may be completed in a few hours or days, and you can complete them all at once for maximum efficiency.

To get started, follow these steps:

  1. Choose a Business Idea

Get some time to brainstorm and investigate company ideas. Think about your interests, talents, resources, availability, and the reasons why you want to start a business at this point.

Consider developing a business plan once you’ve chosen an idea to estimate your odds of generating a profit. You’ll have a better concept of the initial expenses, competition, and money-making tactics if you make a strategy. Before donating financial help, investors and lenders will want to study your business plan, and you may be prepared to prepare one before you begin requesting funds.

  1. Decide on a Legal Structure

Small business legal structures include:

  • sole proprietorship,
  • partnership,
  • limited liability company (LLC), and
  • corporation.

Several special variations of these arrangements are examples of Limited partnerships and S corporations. Consider which business organization form provides:

  • The liability protection you want and the optimum tax.
  • Financing.
  • Financial advantages for you and your company.

For more information on determining the appropriate ownership structure for your company, see this article.

  1. Choose a Business Name

If you’re establishing an LLC or a corporation, be sure your name is distinct from other businesses already recorded with the Texas Secretary of State (SOS). By completing an Application for Reservation or Renewal of Reservation of an Entity Name form with the Texas SOS, you can reserve an available name for 120 days. For LLCs and corporations, there are certain naming criteria (like including a word such as “LLC” for LLCs or “Company” for corporations).

Is your establishment a sole proprietorship or a partnership with a business name that varies from the owner’s name (in the case of a sole proprietorship) or the names of the individual partners (in the case of a partnership)? As a consequence, you need to file an expected business name with the county registrar in the area where you’ll be doing business.

If you plan to manage your business online, you should consider registering your company name as a domain name. Moreover, to avoid trademark infringement difficulties, you must do a federal and state trademark search to make sure that the name you wish to use is not identical to or too close to one currently in use.

  1. Register Your Texas Business Entity

Sole proprietorship: You don’t need to fill out any organizational forms to start a sole proprietorship in the state of Texas. See How to Form a Texas Sole Proprietorship for additional details.

Partnership: You don’t need to organize any organizational paperwork with the state to form a general partnership in Texas. All partnerships should have a formal agreement, even if it is not legally obligatory. The partnership agreement may be useful if there is ever a disagreement between the partners. You must register with the Texas SOS to build a limited liability partnership (typically utilized by professionals).

LLC: For the LLC, you must file a Certificate of Formation with the Texas Secretary of State first. You’ll also need to establish a registered agent in Texas for the service of the process. In addition, while it is not required by law, you must draft an operating agreement to lay out the essentials of how your LLC will run. The operating agreement hasn’t been submitted to the state.

Corporations: In Texas, you must submit a Certificate of Formation to the Texas Secretary of State. You’ll also need to establish a registered agent in Texas for the service of the process. You should also draft bylaws to outline your corporation’s internal operating regulations, even if they are not legally needed. The state does not require bylaws to be filed. S Corporations must also submit IRS Form 2553, Small Business Corporation Election, to the IRS.

  1. Register for the Texas Licenses and Permits Tax. 

Tax Registration. You must file for a sales tax permit with the Comptroller of Public Accounts to sell items in Texas (CPA). Any company doing business in Texas should register with the CPA. You have the alternative of registering online or on paper.

EIN. If your firm hires workers or is taxed separately from you, you must acquire a federal Employer Identification Number (EIN) from the IRS. Even if it’s not legally necessary to get an EIN, there are several commercial reasons to do so. Banks often require an EIN to create a business account, and other organizations with which you do business may also need an EIN to make payments. An EIN may be accepted by filling out an online application on the IRS website. There is no charge for filing.

Regulatory permissions and licenses.

  • Health and safety
  • the environment,
  • building and construction, and
  • specialized businesses or services are all covered.

The SOS Guides and Resources section offers information about state licenses and permits. In Texas, the city or county gives many business licenses and permits. Check the websites of any towns or counties where you want to do business for information on these local licenses and permissions.

Occupational and professional licenses. These folks operate in various disciplines, and certain specialized professions and industries are licensed by the Texas Department of Licensing and Regulation. Professional service businesses must normally apply for a Certificate of Authority from the Secretary of State, and the application may be submitted using the SOSDirect website.

  1. Select a Business Location and Review Zoning Regulations

You’ll need to choose a place for your company and research local zoning laws. Consider your clients’ demands and if your firm might profit from foot or highway traffic. Before committing to a site, take the time to analyze the costs of running your business in the selected location, including rent and utilities. You may use your business plan to check if you can afford your ideal location in the early phase of your business.

It’s analytical to double-check that the location is suitable for your type of business. Evaluate your local ordinances and coordinate with your town’s zoning or planning department to look at zoning limitations for your town or city. Managing your business out of your house is a viable option for creating a new site. Check your local zoning restrictions again if you decide to start a home-based business. Review your lease (if you rent your house) and homeowners association regulations (if applicable) to check whether any of your home enterprises are interdicted.

  1. Prepare and submit tax returns.

Certain types of firms will not owe state tax on their company revenue since Texas does not have a personal income tax.

Sole proprietorships. Sole owners file their personal federal income tax returns with their business income.

Partnerships. On partnership income, partners pay federal taxes. Most Texas partnerships are also liable to the state’s franchise tax, but only if total revenue exceeds a particular threshold. The SOS requires limited liability partnerships (LLPs) and some limited partnerships (LPs) to produce yearly reports.

LLCs. Members pay federal taxes on their portion of LLC revenue on their federal tax returns. The state’s franchise tax applies to LLCs, but only if their total revenue exceeds a particular threshold. Texas does not require LLCs to file an annual report, unlike other states. For further information, see Texas LLC Annual Report and Tax Requirements.

Corporations. A shareholder-employee with compensation must pay federal income tax. The corporation is liable for the franchise tax imposed by the state.

In addition to Texas taxes, there are also federal income and employer taxes. Check out IRS Publications 334, Small Business Tax Guide, and 583, Taxpayers Starting a Business, accessible at irs.gov.

  1. Purchase insurance

Business insurance may safeguard your firm and your assets from the consequences of unforeseeable events like personal injury claims or natural disasters.

  1. Open a business bank account.

Whatever business you start, you should register a separate business account to make tracking your revenue and spending easier. To preserve liability protection, a separate bank account is required for various company forms, such as LLCs and corporations.

Conclusion

Texas is a business-friendly state with various funding alternatives and small company incentives. Texas business formations are increasing as firms depart other states like California in historic numbers.

Tech companies and startups, in particular, have found a home for their small enterprises in Austin, and they continue to migrate there in record numbers.

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