How to Start a Business in Texas (2022 Guide) – Forbes Advisor

Certain types of business entities must file with the state of Texas to become a legal entity. Once you know which business entity you want to use, filing for incorporation is a simple process. You can file your incorporation documents through the Texas Secretary of State’s portal and receive instant confirmation, with the documents arriving in the mail shortly thereafter.

Choose the right business entity

There are multiple entity types that you can choose from for your business. Each type of legal entity comes with its own unique rules and potential tax or operational advantages. Choose from:

  • Limited liability company (LLC): Incorporating as an LLC is common for small businesses in Texas. This entity provides you with protection from liability while giving you a lot of flexibility in how you handle your business taxes. Learn more about how to form an LLC in Texas. It is formed by submitting a certificate of education in the state.
  • C-Corporation: The C-corporation is the preferred business entity for public companies because of its ability to divide the stock of the business into multiple types of stock. It is not usually chosen by smaller businesses looking to start up unless the owners are raising a significant amount of capital. It is established by submitting a certificate of completed education.
  • S-Corporation: When most people talk about a corporation, they probably mean the C-corp discussed above. However, there is another type of corporation that provides tax benefits to owners. This comes from Subchapter “S” of the Internal Revenue Code and is a tax classification that avoids double taxation. Learn more about S-corporations. An S-corp is a simple tax designation and registers the same way as a C-corp with the state.
  • Sole trader: A sole proprietorship is a business owned by one person. All responsibilities and finances fall on the individual. There are no incorporation documents to file with the state to set up this business.
  • General partnership: If you decide to start a business with at least one other person, you can create a general partnership. There is no requirement to file anything with the state to create the entity. You are both responsible for the debts of the partnership.
  • Limited partnership: If you and one or more other people start a business together, you can form a limited partnership after filing a certificate of incorporation with the state if you have at least one general partner and one limited partner. Limited partners are only liable up to their financial interest in the company, while general partners are personally liable for the company’s debts.

You may also need to file a Doing Business As or DBA with the state of Texas if you will be doing business under a name other than your own name or the name of the company you created by filing state incorporation documents. This lets the state know who runs the business and who is responsible for it.

Create a limited liability company online today with ZenBusiness

Click on the status below to get started.

Get started now

Find the right business name

Before you register your business with the state, you’ll need to make sure the name isn’t being used by another business. You can perform an online search to find out if your name is available for as little as $1 per search. This is something you’ll want to pay for to avoid delays in the application process and to have the confidence that you can legally purchase your domain name or create marketing materials with your chosen name.

Apply for a business EIN

An Employer Identification Number (EIN) is your business’s tax identification number that the federal government will use to identify your business. You can apply for an EIN online through IRS.gov. The process is easy, free and only takes a few minutes. This is required for tax purposes for certain business entities and to be able to hire employees.

Get step-by-step instructions on how to get an EIN.

Select a registered agent

A registered agent is a person or entity that takes responsibility for receiving important legal documents on behalf of your business. Every business that files for incorporation with the state must have a registered agent.

If someone files a lawsuit against your business, the registered agent can get this document. You want your registered agent to be someone who is trustworthy and who checks the mail. You can serve as a registered agent or you can hire the services of a registered agent to undertake this responsibility on your behalf.

Apply for business licenses

Once you have officially established your business entity in the state of Texas, you should check what federal, state and local business licenses you need before you can operate. There are a wide variety of licenses required for different industries and professions. You should apply for them as soon as you have a registered name, as they may take time to receive. Learn more about business licenses in Texas.

If your business will sell taxable products or services, you will need to apply for a sales tax permit in order to collect sales tax in Texas.

Leave a Comment