Starting a new business in Texas seems as simple as setting up a website, but you'll actually have to work hard behind the scenes to prepare for a successful launch. Your brand-new website will need a way to accept secure credit card payments from your customers, and you'll need the required state and local permits to avoid fees and penalties.
Fortunately, we've streamlined the process of establishing your Texas business into 6 smart steps. This path paves the way for a smooth ride as the owner of a new enterprise, whether you're opening an ecommerce operation, a brick-and-mortar location, or both.
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6 Steps to Start a Business in Texas
You won't need a general license to run your business in Texas. However, you might need local, state,or federal licenses or permits for certain types of companies. You'll also have to partner with a payment service provider, figure out how to pay taxes, and complete all the necessary paperwork. Starting with these 6 steps will point you in the right direction.
1. Select the Right Legal Structure
Texas Economic Development recommends several common structures for your new business. You can create a sole proprietorship, partnership, limited liability company or corporation. Texas lets you pay the necessary fees by cash, check, or credit card, and you can submit the necessary forms either through the mail or online.
As a sole proprietor, you run your business independently and pay taxes on your company's profits on your individual income tax return. This is the simplest type of Texas business. Partnerships provide a similar structure, but you own and run the business with one or more other people. You can create a partnership agreement to manage the company's operations, but you're not legally required to do so.
If you want to start a sole proprietorship or partnership in Texas, you'll need to register your business with your local county clerk.
If you'll use a name other than your own legal name to run the business, you'll also have to register your "doing business as" (DBA) name. You must complete an assumed name certificate with the county clerk in all Texas counties where you do business. Partnerships require DBAs if your business name doesn't include the last names of all the partners.
Texas also recognizes two special types of partnerships: Limited partnerships (LP) and limited liability partnerships (LLP). An LP has at least one limited partner who has limited personal liability for the company's affairs and one general partner who does not have limited liability. An LLP limits liability for both general and limited partners.
A corporation consists of a legal business entity that's separate from you and the other owners. This structure limits your personal liability for legal judgments against your business. Corporations have shareholders who own portions of the company and directors that manage its daily operations. However, you can start a corporation by yourself and serve as the sole shareholder as well as the president, secretary and director under Texas law.
To start a Texas corporation, you'll submit a certificate of formation to the Secretary of State (SOS) office. You can file this form online through the agency's SOSDirect portal.
Forming an LLC in Texas also requires submission of a certificate of formation to the SOS.
You may want to choose this entity if you want the personal liability protection of the corporate structure without losing the advantageous tax treatment of a partnership. You and your partners can manage the LLC on your own or hire managers to run the business.
2. Choose and Register Your Business Name
Like other states, Texas requires you to pick a business name that doesn't cause confusion among customers. In other words, you can't choose a name that's too similar to the name of another company.
When you find a name that meets the state requirements, you can reserve it through the SOS online portal for a cost of $40. No one else can use that business name for 120 days, or longer if you renew the reservation (which you can do as many times as you want).
You have to submit an assumed name certificate to the clerk in every Texas county where you do business if you have a sole proprietorship or general partnership. Corporations, LPs, LLPs and LLCs must file an assumed name registration with the SOS.
3. Sign Up to Pay State, Federal, and Local Taxes
Tax requirements for your Texas business will vary based on the type of company, the legal structure and other factors. You can follow these steps to enroll with the necessary tax authorities at the state, local and federal levels.
- Sign up for a free Employer Identification Number (EIN) with the IRS. You'll use this number to file federal taxes for your business, or you can simply use your Social Security number if you've started a sole proprietorship or partnership.
- Register for state tax filings with the Texas Comptroller of Public Accounts. If your Texas business sells products or services online, you must collect state and local sales and use tax from your customers and remit these funds to the state. You can get the required sales and use tax permit from the Comptroller's Office at no cost. You might also be responsible for franchise tax depending on the nature of your business.
- Check with your county tax assessment office to find out about local business taxes in your area. You'll also need to pay municipal property tax if you have a physical business location in Texas.
4. Prepare to Accept Online Payments
Pay.com provides the solutions you need to deliver the seamless transactions your customers expect. When you sign up for our service, you’ll have a Pay Dashboard where you can accept and keep track of payments made through your website or through secure Pay Links.
In addition to secure credit and debit card transactions, you'll be able to accept other payment methods as well. Just select your preferred payment methods on your Pay Dashboard, and your customers will see those choices when they check out. You can also see your costs at a glance and avoid expensive surprises with our transparent, flat-fee approach.
5. Select a Registered Agent
Texas requires all business entities to establish an agent for service of process, commonly known as a registered agent. This person or business agrees to accept legal documents for your company. You'll need to complete the appointment of agent form and pay the $25 fee.
You can serve this role as the company's owner or you can select a registered Texas business or Texas resident to do the job on your behalf. For example, your attorney's office or your financial institution can be the registered agent for your business if it offers this service. Either way, your registered agent must have a Texas address.
6. Look For a Business Location
The Lone Star State has no shortage of spots to start your business. If you're in the market for commercial real estate, you can narrow down the search by asking yourself these questions:
- Can customers and suppliers find the location easily? What's foot traffic like in the neighborhood?
- Does the property support your business objectives, now and in the future?
- What image do you want your location to project to clients, employees and other stakeholders?
- Is the property in a safe location that offers amenities such as parking?
- Are you filling a service gap in the neighborhood or will you have to contend with competing businesses?
- Does the property have the proper zoning for your company's operations and activities?
- Does the surrounding community provide access to an available workforce?
- Does the property have room for expansion if necessary?
- Does the cost of rent and associated expenses align with your budget?
- Does the property have the necessary infrastructure for your business operations?
You might not need to look for a location if you plan to run an online Texas business from your home. However, you'll still have to take the necessary steps to register your business, pay taxes, and maintain legal licenses and permits.
The Bottom Line: Starting a Business in Texas
You can avoid logistical headaches in the future by following the right steps to start your Texas business. For example, enrolling with the appropriate tax authorities shields you from late fees and penalties for failure to pay.
If you have a small or medium-sized Texas business, you can access technical assistance, funding information and other resources from the Governor's Office of Small Business Assistance and the Business Permit Office.
Of course, you'll also need a way to get paid for your products or services. Setting up an online payment system can seem like a daunting prospect, but it's actually easier than expected when you work with Pay.com.
You can integrate Pay.com with your business website even if you don't know how to code. In fact, you can even accept payments by sending secure Pay Links if you haven't launched your business website yet.
If you're intrigued, you can complete our online form and tell us a little bit about your new Texas business so we can recommend customized payment solutions.