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Starting a Business in TexasYou’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business. With wide eyes and big dreams, you’re about to enter the world of business ownership.

But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.

But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.

Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.

Time Saving Hack: When you form a business through business formation services, they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account and ensuring your new venture.

1) Write a Business Plan

Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.

A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:

  • Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
  • Company description
  • Market Analysis (opportunities, competition, etc.)
  • Managerial or organizational structure
  • Products and/or services
  • Marketing strategies
  • Funding goals
  • Financial projections

Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.

2) Decide on a Business Name

You might’ve come up with the perfect name right away. If so, consider yourself lucky.

Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.

The state maintains specific naming restrictions for different business structures (see step 3). Corporation names, for example, must contain the terms “corporation,” “incorporated,” “company,” “limited,” or an appropriate abbreviation. And LLC names must include “limited liability company” or an abbreviation like “LLC.” You can find all of Texas’ naming requirements on this page.

Your business name might comply with every single requirement, but you won’t be able to use it unless it’s available. Perform a name search to see if it’s already taken by another company. If not, congratulations! All you need to do is reserve it or use it on your formation documents to claim that name.

3) Decide on a Legal Structure

There are only a few types of business structures, but each one dictates some important parts of how your business will run.

The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.

However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.

4) Choose a Registered Agent

The Secretary of State needs a point of contact for your business, someone who will be available at your registered office address during typical business hours – 9am to 5pm.

This person is called a registered agent, and they serve as an intermediary with the state, receiving all of your company’s important legal communications and relaying them on to you. Your Texas registered agent ensures that no important state documents, deadlines, or payments fall through the cracks, so you’ll want to choose a person or company you trust.

You can choose either an individual or a business entity as your registered agent in Texas, but they must:

  • Be an individual Texas resident or a corporation authorized to do business in the state.
  • Have a physical address in Texas.
  • Have a mailing address in Texas (no P.O. boxes allowed).

When you appoint an individual as your registered agent, that person is solely responsible for your business compliance. So, it’s wise to choose someone who understands the intricacies of business maintenance. But Texas’ registered agent parameters are fairly broad, so you can choose friends or family instead if you’d like.

Or, you can choose a registered agent service instead. These companies take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.

Important: You must continuously maintain a registered agent on file with the Secretary of State. If your agent resigns or you appoint a new one, you’ll need to notify them by filing the appropriate documents.

5) Register Your Business

This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Secretary of State.

LLCs: If you’ve chosen a limited liability company as your business structure, you’ll need to file a Certificate of Formation with the Secretary of State. This Texas LLC filing isn’t cheap. It costs $300 whether you file online or using a hard copy. But once it’s approved, your LLC is up and running, officially on record with the state.

Corporations: Filing procedures are relatively similar for corporations, and you’ll still submit a Certificate of Formation, but there’s a corporation-specific version, so make sure you use the correct one!

Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.

Foreign Entities: If you formed your business in another state and now you want to set up shop in Texas, you will need to foreign qualify it first. This involves submitting an Application for Registration and paying its hefty $750 fee. There are different Application for Registration forms for limited liability companies, corporations, limited partnerships, limited liability partnerships, and nonprofits, but you can find them all on the Secretary of State’s Business Forms page.

6) Get an EIN

The Employer Identification Number (EIN) is your ticket to doing state and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.

If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.

But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.

Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.

Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

7) Open a Business Bank Account

LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.

The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.

It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.

Quick Tip: If you’re considering to use an LLC formation or incorporation service, IncFile is the best when talking about business banking offers. They have a special partnership with Bank of America that gives you a $450 sign-up bonus if you bank with them.

8) Handle Any Tax Obligations

Ah, taxes. They’re always part of the picture, especially when you run a business.

Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.

Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.

There are a few other taxes your business may owe in Texas, depending on your circumstances:

Franchise Tax: This is a tax due by May 15th every year. Only businesses with annual revenue of more than $1,180,000 need to make payments, but every business, regardless of income, must file. If your business earns less than that threshold amount, you’ll simply file a No Tax Due form. Either way, your filing and/or payment will include a Public Information Report. Together, these forms will fulfill your annual reporting requirements.

Sales and Use Taxes: Any business that sells, leases, or rents goods in Texas is subject to Sales and Use Tax at a rate of 6.25% plus any additional tax imposed by your county, city, or municipality.

Withholding and Unemployment Taxes: If your business hires employees, it will be responsible for withholding employee income taxes and paying an Unemployment Tax through the Texas Workforce Commission.

Miscellaneous Taxes: Texas has a number of other, less-common taxes that pertain to specific products, circumstances, and business activities, like the Battery Sales Tax, Mixed Beverage Taxes, and Loan Administration Fee. You can find a complete list of these taxes here.

Visit the Texas Comptroller’s Taxes page for additional tax information.

9) Find an Accountant

Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.

Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.

This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.

10) Create an Operating Agreement

An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.

While operating agreements aren’t technically required in Texas, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.

You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.

Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Secretary of State.

Quick Note: ZenBusiness is the only business formation that includes an operating agreement or corporate bylaws in every package. All other services will charge you extra or push you to buy a more expensive package.

11) Acquire the Necessary Licenses

After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Texas. These licenses and permits come from a wide variety of departments and state boards, but here are a few of the most common types:

Professional Licenses: There are certain occupations that need to obtain licensure from a specific state board before doing business in Texas. The Department of Licensing and Regulation maintains a complete list of these licensed professions.

Environmental and Agricultural Permits: If your business activities affect Texas’ land, air, or water in any way, it will likely need to apply for a license through the Commission on Environmental Quality, the Department of Agriculture, or other similar offices.

Health Licenses and Permits: Businesses dealing with food service, healthcare, and other human services will need particular health permits. These may come from the Texas Department of Health and Human Services or from local health departments.

Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.

These are a few of the most common license and permit types, but it’s not a complete list. Fortunately, the state provides this comprehensive licensing guide, which includes every license or permit your business might potentially need.

12) Consider Business Insurance

Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.

While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.

If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.

13) Build a Website

Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.

But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.

Quick Note: As we mentioned earlier, if you’re looking to build a business website, there are a handful of good business incorporation services that will help you get started. ZenBusiness or IncFile, in our opinion, have the best business website offers.

14) Launch Social Media Accounts

Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.

Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.

15) Understand Ongoing Texas Requirements

After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget your state’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.

Your annual reporting requirements in Texas consist of two separate forms, both due by May 15th. The first is the Franchise Tax. If your business makes more than $1,180,000 in annual revenue, you will need to file an EZ Computation form or a Long Form and pay the requisite tax. If it earns less than $1,180,000 annually, you will need to file a No Tax Due form. Either way, you must also file a Public Information Report. You can find the relevant tax documents here.

16) Check Out Texas Small Business Resources

You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.

SBA.gov contains a wealth of useful information, resources, and tips for Texas-based small business owners. They have a page dedicated to each of Texas’ SBA district offices, including Dallas/Fort Worth, Houston, San Antonio, Lubbock West Texas, and Lower Rio Grande Valley. On these pages, you’ll find info on events, consulting, news, loans, and even a helpful resource guide, so you can take on your new business endeavor with confidence and the support you need for long-term success.