How to Start a Business in Texas
“You don't have to see the whole staircase, just take the first step.” ― Martin Luther King Jr.
Many would agree, the most overwhelming step towards owning a business is actually starting it. It takes courage and confidence in your ability to succeed. We live in Texas and one thing Texas is known for is big ideas and even bigger personality. It then should not come as a surprise that Texas is one of the best states to explore entrepreneurship opportunity.
In July of 2019, Texas was found to be the best state in the US to start a business.[1] Among many reasons why Texas is a great state for starting a new business is that:
(1) there are no corporate or person income taxes,
(2) there is a highly skilled workforce,
(3) easy access to global markets and
(4) often ranked in the top 5 US cities for most accessible financing.
Here’s what you need to know if you have the courage and confidence to build your business in the Lone Star State.
Step 1: Develop A plan
It may sound cliché, but any successful business formation starts with a plan. Start jotting down your ideas on paper. Then develop your business plan which should include answers to these questions:
§ What product/service do I want to offer?
§ Why am I offering it?
§ Who am I offering it to?
§ Where am I offering it?
§ When do I plan on offering it?
You can find plenty templates online to help you create a business plan for free.
Step 2: File Necessary Paperwork
The next step in your business formation is to register with the state. You must select the type of business entity you want to form and file the appropriate paperwork with the Texas Secretary of State. Any formally organized business in Texas must appoint a registered agent to accept service of process on its behalf so you will need to have a registered agent. At this stage, you must be prepared to pay the appropriate filling fees associated with the type of business structure you picked.
Step 3: Register for EIN
After the state accepts the registration of the business, you must apply for an EIN number also known as Federal Employer identification number or tax id. You will need an EIN number to open a bank account and file federal taxed. You must apply for this even if you do not have any employees. The IRS issues EINs at no charge.
Step 4: Open a Business Bank Account
Once you have your EIN number, you will be able to open a business bank account. Each bank has varying policies, but they generally will require the paperwork that you filed with the state and the EIN. If you mix your personal and business accounts, things can get messy at tax time, and you could be facing potential liability. Thus, this is an important step not to be skipped.
Step 5: Register with Applicable State Departments
A general business license is not required in Texas. However, depending on the nature of your business, you may need licenses, permits, certifications, registrations or authorizations at the federal, state and local level. In addition, you may need to register your business for a state tax ID with the Texas Comptroller of Public Accounts (CPA). If you are required to charge taxes on your product or service or are hiring employees., failing to do so may subject your business to heavy fines and penalties.
Step 6: Start Making Money and Protect Your Business
If you’ve followed these steps, you are officially open for business. However, your business formation is not complete. Although you have a legal business in Texas, your business needs protection and must stay in good standing. A small business attorney can advise on you how you can best protect your business and maintain compliance according to your business structure.
If you want personalized advice from The Law Office of Ruthe Belachew, PLLC and continuous service throughout your business journey, do not hesitate to call us at 945-900-2529.
[1] Adam McCann, Best & Worst States to Start a Business, WalletHub, (July 20, 2021), https://wallethub.com/edu/best-states-to-start-a-business/36934
