exas just might be the ideal state to start your business. With a fast-growth population, low-regulation business climate, and no state taxes on corporate or personal income, it’s no wonder Texas has long been considered a top state to own or operate a business.
If you’re ready to start your business in the great Lone Star State, be sure you begin your new venture on the right legal footing. Here’s how to register a business in Texas.
What Is a Business License?
A business license is a permit issued by a state or government entity that allows a business to operate legally. It doesn’t offer insurance or protect a business from debt or negative cash flow.
While license requirements vary for business structure and location, all Texas businesses must be registered with the state with a proper license.
5 Steps to Register Your Business in Texas
Registering a business in Texas takes a bit of patience and a little research. This simple guide can help you get the legal ball rolling.
1. Determine your business structure
You’ll need to choose a business structure, also known as a business entity, that best first your liability requirements, operational needs, and plans for employees. The business structure you choose also determines where you’ll register your business and how much it will cost.
Some common Texas business structures include:
- Sole proprietorship: If you run your business on your own and want to own all of the business assets without liability protection, this is the structure for you. In Texas, a sole proprietorship is not subject to the state franchise tax.
- General partnership: A partnership is designed for two or more individuals joining in business. All involved parties are equally liable for the business but enjoy exclusion from the state franchise tax. In Texas, general partnerships can register with the secretary of state for $200 per general partner.
- Limited liability company: Also known as an LLC, this combines perks from multiple business structures, making it a common choice for business owners, especially those with employees. An LLC requires a certificate of formation be filed with the Texas secretary of state at a cost of $300. LLCs are subject to the state franchise tax in Texas.
- S- or C-corporation: All for-profit corporations in Texas must register with the secretary of state. The filing fee for the certificate of formation is $300. Corporations are also subject to a state franchise tax. This business structure offers stronger protection from personal liability, as corporations are considered separate entities from their owners.
Sole proprietorships and partnerships can register with their local county clerk’s office. LLCs and corporations must register through the secretary of state.
2. Choose a business name
If you’re operating as a sole proprietorship, your name can be used for your business. Otherwise, you’ll need to do a little research to see if your desired business name is available. You can conduct a quick Google search and then check the Texas Department of State: Division of Corporations database to ensure another business in Texas isn’t registered under a similar name.
3. Obtain an EIN (employer identification number)
Applying for an EIN is a free but necessary step for businesses. An EIN is how the IRS tracks your business finances, and it can be used to establish business credit, file for employee tax withholdings, and open a business checking account.
Note that a sole proprietor does not need an EIN and can use their social security number as an identifier instead. However, an EIN can benefit your small business, from enabling you to qualify more easily for a loan to helping protect your assets and preventing identity theft.
4. Apply for business licenses and permits
The state of Texas does not require a general license for new businesses, but the county or city out of which a business plans to operate will have its own requirements that vary by business type.
Texas provides plenty of business resources for those just starting out. The 2022 Texas Business Licenses & Permits Guide offers a comprehensive listing of state permits and licenses broken down by industry. Additional information on permits, licenses, patents, trademarks, securities, and more can be found on the Texas Secretary of State website.
There are a variety of small fees associated with different types of business filings. You can view a list of fees here to get an estimate of what it may cost to get your business legally off the ground.
5. Consider additional requirements
Once you’re registered, there may be other legal requirements to consider, such as business insurance and unemployment tax. You can find more information on unemployment tax in the Governor’s Small Business Handbook.
Set up your small business for success
The Lone Star State offers a combination of competitive business advantages, making it a popular choice for entrepreneurs.
Once you’ve established your Texas business, it’s time to set yourself up for success. This includes opening a business checking account to keep all your business finances in the same place. Companies using an online banking platform can enjoy features like free transfers, virtual debit cards, and custom integration with other small business tools.
Novo offers award-winning, free business checking accounts to Texas business owners, and it only takes a few minutes to apply for an account. See how Novo provides powerful banking tools that can give Texas businesses an edge.
This page is for informational purposes only and is not intended to be relied upon as legal, financial, or accounting advice. Please consult your own professional if you have any questions.