How To commence a Business in Texas: 12 Essential Steps

“Texas doesn’t collect personal or business income taxes, and that’s one of the large advantages here for businesses,” says Steve Lawrence, Associate Dean of the University of Houston’s Bauer College of Business and Executive Director of the University of Houston Texas Gulf Coast tiny Business advancement Center (SBDC) Network.

Although Texas is known as the Lone Star State, you won’t be alone as a business owner: There are 3.2 million tiny businesses in the vast state. And as the eighth largest economy in the globe, Texas’s economic climate makes it highly attractive to entrepreneurs.

If you’re considering Texas as the place to launch your business, here are some resources to assist you get started.

How to commence a business in Texas

1. Choose a business concept
2. Name your business
3. make a roadmap
4. Choose a business structure
5. Register a fictitious name
6. Get an EIN
7. Get a registered agent and register your business with the state
8. Pay state taxes
9. Obtain a business license and permits
10. Examine insurance options in Texas
11. comprehend monetary considerations
12. trade your business

1. Choose a business concept

Whether your business concept is fully formed or still at the aspiration stage, the first step on your tiny business in Texas checklist is to develop your concept. receive the period to examine and articulate the details of your concept:

• What products will you sell?
• Who will your ideal customers be?
• What’s your pricing schedule?
• What will it expense to produce goods?
• How will you generate awareness of your offering?

2. Name your business

Before you can commence a business, you require a name for it. A business name generator is a quick way to discover encouragement.

Once you’ve made a shortlist of feasible business names, do a quick online search to view if any businesses are already using them. Next, search the US Patent and Trademark Office’s trademark database to make sure no one has already trademarked your preferred name. Lastly, consult a domain name generator to make sure a corresponding domain name is available.

There are some requirements for business names in Texas, which you can discover by visiting the Texas Secretary of State name filings FAQs. Among the criteria for naming your business:

• Identify appropriate designation, such as “Corporation,” “Incorporated,” “corporation,” “Limited,” or the corresponding abbreviation. (More on choosing a business structure later.)

• The name cannot be the same or similar to any existing or registered business in the state.

• Names cannot include words such as “lender, “depend,” “veteran,” and “college,” among others, without specific authorizations.

When you’re ready to savings your business name, you can do so online through SOSDirect. The name can be reserved for 120 days (and renewed). The name reservation filing fee is $40.

3. make a roadmap

The state of Texas does not require you to write a roadmap. However, many lender loan officers will desire to view one before granting you a business loan. Plus, a roadmap is an ideal way to keep yourself on track, organized, and objective-oriented.

A roadmap is a document that outlines:

• corporation description
• trade analysis
• Management and organization
• Products and services
• Customer segmentation
• Marketing schedule
• Logistics and operations schedule
• monetary schedule

Writing a roadmap is a straightforward, methodical exercise in analyzing and explaining your business concept. 

“Write a roadmap that includes the total business framework, marketing, operations, and the finances. Lay it out in two segments: years one to two and years three to five,” explains Lawrence.

Next, have an experienced professional or mentor review it. 

“Do not use household or friends, because they’re not going to provide you an unvarnished, truthful view.”

To get started, consider using a roadmap template, or check out some roadmap examples to view what’s feasible.

4. Choose a business structure

When examining how to commence a business in Texas, you’re going to have to choose a business structure matching your priorities and how much administrative overhead you can handle. Three popular types of business structures in Texas are sole proprietorships, limited debt companies (LLC), and corporations. Each has its advantages and disadvantages:

Sole proprietorship

The simplest business structure available is the sole proprietorship, an unincorporated business owned by just one person. It requires the least amount of administrative work to get started, and it’s inexpensive to register. However, sole proprietors’ personal assets and business assets are the same under the law, which means a sole proprietorship offers no legal protections from obligation collectors or court proceedings.

Limited debt corporation

A limited debt corporation (LLC) is a type of business structure offering the simplicity of a sole proprietorship because it’s relatively straightforward and low expense to form. Additionally, it offers some debt protections separating your personal assets from your business assets. This protects your personal property from business lawsuits and debts. LLCs can also require less administrative work than more complicated business structures like corporations.

The Texas Secretary of State does not require you to submit an operating agreement when you register an LLC. However, creating one may be a excellent concept, because it helps describe how your LLC will be managed, who the stakeholders are, and how profits are allocated. If you require assist writing yours, operating agreement templates are available.

Corporation

A corporation is a type of business structure owned by shareholders and able to issue distribute. This legal entity fully separates the person owners from the business and protects the personal assets of owners from lawsuits and obligation collection. In Texas, there is no corporate income levy. Instead, there is a type of business levy known as the franchise levy.

Corporations are complicated business structures to commence and maintain, with greater administrative requirements and regulations to adhere to. As a corporation, you are typically governed by a board of directors with bylaws. The primary advantage of a corporation structure is the ability to issue distribute, which may attract property and/or talent for your throng. 

To set up a corporation in Texas, pursue these steps:

Prepare corporate bylaws

Corporate bylaws define how your corporation is structured and governed. They also include details such as annual meetings, quorum (minimum number of voting board members or stockholders), distribute, and directors. Corporate bylaw templates are available online, if you require a starting point.

Select directors and hold a board conference

One of the requirements of a corporation is a board of directors to assist to govern your corporation while providing valuable knowledge and encounter. In Texas, directors can be elected, appointed, or designated according to your corporate bylaws, and you’ll require at least three people to serve on your board. Rules regarding directors are available in the Texas Business Organizations Code.

Issue distribute

distribute is one of the things that makes corporations distinctive. By issuing distribute, you are distributing ownership between stakeholders, which allows you to raise property funds for advancement or operational projects while bringing potentially beneficial parties into your corporate throng. distribute is usually issued at the first board conference. The Texas Business Organizations Code provides details on how to issue distribute.

5. Register a fictitious name

As part of the recent business procedure, you may desire to register a fictitious name, also known as a DBA (doing business as). For instance, if you’re a sole proprietor, but you don’t desire to publicly operate under your own name, a DBA allows you to choose a distinctive name for your business. The same goes for a corporation or LLC; if you don’t desire to include the word “Incorporated” or “LLC” in your community-facing business name, you can use a DBA.

Registering a fictitious business name is meant to connect the factual identity of a business owner with the name of the business they own, so stakeholders are able to pursue legal action or obligation collection. File an assumed name certificate to secure your DBA in Texas.

6. Get an EIN

An employer identification number (EIN) is a federal levy number functioning similarly to your Social safety number (SSN), except it’s for your business. As a sole proprietor, you are not required to get an EIN from the Internal income Service (IRS). 

However, if you schedule on hiring employees, you can sign up for one using the free, online registration. You can also apply by fax, mail, or telephone. To register, have your SSN or person taxpayer identification number (ITIN) on hand.

7. Get a registered agent and register your business with the state

A registered agent is a person or organization you designate to receive court documents on your behalf if your business is subject to legal action, such as a lawsuit or obligation collection. In Texas, you cannot serve as your own registered agent. More information on registered agents can be found in the Texas Secretary of State Registered Agent FAQs.

Next, register your business by filing a Certificate of Formation. This document details the specifics of your corporation, such as entity name, registered agent contact information, mailing address, and other details. You can file your certificate of formation online via SOSDirect. Information is also available on how to file using alternate methods. Note: You must have your EIN before you can register with the state.

The filing fee for professional and for-boost corporations and LLCs is $300 and $25 for nonprofits. More information is available through the Texas Secretary of State website, and forms can be submitted via SOSDirect.

8. Pay state taxes

Texas is one of the few states that doesn’t collect corporate income taxes. Instead, LLCs and corporations in Texas are required to pay an annual franchise levy levied by the Texas Comptroller of community Accounts. 

Texas also imposes a flat-rate state sales and use levy on all retail sales transactions, while also allowing local jurisdictions to add on a divide tiny percentage (up to 2%) levy.

9. Obtain a business license and permits

No matter your business structure, type, and location, there is a excellent chance of needing to obtain a business license and permits. In Texas, a general business license is not required. However, licensing and permits may be required for sure industries and locations. For example, any business selling liquor needs to have a license from the Texas Alcoholic Beverage fee.

Information on which industries require licenses and permits is available in the Texas Business Licenses & Permits navigator. Licensing and permits are administered by the Texas Economic advancement & Tourism’s Business Permit Office. Additional application information is available through the Governor’s tiny Business Resource Portal.

10. Examine insurance options in Texas

Even with the protections offered by an LLC or corporation, it’s still a excellent concept to have insurance for your business. The Texas Department of Insurance provides a affluence of information on your insurance options, which include:

• General debt
• Professional debt
• Workers’ compensation

11. comprehend monetary considerations

As a business owner, it’s crucial you comprehend monetary considerations such as keeping divide personal and business accounts. You may desire to open a business lender account, apply for a business loan card, and consider getting a business accountant. Their expertise can assist you keep your monetary reporting books balanced and concentrated on monetary accountability.

You might also require additional pool as part of your recent business activities. A business loan from a lender is one alternative.

“The two most significant challenges for tiny businesses in Texas correct now are a tight labor trade and accessing pool,” says Lawrence.

Amid these pressures, Lawrence offers a couple finance best practices for business achievement:

Shape up your loan score

Reduce obligation, pay off loans, and make regular loan card payments. If you don’t have a loan card, get one and commence making regular payments to establish loan—even if it’s only $10 or $20 a month. A excellent loan score makes lender loans easier, lowers gain rates, and improves your chances of leasing space or renting equipment.

Establish a banking connection

Open a checking account and loan (such as loan card or lines of loan) at a lender, and get to recognize the banker, branch manager, or tiny business advisers at your local branch. A banking connection is significant for tiny businesses to access pool. “Just having a checking account is not a connection,” Lawrence stresses.

12. trade your business

A core part of marketing your business is your distinctive worth proposition. Lawrence advises that you research how to differentiate your product from the competition.

“You must have a better worth or better standard, your product or service has to be faster, bigger, or better than the others—it has to be differentiated in some way,” he says. 

At this stage, it’s key to figure out the best marketing strategies to showcase your recent operation and attract customers. You can accomplish this by taking the following steps:

Brand your business

Your brand image is often the first thing potential customers encounter, so it’s significant to construct a brand that is recognizable, attractive, and conveys the competitive difference of your products and services. Branding includes:

• Your corporation logo. A logo is a key part of your brand identity. Try a logo maker for straightforward logo creation.

• Official brand colors and imagery. Incorporate color hypothesis into your procedure.

• A catchy slogan or tagline. You can brainstorm your own slogan ideas or check out a slogan maker for encouragement.

• Cohesive fonts or typefaces. Consistent fonts and typefaces across your website and other business assets ensure a cohesive brand encounter. Apps such as Fontify can assist with this.

• Tone and voice. Having a distinctive brand voice and tone helps construct depend and connection with your customers.

construct a business website

Building a website is a critical element to starting your business. For many potential customers, it’s the first place they discover about your corporation. Even without any advancement encounter, you can launch your site. Consider using a platform like Shopify for a more streamlined procedure. To get started, gather the following:

• Digital logo files in different sizes to suit your front page, footer, and elsewhere you schedule to brand your recent website.

• Attractive, high-resolution product photos and imagery to engage users visually.

• Coordinated fonts to make a consistent look and feel across your promotional materials.

• A site chart outlining the page structure makes it easier for you to organize all information you desire to communicate to your customers.

• Your business contact information including phone number, email, and social media handles so customers can easily reach you or your customer service throng with product questions or other feedback.

Promote your business

make a marketing schedule to implement an effective schedule to promote your business and sell your products online. This document identifies your products and services, and the best sales channels and promotional activities for your target spectators. Marketing plans can also assist you remain on track and reach your business goals.

Marketing plans often include:

• An executive summary summarizing your overall schedule

• A mission statement outlining your overarching goals and business philosophy

• Objectives detailing the specifics of what you desire to achieve

• A SWOT analysis to assist you identify what you’re doing correct and what needs to be refined

• trade research assessing your industry, potential customers, and competitors

• A marketing schedule detailing your schedule of attack

• A apportionment for education and training to assist you manage and develop your business, and keep your finances under control

For more insight and encouragement, check out these marketing schedule examples.

Tips for starting a business in Texas

Texas is a distinctive place to commence a business, with an economy experts declare is driven by a triad of cities: Dallas, Houston, and Austin. With their diverse industries—including finance, transportation, utilities, technology, manufacturing, logistics, health worry, and education—and top-ranked universities (from the University of Texas at Austin to Texas A&M University to Rice University), there are ample resources and opportunities to commence and develop your business.

Here are a few tips Lawrence offers to get you on the correct path for your recent business:

• Research, research, research. recognize the competition, the product, and its pricing, geography (such as business location), and trade trends. SBDC clients have free access to resources to assist throughout this procedure.

• make a backup schedule. For example, draw up an alternative way to develop, deliver, and/or back your product or service in case of setback from a devastating business occurrence.

• Have a settlement of brains and heart. tiny businesses require thrill and heart; settlement your emotional attachment to your business with a thorough knowledge of your trade to achieve.

*This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, levy, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, levy, and business advisers, as needed. Businesses outside of Texas will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies.