How To Start A Business In Texas (2022 Guide) – Forbes Advisor


Some types of business entities must file paperwork with the state of Texas to become legal entities. Once you know which business entity you want to use, filing formation papers is a simple process. You can file the formation papers via the Texas Secretary of State’s portal and get a confirmation immediately with the paperwork arriving in the mail shortly after.

Choose the Right Business Entity

There are multiple types of entities that you can choose from for your business. Each entity type comes with its own unique rules and potential tax or operational benefits. Choose from:

  • Limited Liability Company (LLC): Registering as an LLC is common for small businesses in Texas. This entity grants you liability protection while also giving you a lot of flexibility in how you handle your business taxes. Learn more about how to set up an LLC in Texas. It is formed by filing a certificate of formation with the state.
  • C-Corporation: A C-corporation is the business entity of choice for public companies because of its ability to divide up the stock of the business into multiple share types. It is not typically chosen by smaller businesses looking to get started unless the owners are raising a significant amount of capital. It is formed by filing a certificate of formation.
  • S-Corporation: When most people talk about a corporation, they are likely referring to the C-corp discussed above. There is another type of corporation, though, that provides tax benefits to the owners. This comes from subchapter “S” of the tax code and is a tax classification that avoids double taxation. Learn more about S-corporations. An S-corp is simply a tax designation and is registered in the same way as a C-corp with the state.
  • Sole Proprietorship: A sole proprietorship is a business owned by one person. All of the liability and finances fall to the individual. There are no formation papers to file with the state to form this business.
  • General Partnership: If you choose to go into business with at least one other person, you can form a general partnership. There is no requirement to file anything with the state to form the entity. You are both liable for the debts of the partnership.
  • Limited Partnership: If you and one or more other people form a business together, you can form a limited partnership after filing a certificate of formation with the state if you have at least one general partner and one limited partner. The limited partners are liable only up to their financial interest in the company while the general partners are personally liable for the company’s debts.

You may also need to file a Doing Business As, or DBA, with the state of Texas if you will be doing business under a name other than your own name or the name of the company you formed by filing formation papers with the state. This notifies the state as to who is operating the business and who is responsible for it.

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Find the Right Business Name

Before you register your business with the state, you’ll need to be sure the name is not being used by another business. You can conduct an online search to find out if your name is available at a cost of up to $1 per search. This is something you’ll want to pay for so that you can avoid slowing down your application process and have the confidence that you can legally buy your domain name or create marketing materials with your chosen name.

Apply for a Business EIN

An employer identification number (EIN) is your business’s tax identification number that the federal government will use to identify your business. You can apply for an EIN online through IRS.gov. The process is simple, free and only takes a few minutes. This is required for tax purposes for certain business entities and to be able to hire employees.

Get the step-by-step instructions on how to get an EIN.

Choose a Registered Agent

A registered agent is a person or entity that takes the responsibility of receiving important legal documents on behalf of your business. Any business that files formation papers with the state is required to have a registered agent.

If someone files a lawsuit against your business, the registered agent can receive that document. You want your registered agent to be someone who is reliable and who checks the mail. You can serve as the registered agent or you can hire a registered agent service to handle this responsibility on your behalf.

Apply for Business Licenses

Once you’ve officially formed your business entity in the state of Texas, you should check on what federal, state and local business licenses you need before you can operate. There are a wide variety of licenses required for different industries and professions. You should apply for these as soon as you have a registered name because these can take time to get. Learn more about business licenses in Texas.

If your business will sell taxable products or services, you will need to apply for a sales tax permit so that you can collect Texas sales tax.



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