All your accounting needs

8 Steps to Start a Business in Texas

Table of Contents

Texas is noted for having lower taxes and fewer business regulations than many other states. Having said that, even the most daring entrepreneur must follow the rules.

Here are the nine steps you must take if you want to start a business in Texas.

1. develop a business plan

A business plan serves as a framework for how your firm will operate. Creating a business plan helps you get organized for the launch of your company, and you may use it afterward to ask for a loan or attract investors. 

Once your company is established, you’ll use your plan to stay on track with your professional goals and make future plans.

Creating a business plan entails a number of phases, including competitive research. Also, don’t forget to include an attention-grabbing cover page.

read more on: achieving financial success in 2024 the most effective accounting solutions for your business

2. select your entity type

The IRS recognizes the following Texas business entity types:

  • Sole proprietorship 
  • Limited liability company 
  • Partnership 
  • Corporation

In Texas, you can also choose another entity type: A limited liability partnership (LLP). In general, this structure is intended only for lawyers, accountants, and other professionals. It provides liability protection for your partnership in the state of Texas.

In addition, LLPs,  LLCs, and corporations insulate you from liabilities. While sole proprietorships do not provide liability protection, they are the easiest to establish. You are not required to file any paperwork with the state.

Countick’s professional team guides you through company entity types so you can discover more about the advantages and disadvantages of each business form.

3. give your company a name

The type of business structure you select influences whether or not you must register a name for it.

sole proprietorships and general partnerships that operate under the names of their owners

In Texas, if you form a sole proprietorship or a general partnership and do business under your own name or the surnames of partners, you do not need to register your business name with the Secretary of State (SOS).

sole proprietorships and partnerships that operate under names other than that of their owners

If your sole proprietorship or partnership operates under a name other than the owners’, you must register it with the county clerk’s office in the county where your business is located. 

For example, if your business is located in Austin, you will register it with the Travis County Clerk’s office. Forms and procedures for this differ by jurisdiction.

corporations, LLCs, and LLPs

You must register an assumed business name with the SOS if you are forming an LLC, LLP, or corporation. However, you must first submit a Reservation or Renewal of Reservation of an Entity Name form.

In Texas, how do you file a name reservation request?

In Texas, filing a Reservation or Renewal of a Reservation of an Entity Name reserves your name for 120 days. If you haven’t registered your business by then, you can do so by submitting the same form for another 120 days. A name reservation application costs $40.

in Texas, how do you register an assumed business name?

In Texas, an assumed name is the same as a Doing Business As (DBA) name. This is accomplished by submitting an Assumed Name Certificate to the SOS. Your assumed name is valid for ten years, and registering it costs $25.

look for business names in texas

You must come up with a unique name for your company. On the SOSDirect website, you may search for currently registered business names. Each search costs one dollar.

Your goal should be to provide no results, indicating that no one else has chosen your name.

in Texas, you can trademark your company name

In Texas, registering an assumed name and a Reservation or Renewal of Reservation of an Entity Name does not provide legal protection for your name or logo. There’s still a chance that someone else will copy it or closely imitate it. 

You must submit a Trade or Service Mark Application to the SOS to trademark your company name.

4. establish your company in Texas

Here’s an overview of officially registering your business in Texas per entity type. You will always be providing formal paperwork to the SOS.

The Type Of Entity  How to Form Legally Additional Documentation Forms
Sole proprietorship Registering your sole proprietorship with the state is unnecessary. n/a  n/a 
LLC Form a Limited Liability Company and file a Certificate of Formation.

When you file your Certificate of Formation, you must register an individual or corporate agent.

Operating Agreement (no need to file with the state) Forms 205 (Limited Liability Company Formation Certificate)
Partnership A general partnership does not need to be registered under the state partnership agreement. Although you are not required to submit a copy to the state, you should have one prepared before forming your partnership n/a
LLP File a Registration of Limited Liability Partnership (LLP) agreement with the SOS  partnership agreement (the state does not require this)  Forms 701(Limited Liability Partnership Registration)
Corporation  Fill out the Certificate of Formation-For-Profit Corporation form.

When you file your Certificate of Formation, you must register an individual or corporate agent.

Corporate bylaws (which are not required to be filed with the state) Form 201 (Formation Certificate-For-

Profit Corporation)

5. establish a business bank account

Opening a business bank account is essential to establishing your company’s finances. It separates your business and personal banking transactions, making it easier to manage your bookkeeping and stay on top of deductible spending.

6. determine your location

Local zoning rules will determine the location of your business. Check out the Municode Library for Texas to search for zoning and ordinance information by location.

7. purchase business insurance

The state of Texas does not mandate company insurance. However, we strongly advise you to insure portions of your business anyway—it may help you avoid disaster in the future.

8. research the Texas franchise tax

Except for sole proprietorships, all business entities are subject to the Texas franchise tax. There are several methods for calculating this tax; depending on your revenue, one method may save your company more money than another. The Comptroller’s website has information on how the tax is computed, as well as payment deadlines.

helpful resource: business entities understanding tax implications

Are you ready to start your own business? Setting up bookkeeping

is one of the most critical initial investments you can make. With complete financial transparency, you’ll have all the information you need to make critical early business decisions. The countick

is offering one month of free bookkeeping.

further read: the importance of accurate bookkeeping for tax filing

More To Explore