Our Guide to Starting a Business in Texas
How to Start a Business in Texas
Starting a business in Texas requires completing a Certificate of Formation for your company and submitting it to the Secretary of State. The state filing fee is $300 for both LLCs and corporations, and most online filings are processed by the state in 2 working days.
Before you begin to fill out this form, you’ll need to make some big decisions. You should know which type of entity you want to form, who will serve as your registered agent, what your business name will be and how your company will be managed.
Guide to Starting a Business in Texas
So many decisions! And we’re here to help. In this guide we’ll go over the big picture planning that goes into forming a Texas entity, as well as the smaller bureaucratic tasks you’ll need to complete once your business is approved.
We’ll also be your Texas registered agent if you so choose. Our local ($35!) service includes same-day scans of your legal mail, a Texas business address you can use to protect your privacy, and ongoing support from a team that actually knows Texas business.
If you get to the end of this guide and still have questions about forming a Texas entity—or if you simply want to learn more about our services—shoot us an email or call. Providing Texas business solutions is all we do, and we’ve always got time for our clients.
Steps to Starting a Business in Texas
There are a number of boxes you’ll need to check as you register your Texas business and get it ready to enter the marketplace. We’ve broken it down into the following 10 steps.
The decisions you make now will have a major impact on the future of your company. This guide provides a jumping off point, but we recommend that you continue to do research and carefully consider questions like which entity type will work best for you.
Step #1: Choose a Texas Entity
Registering your company as a Texas LLC or corporation will add legitimacy and help protect your personal assets in the event of a lawsuit against your business. These legal structures are similar in some ways: both provide liability protection and the ability to raise capital, and both can exist indefinitely. To choose the right entity type you’ll need to think about your long-term business goals, how you want to be taxed, and the level of formality with which you want to run your company.
If you’re starting a small company and you want an informal, adaptable business structure that will still provide liability protection, forming a Texas LLC is a simple solution. If you have plans to greatly expand your business, bring in a large number of investors, or eventually make a public offering, a corporation may be a better choice.
Overview of LLC Benefits
- LLCs are simpler to run than corporations.
They enjoy fewer operating regulations and record-keeping requirements than their corporate counterparts. For example, Texas statutes § 21.351- 21.372 detail the many corporate shareholder meeting requirements and voting procedures. Texas LLCs, however, aren’t required to have regular meetings at all.
- LLCs offer streamlined taxation.
At the federal level, all business profits “pass through” to members’ individual income tax returns. Unlike a corporation, the company itself is not subject to corporate income tax—unless it elects C-Corp status. On the state level, however, Texas taxes even the playing field for LLCs and corporations. The state has no personal or corporate income tax. Instead, both LLCs and corporations are subject to the State Franchise Tax.
- LLCs are adaptable.
They can be organized in a variety of ways to suit your needs. The management structure laid out in the operating agreement largely governs how the company will be run. Members can run the business directly or appoint managers to operate more like a corporation.
Overview of Corporation Benefits
- Corporations were built for raising capital.
If you plan to grow your company by seeking external funding and distributing ownership, corporations make it easy to do so. You can issue different types of stock based on profit distribution, voting rights or a combination of the two.
- Corporations have greater prestige.
As corporations are the longest standing entity type, adding “Inc.” to your company name could help establish your company as viable in the eyes of your clients, vendors and investors.
- Corporations offer certain tax advantages.
As profits increase, a corporate structure could increase your tax savings. Rather than having your dividends pass through to individual tax returns (as they would in a typical LLC), you can choose to leave them in the company, reducing shareholders’ personal income tax burden. Furthermore, salaries can be deducted from the company’s taxable income, lowering your company’s overall tax obligation.
Step #2: Finalize Your Business Name
Naming your Texas business is a fairly simple step, but there are two requirements you should be aware of.
- Your business name must include the appropriate corporate tag.
If you’re forming an LLC, you should include the words limited liability company, limited company, or an abbreviation such as LLC. Names of corporations must include company, incorporated, limited, Co., Corp., Inc., or Ltd.
- Your business name must be distinguishable from other registered Texas entities.
Your name cannot be too similar to the name of an existing Texas business. You can do a Texas entity name search online, email [email protected], or call (512) 463-5555 to find out if your name is still available.
Step #3: Designate a Texas Registered Agent
Whether you’re forming a Texas LLC or a Texas corporation, you’re required to appoint a Texas registered agent on your Certificate of Formation.
Your Texas registered agent is responsible for receiving service of process and other legal documents on behalf of your business. They must maintain regular business hours at a designated street address in Texas. You can serve as your own Texas registered agent, ask a friend or family member to fulfill this role, or hire a company that provides professional registered agent service.
One of the benefits of enlisting a professional registered agent is that you won’t have to include your residential address anywhere on the public record—and risk opening yourself up to years of junk mail.
We provide Texas registered agent service independently or as part of our comprehensive Texas business formation packages. As your local registered agent we instantly scan and upload any legal mail we receive for your business to your secure account.
We also list our Texas business address for every member/director/officer of your company, keeping everyone’s private information out of the public record.
Step #4: Create Your Operating Agreement/Corporate Bylaws
Creating a governing document for your business is an essential step. This internal document serves as an operating manual for how your company will be managed, how profits will be distributed, and how owners/members can join or leave the company.
The governing document of a Texas LLC is called an operating agreement (also referred to as a “company agreement”). Texas corporations are governed by their corporate bylaws.
Your governing document should address the following questions, among others:
LLC Operating Agreement
- What is the ownership percentage of each member?
- Will the LLC be member-managed (with members equally taking part in running the company) or manager-managed (with an appointed manager or managers overseeing operations)?
- What was each member’s initial contribution to the company?
- What rights and obligations do members have?
- How will profits and losses be distributed?
- How can membership interest be transferred?
- Who are the directors/officers of your company?
- What are the powers/duties of directors/officers?
- How much stock will each shareholder receive?
- What was each owner’s initial contribution?
- How can the bylaws be amended?
- Who has a voting stake in the company?
If you’re not sure how to create your governing document, we can help. Our business formation packages include free, customizable LLC operating agreements and corporate bylaws.
Step #5: File Your Certificate of Formation
It’s time to make your Texas business official! Filing your Certificate of Formation with the Secretary of State is a step you’ll want to complete with the utmost care to make sure that your filing is accepted.
Submitting this document online through the Texas SOS Direct website is the easiest and fastest method. (Note: there is a small service fee when you file online, so your total will be $308.10). Online filings are generally processed by the state in 2 business days.
Or, you can download the form you need from the Business and Nonprofit Forms page of the Texas SOS website, fill it out and send it to:
Secretary of State
P.O. Box 13697
Austin, TX 78711
An even easier option is to hire us to register your business with the State of Texas. We form LLCs and corporations faster and at a lower cost than anyone else out there, and provide a Texas address to protect your privacy.
All of our business formation packages include a year of local registered agent service with same-day scanning of any legal documents we receive for your company. After the first year, you can renew our service, or easily cancel with no fees.
Step #6: Apply For a Tax ID Number (EIN)
After you register your business, we recommend applying for a Federal Tax ID from the IRS (also known as an employer identification number or EIN). The IRS uses this unique number to identify your business for tax purposes, and a majority of banks will want to see your EIN before you open a business bank account. You can apply for an EIN on the IRS website, or add EIN service when you hire us to form your Texas company.
Step #7: File Your BOI Report
The vast majority of LLCs and corporations in the US are required to file a Beneficial Ownership Information Report (BOI), as of January 1, 2024. This report is free and must be filed with the Financial Crimes Enforcement Network (FinCEN). The report should include information about your company, as well as for someone with a significant ownership stake in your business:
- Business name (including DBAs)
- Business address and jurisdiction of formation
- Beneficial owner’s full legal name and date of birth
- Beneficial owner’s residential address
- Copy of beneficial owner’s ID with unique identifying number
Companies have 30 days to file. However, if your company is formed during the 2024 calendar year, you have 90 days. And if your company was formed before 2024, you have until January 1, 2025 to submit your BOI report.
Too much to keep track of? For just $9, we can file your BOI report for you!
Step #8: Obtain Texas Business Licenses
While Texas businesses do not require a general business license to operate in Texas, you may need to obtain a specific license for your profession or industry.
The official Texas State website is a good resource for specific information regarding permit, license and registration requirements.
If you need to obtain or renew an occupational license, visit the Texas Department of Licensing and Regulation website. They provide dozens of links to Texas licensing programs, as well as downloadable applications and educational resources.
Your business may also need one or more permits to comply with city/county laws. The 2022 Texas Business Licenses & Permits Guide, published by Texas Governor’s office, contains a comprehensive list of all permits you may need to operate your business in the Lone Star State.
Step #9: Hold Your First Company Meeting
Holding an initial meeting with all members/owners of your company will give you a chance to finalize your business affairs and make sure you’re ready to open your doors. During this meeting you should:
- ratify key documents, such as your operating agreement/corporate bylaws
- confirm officers/members/directors (and agree on everyone’s salaries)
- designate the bank branch where you will open your business account
- give members/officers authorization to open this bank account
- approve other relevant resolutions
Make sure to designate someone to take written minutes at this meeting, and keep the minutes in your company records.
Step #10: Open a Business Bank Account
The next step in setting up your Texas company is opening a business bank account. This account will allow you to keep your business transactions completely separate from your personal finances (and the accounts of other owners/members). With this account, you’ll be able to pay your employees, take in revenue and make purchases for the company.
In order to open an account for your business, banks typically need to see the following documents:
- Certificate of Formation
- Business License (if your business requires one)
- Federal Tax ID for your business (EIN)
- Operating agreement or corporate bylaws
- Initial Resolution Authorizing Opening of Accounts
Your business account must be opened in person by an authorized member/owner of your company. As requirements can vary from bank to bank, you’ll want to call ahead and make a list of what is required to open this account.
Step #11: Prepare to Pay Texas Business Taxes
Texas Franchise Tax
Every Texas business entity must submit a Texas Franchise Tax report annually. This report is due on May 15 every year. If your revenues are below the threshold ($1,230,000), you won’t owe any tax, but you still need to submit the report to remain in good standing with the State of Texas. When you sign up for our incorporation or registered agent service, we’ll send you helpful reminders as the due date approaches.
Sales and Use Tax
Most businesses will also need to register for the Texas Sales and Use Tax. You can learn more about this tax and register online, through the Sales and Use Tax page of the Texas comptroller’s website.
If you’re ready to start your Texas business, why wait? Sign up with us today and we’ll process your order quickly, form your company with the Secretary of State and be there for ongoing support whenever you need it.