Starting a Business in Texas
Texas offers one of the best business ecosystems in the nation. Businesses thrive here because of our excellent geographic location, highly skilled workforce, low tax burden, reasonable cost of living, predictable regulatory environment and our reputation for having a truly business friendly climate.
A business plan is a dynamic road map for your business. It should outline the main purpose and value proposition of your business, its structure, financing and competitive advantages. The SBA has some great templates
What is an LLC?
A limited liability company, or LLC, is a business entity created under state law that combines characteristics of both a corporation and a partnership. Like a corporation, the owners of an LLC are generally not personally liable for company debts.
Like a sole proprietorship or a partnership, an LLC has operating flexibility and is, by default, a “pass through” entity for tax purposes. This means that the LLC does not pay taxes on its profits, but instead, profits and losses are “passed through” to the owners, who must then pay tax on their share of LLC income.
1. Choosing a Unique Business Name for Your Texas Corporation
Every TX business needs a unique name, including your corporation. You can carry out a Texas business entity name search on the Texas Comptroller of Public Accounts website or by using Texas SOSDirect. The name of your Texas S Corporation or C Corporation cannot be confusable with another business that’s been formed in Texas. If you’re not forming your TX corporation right away, you can reserve the name with the secretary of state.
2. Establishing an Address for Your Texas Corporation
A Texas corporation must have a designated address. That could be your home address (if you’re running the company from your residence), where your office is located or any physical address of your preference. The address can be outside the state of Texas and can be a P.O. Box.
3. Assigning a Registered Agent – Texas Corporation
When your TX corporation is formed, it must have a “Registered Agent.” This is an official position; the Registered Agent is someone who receives official legal and tax correspondence and has responsibility for filing reports with the Texas Secretary of State.
A Registered Agent position for a Texas S Corporation or C Corporation can be filled in several ways.
This position can be carried out by you, another accountable person in the business or a dedicated Registered Agent service. Your TX Registered Agent must have a physical street address in Texas and must be present to receive important documents for your company during business hours.
We always recommend using a proper Texas Registered Agent service since they provide several benefits:
- Some people establish companies outside of the state they live in and will use a Registered Agent service to provide an address for receiving legal documentation in the state.
- The Registered Agent address is listed in public records on the secretary of state website. If you do not want your own name and Texas address to be registered, you should use a Registered Agent service.
- The Registered Agent must be present or available during normal business hours (9 a.m. to 5 p.m. Monday to Friday) to receive any legal correspondence, since the type of documents delivered to the Registered Agent require a signature on delivery.
4. Creating Your Texas Certificate of Formation
Once you’ve gathered all the information for your Texas corporation, you’ll need to file a formal document with the TX Secretary of State. This document is known as your “Certificate of Formation,” and filing the document creates your TX corporation. Here’s what the Certificate of Formation normally includes:
- The corporation’s name
- The corporation’s Registered Agent and their address
- The names and addresses of directors
- The corporation’s purpose
- The corporation’s capital structure (number of shares to be issued, who owns them, pricing, etc.)
- The name and address of the organizer
5. Filing Your Certificate of Formation With the Texas Secretary of State
You can file your Texas corporation Certificate of Formation online, mail in a form or have an agent do it on your behalf. There is a fee to file and start a corporation in Texas. You only need to file your Certificate of Formation once.
6. Legal and Compliance Requirements for Your Texas Corporation
Once your Texas corporation has been created, you will need to get certain legal requirements in place. These include:
- File IRS Small Business Tax Election form 2553 if you want your TX business to be treated as an S Corporation.
- Create and issue stock certificates to your shareholders.
- Apply for business licenses and permits. You may require licenses from the state of Texas, your county, township and various industry or federal bodies.
- Get an Employer Identification Number (EIN).
- File for taxes with the Texas Comptroller of Taxes
- Get all formalities in place for employees, including unemployment, disability, payroll, insurance and taxes.
- Appoint a Board of Directors for the corporation.
- Appoint officers to the corporation.
- Get a corporate records book to capture all your important corporate information.
There’s no denying that Texas is a great state for starting a new business. Here are just a handful of reasons why:
- There are no corporate or personal income taxes.
- Texas regularly leads the nation in exports.
- Texas boasts an impressive diversity of industry.
- Texas is the second-most populous state in the U.S., with a population of approximately 30 million people.
- Houston is the fourth-largest city in the United States.
- Austin is one of the top startup cities for entrepreneurs in the U.S.
- Texas is home to over a dozen companies on the Fortune 100 list.
- 2.7 million small businesses, employing 4.7 million people, call Texas home. This includes 1.1 million minority-owned business employees.
Clearly, Texas is a great place to be – and not just for the coffee and brunches and cowboys.
Texas Start-Up Guides and Resources
- Texas.gov: The award-winning official eGovernment website for the State of Texas, providing citizens, local government, and state agencies with a single, secure structure to conduct business online.
- Texas Hospitality for Small Business Owners: Information provided by the Texas Economic Development Division within the Governor’s Office, includes information on business structure, EINs, business taxes, and employer requirements.
- The Governor’s Office Small Business Handbook (PDF): A start-up guide for small businesses provided by the Texas Economic Development Division within the Governor’s Office.
- Small Business | USA.gov: An official site of the U.S. Government that provides access to federal, state, and local information for small business owners.
- Starting & Managing Your Business: Guides provided by the U.S. Small Business Administration for every stage of business.