How to start a business in Texas

With no corporate or personal income taxes, Texas is one of the most corporate-friendly states in the country.¹ It also has a huge population, home to nearly 30 million potential customers for any given niche.²

If you’ve always dreamed of opening a new business in Texas, use the checklist below to help you get started.

Steps to starting a business in Texas

Although the exact requirements vary from industry to industry, below are some of the most common steps entrepreneurs need to follow when starting a business in Texas.

1. Decide on a business structure

For tax purposes, every business must form some type of legal entity. Below are some of the more common corporate structures, with the according pros and cons of each type:

• A sole proprietorship can be the simplest of all the corporate structures to set up because it requires the least amount of paperwork. However, this structure carries the highest legal exposure since your personal assets are not separated from your business.

• A general partnership is similar to a sole proprietorship – except that there are two or more parties involved. In addition, certain types of limited partnerships exist and may help shield the owners’ personal assets from those of the business.

• A limited liability company (LLC) represents a middle ground. It is relatively easy to establish, and it offers business owners nearly as much protection as a traditional C-corporation.

• A corporation offers limited liability; however, it is seen as a less flexible entity than an LLC.

2. Create your brand

The next steps are often the most fun for entrepreneurs since they involve more creative aspects, such as:

• Choosing a business name. Most states grant a lot of leeway in this area, with the only real restriction being that you can’t pick a name that’s already being used by a competitor within the same niche.

• Choosing a business identity. The exact steps vary, but this is where you lock down values, mission statements, color pallets, logos, fonts, slogans, and trademarks.

Note that some branding aspects – such as trademarks and business names – require filling out applications with the Texas Secretary of State. You might also want to submit paperwork to the U.S. Patent and Trademark Office.

3. Get a federal tax ID number

Once you have an official business name, you’re ready to apply for an employer identification number (EIN), which is a unique ID assigned to your company for tax purposes. Think of it as a Social Security number for your small business.

In addition to being a legal requirement for starting a business in Texas, you’ll need this EIN for everything from opening a business bank account to signing equipment leases to applying for small business grants in Texas. Even if you plan on starting a sole proprietorship, applying for this federal tax ID isn’t a step you should skip.

4. Apply for relevant licenses and permits

Every business is different and carries unique regulatory requirements. For example, you need a liquor license to open a bar. Massage therapists are required to obtain certification before they can legally charge clients.

Because so many professions need some type of permit or accreditation, you should visit the Texas Department of Licensing and Regulation (TDLR) to verify what rules might apply to your small business. The last thing you want is for a surprise food safety inspection or missing permit application to sideline your startup.

In addition to industry-specific regulations, you may be subject to additional requirements according to the size of your workforce – such as providing health benefits if you have more than a certain number of employees. The Texas Workforce Commission is a great resource for finding which rules apply to your situation. However, it’s always a good idea to consult with an attorney and tax advisor to verify that your paperwork is in order.

5. Set up payment acceptance

You can’t officially make that first sale until you have a secure way to accept payments. This is true whether you’re selling in-person, over the phone, or online.

At Clover, our PCI-compliant payment and POS solutions allow you to securely process transactions no matter where or how your customers wish to pay. In addition to standard credit cards, we support debit cards, gift cards, chip cards, contactless payments, and checks – all backed by industry-leading data security and fraud protection. With a Clover Account, you can also expand your payment environment with any number of third-party plug-ins from the Clover App Market.

To learn how our suite of POS and payment solutions can help as you’re opening a business in Texas, schedule a free consultation with our merchant services team today.

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

1 “Why Texas?” Texas Economic Development

2 “Texas,” United States Census Bureau

Editorial Team

By state, Guides, SMB, Start a small business

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