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

Some types of corporations must file with the State of Texas to become a legal entity. Once you know which business entity you want to use, filing incorporation papers is a simple process. You can submit the incorporation papers through the Texas Secretary of State’s portal and receive instant acknowledgment when the paperwork arrives in the mail shortly thereafter.

Choose the right business entity

There are several types of entities to choose from for your business. Each business type has its own unique rules and potential tax or operational benefits. Choose:

• Limited Liability Company (LLC): Registering as an LLC is common for small businesses in Texas. This body provides you with liability protection while giving you a great deal of flexibility in managing your corporate taxes. Learn more about forming an LLC in Texas. It is formed by filing a certificate of incorporation with the state.
• C Corporation: A C-Corporation is the preferred business entity for public companies because it can split the company’s stock into multiple stock types. It is not typically chosen by smaller companies looking to get started unless the owners raise a significant amount of capital. It is formed by filing a certificate of incorporation.
• S Corporation: When most people talk about a company, they’re probably referring to the aforementioned C-Corp. However, there is another type of corporation that offers tax benefits to 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 with the state like a C-Corp.
• One-man business: A sole proprietorship is a company owned by one person. All liability and finances rest with the individual. There are no incorporation papers to be filed with the state to incorporate this company.
• General partnership: If you decide to do business with at least one other person, you can form a general partnership. It is not necessary to file anything with the state to form the entity. They are both liable for the debts of the partnership.
• Limited partnership: If you and one or more other persons form a company together, you can form a limited partnership after filing a certificate of incorporation with the state if you have at least one general partner and one limited partner. The limited partners are only liable for their share of the company’s assets, while the general partners are personally liable for the company’s liabilities.

You may also be required to file a Doing Business As (DBA) with the state of Texas if you conduct business in a name other than your own name or the name of the company you formed by filing incorporation papers with the state. This tells the state who runs the business and who is responsible for it.

Find the right company name

Before registering your business with the state, you must ensure that the name is not being used by another business. You can search online to see if your name is available at a cost of up to $1 per search. This is something you want to pay for so you don’t slow down your application process and have peace of mind 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’ tax identification number, which the federal government uses to identify your business. You can apply for an EIN online through IRS.gov. The process is easy, free and only takes a few minutes. This is required for tax reasons for certain companies and to be able to hire employees.

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

Choose a registered agent

A registered agent is an individual or entity who accepts responsibility for obtaining important legal documents on behalf of your company. Any company filing incorporation papers with the state must have a registered agent.

If someone files a lawsuit against your company, the registered agent can get this document. You want your registered agent to be someone who is reliable and will check the mail. You may act as a registered agent or engage a registered agent service to assume this responsibility on your behalf.

Apply for business licenses

Once you have officially incorporated your business entity in the state of Texas, you should verify what state, state, and local business licenses you need before you can operate. There are a variety of licenses required for different industries and professions. You should apply for these as soon as you have a registered name as it may take some time to receive them. Learn more about business licenses in Texas.

If your business sells taxable products or services, you must apply for a sales tax permit in order to collect Texas sales tax.