As the second biggest state in the United States of America and the top ranking for economic development, State of Texas is an ideal place for entrepreneurs to start their businesses. Starting a Texas business can be an extraordinary way to be your own boss and take on exciting challenges in the world of business.
Also, Texas’ support for small businesses is apparent in its low business licensing fees, its absence of red tape, and a quantity of reasonably cheap real estate.
How to start a business in Texas: The Main steps
Choose a business idea
Whether your business idea is completely formed or is still in development, this is the first step in starting your business in Texas. Look for an idea that fit your interests, your goals, and your abilities. This will help you stay inspired and will largely increase your chance of success.
Determine your business structure
Next is choosing the type of legal entity you want your business to be. Some business structures are free to register, some have a low fee and some are subjected to the state franchise tax.
Some of the most common business structures to choose from in Texas are the following:
- Sole proprietorship: a sole proprietorship is a simple business structure that isn’t separated from its owner. This means that 100% of the business’s profits go to the owner, also 100% of the financial liability falls on the owner as well. The sole proprietorship usually assumes the owner’s name, and isn’t subject to the state franchise tax.
- General partnership: a general partnership is a simple unincorporated business structure but it’s for two or more people. It’s a separate business entity from the owners, but the liabilities still hit up the partners’ personal assets. General partnerships aren’t subject to the state franchise tax.
- Corporation: Corporations have more legal regulations than LLCs and tend to be more desirable to investors. Corporations are individuals with limited liability, centralized management, and ease of ownership transferability. The owners of corporations are called shareholders, and the managers of the business are called directors.
- Limited liability company: an LLC combines the personal asset security of a corporation with the flexibility of a sole proprietorship. The majority of small businesses prefer the LLC structure due to its simple maintenance and satisfactory tax treatment. An LLC is established by filing a certificate of formation with the Texas secretary of state. An LLC is subject to the state franchise tax.
Legal business entities such as an LLC, or corporation, have increased credibility and protection from personal liability in the case the business is sued.
Pick a business name
Before you can start a business in Texas, you need a name for the business. When choosing a name for your business in Texas, you have to choose an available name that obeys Texas’ naming rules and resonates with your clients.
It’s recommended you make a shortlist of possible business names and once you have the list, do a quick search online to see if any businesses haven’t already adopted them, then search the United States Patent and Trademark Office to make certain no one has already trademarked your chosen business name.
Once you’ve selected a name and found out it’s not trademarked, check the Texas Department of State: Division of Corporation’s database. This will guarantee your business name is not the same or similar to another company registered in Texas.
Get an Employer Identification Number (EIN)
An EIN or business tax identification number is a federal tax number that functions like a Social Security Number, but it’s for a business. As a sole proprietor, you are not compelled to get an EIN from the Internal Revenue Service. However, if you want to hire employees, you can sign up for one online via an easy, interview-style application. You can also register by telephone or mail.
While sole proprietors are not compelled to file for an Employer Identification Number, owners of LLCs and corporations most certainly are. This number is significant in the setup process as it functions similarly to your personal SSN.
Acquire business licenses and permits
To operate your new business legally in Texas, you have to acknowledge federal, state, and local government regulations. In most cases, this involves acquiring one or more business licenses and permits.
In Texas, a general business license is not required, however, licensing and permits may be needed for specific industries and locations. For instance, a restaurant will probably need health permits, signage permits, etc.
Licensing and permits are allocated by the Texas Economic Development Business Permit Office and applications can be formulated via the Governor’s Small Business Resource Portal.
Check on your business employer requirements
For virtually all businesses, building a strong team is a significant step toward being profitable. But this isn’t only about employing the right individuals, you also need to make sure you stay compliant with the requirements for hiring employees lawfully. This includes confirming that you are registered with the IRS for employee taxes and reporting new employment to the State of Texas.
Not fulfilling these obligations could result in the loss of the Company’s charter and large fines. So it’s recommended to hire a tax or business attorney to make sure you’re obeying the law.
Sign up for business banking
If you’re a new business owner, it’s a very good suggestion to separate your personal and business banking accounts, as using dedicated business banking is important for personal asset protection.
Using a business bank account also makes accounting and tax filing easier.
Additionally, getting a business credit card helps distinguish personal and business expenses which builds your company’s credit history, and can be beneficial in raising capital.
Texas is the dominating job creator in the US and has the second biggest state economy. It attracts entrepreneurs because of its business-friendly environment, reasonable cost of living, and other characteristics.
If you want to start your business in Texas, please contact your Damalion expert now.
