Start a Business

Executive Cutting Red Ribbon
  • Start a Business

    In business, there are no guarantees. There is simply no way to eliminate all the risks associated with starting a small business – but you can improve your chances of success with good planning, preparation, and insight. In Texas, small businesses continue to thrive due to a variety of factors including our excellent geographic location, our highly-skilled workforce, our low tax burden, our reasonable cost of living, our predictable regulatory environment, and our legacy of being Wide Open for Business. For the most recent statistics on the Texas small business climate please download the SBA State Profile: Texas.

    Starting a business in Texas requires you to complete a number of basic steps and make some key decisions. As part of your overall plan, you'll need to select a location, decide on a business structure, and obtain the necessary licenses and permits. Additionally, determining which financing options will meet your short-term needs and long-term goals is crucial. Within this section, you will find information on some quick steps on how to get started. For a more comprehensive guide and resource, please download the Governor's Small Business Handbook.

    We’ve broken the process of starting a business down into four basic steps, which are discussed in greater detail via the following links. Please note that new business owners should not hesitate to seek the guidance of a professional tax consultant, accountant, and/or attorney to help verify that all legal requirements are met before operating a business.

    • Step 1: Business Structure and Name
      Determine the legal structure of the business and properly file the business name with the state and/or county.
    • Step 2: Business Tax Responsibilities
      Determine the potential tax responsibilities of the new business on the federal, state, and local level.
    • Step 3: Business Licenses and Permits by Business Type
      Determine necessary licenses, permits, certifications, registrations, and/or authorizations for a specific business on the federal, state, and local level.
    • Step 4: Business Employer Requirements
      Determine federal and state employer requirements. There are various laws relating to employment of personnel.

     

  • Step 1: Business Structure and Name

    The first step in starting a business is to determine the basic legal structure of the business, and to properly record the business name. This step is important when starting a business, since financial implications vary depending on which legal structure is selected. These range from corporation responsibilities for annual franchise tax fees to personal liability for business dealings as a sole proprietorship. The business name selected is the identifying and marketing component of the business. It should be given much thought and consideration. A professional tax consultant, accountant, and/or attorney should always be consulted before determining legal structure and business name.

    Legal Structure

    There are several legal structures available for businesses operating in Texas. Each structure is listed below with a brief description of the entity.

    SOLE PROPRIETORSHIP

    A sole proprietorship exists when a single individual operates a business and owns all assets. A sole proprietor is personally liable for all debts, and business ownership is nontransferable. Under a sole proprietorship, the life of the business is limited to the life of the individual proprietor. The sole proprietorship makes no legal distinction between personal and business debts, and it does not require a separate income tax return. A sole proprietorship is often operated under the name of the owner. Whenever operating a business under a name other than the sole proprietor, an Assumed Name Certificate must be filed with the county clerk. Assumed Name Certificates are discussed later in this section.

    GENERAL PARTNERSHIP

    A general partnership exists when two or more individuals or businesses join to operate a business. Under a general partnership, a separate business entity exists, but creditors can still look to the partners' personal assets for satisfaction of debts. General partners share equally in assets and liabilities. A general partnership requires an annual partnership income tax return (separate from the partners' personal returns). A general partnership may be operated under the names of the owners, or a different name. In either case, an Assumed Name Certificate must be filed with the county clerk.

    LIMITED PARTNERSHIP

    A limited partnership is a partnership formed by two or more persons or entities, under the laws of Texas, and having one or more general partners and one or more limited partners. General partners share equally in debts and assets, while limited partners have limited debt obligations. A limited partnership must be registered with the Secretary of State. (See next section for details on the business name.)

    REGISTERED LIMITED LIABILITY PARTNERSHIP

    A registered limited liability partnership is a general partnership that has been registered with the Secretary of State. A partner's liability in a registered limited liability partnership differs from that of an ordinary partnership. In a registered limited liability partnership, a partner is not individually liable, under some circumstances, for debts and obligations of the partnership arising from errors, omissions, negligence, incompetence, or malfeasance committed in the course of business by others in the partnership.

    CORPORATION

    A corporation (Subchapter C or S) is created when two or more individuals, partnerships, or other entities join together to form a separate entity for the purpose of operating a business in the state. A corporation has its own legal identity, separate from its owners. The corporation offers protection to the business owners' personal assets from debts and liabilities relating to the operation of the corporation. Taxation of the corporation varies depending on the type of corporation formed. A corporation must be registered with the Secretary of State.

    A Subchapter C Corporation is taxed at a higher rate than an individual. The owners are not taxed personally for profits; however, the owners do pay personal taxes on any salaries and/or dividends, and the corporation is also taxed on the profits.

    Owners of Subchapter S Corporations may deduct business losses on personal income tax returns, similar to a partnership. The Subchapter S Corporation also offers alternative methods for distributing the business income to the owners.

    LIMITED LIABILITY COMPANY

    A limited liability company is an unincorporated business entity which shares some of the aspects of Subchapter S Corporations and limited partnerships, and yet has more flexibility than more traditional business entities. The limited liability company is designed to provide its owners with limited liability and pass-through tax advantages without the restrictions imposed on Subchapter S Corporations and limited partnerships. A limited liability company must be registered with the Secretary of State.

    Business Name

    Once the legal structure of the business has been determined, and if a separate business name will be used, the business name must be registered with the county clerk's office and/or the Secretary of State.

    It is very important to do a thorough search when considering a business name. If a corporation and an unincorporated company have very similar names, neither automatically has the right to the name. If both parties have properly filed the Assumed Name Certificate, the courts will most likely have to decide this matter. Taking the time necessary to conduct the name research up front will help avoid legal costs after the business is opened and operating.

    STATE REGISTRATION

    All businesses operating in Texas as limited partnerships, registered limited liability partnerships, limited liability companies, corporations, professional corporations, nonprofit corporations, and professional associations must register with the Secretary of State. The Secretary of State provides a summary of requirements for the creation of these entities, but does not provide forms except for registration of a limited liability partnership. The Secretary of State publishes the Filing Guide, which offers guidelines for registering business entities. The guide also includes administrative rules and sample forms promulgated by the Secretary of State. The guide costs $35 and can be purchased directly from the Secretary of State (No longer available as of 2/15/2000). To order, refer to the telephone numbers listed on the next page.

    Corporations, limited partnerships, and limited liability companies organized in other states or countries may transact business in Texas by obtaining a certificate of authority through the Secretary of State. The Secretary of State can provide forms for the certificate of authority. An out-of-state business may also consider the option of creating a Texas corporation, limited partnership, or limited liability company for transaction of business in Texas.

    A name may not be used by more than one corporation in the state. The Secretary of State will perform a name search to verify that no other corporation, limited partnership, or limited liability company in Texas is using the exact name selected. To find out if a business name is available, call the Secretary of State and they will do an immediate computer search. The search is only for business names registered with the Secretary of State, and does not include business names registered only with a county clerk.

    If a corporation will transact business under names other than that stated in the articles of incorporation, the corporation must file an Assumed Name Certificate with the Secretary of State, and with the county clerk in which the principal office and registered office of the corporation are located. (See next section for details on Assumed Name Certificates.) For more information, contact the Secretary of State, Corporations Section, P.O. Box 13697, Austin, Texas 78711-3697.

    LOCAL REGISTRATION (ASSUMED NAME CERTIFICATE)

    If the business will operate as a sole proprietorship or a general partnership, an Assumed Name Certificate or d.b.a. (doing business as) for each name (or deviation of that name) the business will use must be on file with the county clerk in each county where a business premise will be maintained. If no business premise will be maintained, it should be filed in each county where business will be conducted.

    If the business will operate as a corporation, limited partnership, or limited liability company, and the business will be identified by a name other than the name on file with the Secretary of State, an Assumed Name Certificate must be filed with the Secretary of State and each county in which the business will have a registered or principal office. Neither the filing of an Assumed Name Certificate nor the reservation or registration of a company name imparts any real protection to the party filing the certificate. It is merely a formal process that informs the general public of the registered agent for a business and where official contact with the business can be made.

    FILING THE ASSUMED NAME CERTIFICATE

    Each county clerk office may use a different form; however, the information requested should be the same. Be prepared to provide the business name, mailing address, city, state, zip, expected period of operation, business type, and owner information.

    Period of operation is the period of time the business will use the name. Ten years is the maximum length of time an assumed name filing is valid. However, if the name will be used for a period of less than ten years, indicate this on the form. Note that names must also be renewed every ten years.

    Business type refers to the legal structure of the business. Indicate whether the business will operate as a corporation, partnership, sole proprietorship, etc.

    Owner information is the name(s) of the owner(s), personal address(es), and signature(s). All owners' signatures must be notarized. This service is sometimes offered at the county clerk's office. The form cannot be filed until all owners have signed it and all signatures have been notarized.

    The following information will be helpful in filing the Assumed Name Certificate in the county the business will operate. First, write down the name of the business you will be considering. Pay close attention to capitalization, spacing, punctuation, etc. Consider this carefully as this name will identify the business to the public.

    Next, search the county records for that exact business name in the assumed name books or computer. An assumed name filing is valid for ten years, so search records for the last ten years to verify that the name is available. One book will not necessarily encompass one year of filings, so check the front of the book for dates. Some records are computerized; however, a computerized index may not contain ten years of filing history. Use the computer for the period it covers, and then use the books for any of the remaining ten years. If the business name has been used, look in the margin to see if it has been abandoned. If the name has been abandoned, it can legally be used again. Many county clerk offices will provide a name search service for a nominal fee. The whole search process will often be taken care of through the mail. Please contact the local county clerk for verification of their process.

    Finally, if the company name is available, fill out the assumed name form and have it notarized. Then file it with the county clerk's office. The county clerk will keep the original Assumed Name Certificate, so be sure to request several certified copies (at least one for the bank and one for your business records). For filing fee information and accepted form of payment, contact the local county clerk's office. Most county clerk offices accept cash, certified checks, or money orders. If processing via mail, send the forms by certified mail with a return receipt requested to verify receipt by the county clerk.

    Go to Step 2: Business Tax Responsibilities

  • Step 2: Business Tax Responsibilities

    The second step for starting a business is to determine the federal, state, and local tax obligations. The following sections briefly discuss each of these areas. It is strongly recommended that a professional tax advisor, accountant, and/or attorney be consulted before starting a business.

    Federal Taxes

    Information regarding federal income taxes, tax identification numbers, business tax credits, and employment tax regulations may be obtained by contacting the following agencies:

    INCOME TAXES, TAX IDENTIFICATION NUMBERS, AND BUSINESS TAX CREDITS

    Internal Revenue Service
    825 East Rundberg Lane, Suite H-4
    Austin, Texas 78753
    800-829-1040 or 800-829-4059 (TDD)

    Business Tax Kit and other publications: 800-829-3676 or 800-829-4059 (TDD)

    EMPLOYMENT TAXES

    Social Security Administration
    800-772-1213

    State Taxes

    BUSINESS TAXES

    The Comptroller of Public Accounts is charged with the administration and collection of state and local sales tax from businesses operating in Texas, and also collects any franchise taxes owed by Texas corporations. There is no state income tax in Texas. The Comptroller maintains field offices in most major Texas cities to provide assistance and aid in complying with tax regulations. For further information on these taxes, contact:

    Comptroller of Public Accounts
    111 East 17th Street
    Austin, Texas 78711
    512-463-4600 or 800-252-5555

    The permits required for taxes collected by the Comptroller are defined and outlined in the section titled Listing of Business Licenses and Permits.

    EMPLOYMENT TAXES

    The Texas Workforce Commission collects all unemployment taxes for workers employed in Texas. For information regarding these taxes, to obtain a state employer's identification number, and for information on tax credits, contact:

    Texas Workforce Commission
    Tax Department
    101 East 15th Street
    Austin, Texas 78778

    New Employer Accounts/Status of Accounts: 512-463-2731 or 800-832-9394
    Quarterly Reports: 512-463-9182
    Rates: 512-463-2758
    Unemployment Insurance Customer Service: 512-463-2542

    Local Taxes

    BUSINESS TAXES

    If the business owns tangible personal property that is used to produce income, the property must be reported on a rendition form to the local county appraisal district, after January 1 and no later than March 31, each year. Business owners must report all inventories, equipment, and machinery. For additional information, contact the local county appraisal district. See the government pages of your local telephone directory for telephone numbers.

    Tax Reference Table

    The following information pertains to state and federal taxes. The IRS Business Site assist businesses structured as Corporations, International Business, Partnerships and Small Businesses Self-Employed. The site has vital links to other Texas government entities. The IRS Employer ID Numbers (EINs) sites assist in obtaining an EIN. The site provides information on changing Ownership and information on EIN for Health Transactions. Businesses may need a National Standard Employer Identifier (NSE) for electronic health transactions. Further assistance on Texas tax can be viewed on the Texas State Comptroller website which includes information on electronic filing and online assistance through the STAR system.

    Go to Step 3: Business Licenses and Permits by Business Type

  • Step 3: Business Licenses and Permits

    The State of Texas does not require a general "business" license. However, there are a number of regulatory agencies that have licensing and permitting requirements based on the type of service, or products associated with your business.

    To ensure that all permitting requirements are met, you should contact the local county and/or city government in which you plan to conduct business to determine if there are any additional requirements.

    Please visit the Texas.gov's Occupational Licenses and Permits and select the applicable occupation from the menu on the left.

    Should the business discharge pollutants, the Texas Commission on Environmental Quality requires various air, water and waste permit authorizations.

    To determine state occupational licensing and permitting requirements, please visit the Texas Department of Licensing and Regulation (TDLR) for more information.

    Go to Step 4: Business Employer Requirements

     

     

  • Step 4: Business Employer Requirements

    The final step in starting a business is determining the federal and state employer requirements. As an employer, you have labor, safety, and tax obligations. The information below is the labor, safety, access, and new hire reporting regulations administered by federal and state agencies. For employer tax requirements, refer to "Step 2: Tax Responsibilities"

    Federal Requirements

    AMERICANS WITH DISABILITIES ACT REQUIREMENTS

    The Americans with Disabilities Act (ADA) provides protection for people with disabilities in the areas of employment, public services and transportation, public accommodation, and telecommunications.

    For federal information on how the Americans with Disabilities Act will affect a business and for technical assistance with provisions applying to employment, contact:

    U.S. Equal Employment Opportunity Commission
    1801 L Street N W
    Washington, D.C. 20507
    800-669-4000 or 800-669-6820 (TDD)

    For technical assistance on the ADA standards for accessible design and other ADA provisions applying to businesses, nonprofit agencies, and state and local government services, contact:

    Office on the Americans with Disabilities Act: Civil Rights Division
    U.S. Department of Justice
    950 Pennsylvania Avenue NW
    Civil Rights Division
    Disability Rights Section - NYA
    Washington, DC 20530
    800-514-0301 or 800-514-0383 (TDD)

    For specific information regarding the ADA requirements for telecommunications, contact:

    Federal Communications Commission
    445 12th Street SW
    Washington, D.C. 20554
    202-418-0600 or 202-418-7233 (TDD)

    For information regarding the ADA requirements for accessible design in new construction and alterations, contact:

    U.S. Architectural and Transportation Barriers Compliance Board
    United States Access Board
    1331 F Street NW, Suite 1000
    Washington, DC 20004
    800-872-2253 or 800-993-2822 (TDD)

    For information regarding the ADA requirements for transportation, contact:

    U.S. Department of Transportation
    Federal Transit Administration
    East Building, 5th Floor
    1200 New Jersey Avenue, SE
    Washington, DC 20590
    888-446-4511 or 800-877-8339 (TDD)

    EQUAL EMPLOYMENT REQUIREMENTS

    Federal and state laws prohibit employment discrimination. The United States Equal Employment Opportunity Commission (EEOC) and the Texas Workforce Commission, Civil Rights Division (TWCCRD) are charged with enforcing fair employment laws which prohibit discrimination on the basis of race, color, sex, religion, disability, age, or national origin. Current statutes cover all employment transactions. All employers with 15 or more employees engaged in an industry affecting commerce, employment agencies, and labor unions are prohibited from denying equal employment opportunities. Regardless of the number of individuals employed, a county, municipality, and any state agency or instrumentality including public institutes of education, are also prohibited from denying equal employment opportunities. The TWCCRD will provide technical assistance and training to employers to facilitate compliance with laws prohibiting employment discrimination. The TWCCRD has jurisdiction for investigating equal employment opportunity complaints in Texas. The EEOC promotes voluntary programs that allow employers and organizations to implement equal employment opportunity programs within their businesses. For information regarding federal equal employment requirements, contact:

    U.S. Equal Employment Opportunity Commission

    Dallas District Office
    207 South Houston St., 3rd Floor
    Dallas, Texas 75202
    800-669-4000 or 800-669-6820 (TDD)

    El Paso District Office
    300 E. Main Dr., Ste. 500
    El Paso, Texas 79901
    800-669-4000 or 800-669-6820 (TDD)

    Houston District Office
    Total Plaza
    1201 Louisiana St., 6th Floor
    Houston, Texas 77002
    800-669-4000 or 800-669-6820 (TDD)

    San Antonio District Office
    Legacy Oaks, Bldg. A
    5410 Fredericksburg Rd., Ste. 200
    San Antonio, Texas 78229
    800-669-4000 or 800-669-6820 (TDD)

    SAFETY REQUIREMENTS

    The Occupational Safety and Health Consultation (OSHCON) program is administered by the Texas Department of Insurance, Division of Workers’ Compensation.  The program conducts free on-site safety and health consultations to help small, private sector employers understand and comply with Occupational Safety and Health Administration (OSHA) regulations.  The program is geared toward employers in high hazard industries with 250 or fewer employees per worksite and less than 500 employees nationwide.  

    Free services include identification and evaluation of safety and health hazards; industrial hygiene services, such as noise level monitoring and air sampling; hazard correction assistance; hands-on training; technical updates on OSHA standards; safety and health management program assistance; and safety training audiovisual loans and publications.

    For more information regarding state and federal occupational safety and health requirements, contact:

    OSHCON
    Texas Department of Insurance
    Division of Workers' Compensation
    7551 Metro Center Dr., Ste. 100, MS 22
    Austin, Texas 78744
    800-687-7080

    For information regarding federal occupational safety requirements, contact:

    Occupational Safety and Health Administration (OSHA)
    U.S. Department of Labor, Regional Office
    525 Griffin St., Room 602
    Dallas, Texas 75202
    972-850-4145

    WAGE AND LABOR REQUIREMENTS

    For information on federal minimum wage laws, overtime, and other questions regarding wages and hours, contact:

    U.S. Department of Labor
    Regional Wage and Hour Offices
    Corpus Christi: 361-888-3152
    Dallas: 817-861-2150
    Houston: 713-339-5500
    San Antonio: 210-308-4515
    McAllen: 956-682-4631

    For general information regarding federal labor laws, contact:

    U.S. Department of Labor
    Regional Office
    525 Griffin St., Ste. 800
    Dallas, Texas 75202
    214-767-6895

    State Requirements

    AMERICANS WITH DISABILITIES ACT REQUIREMENTS

    For information and technical assistance on the Americans with Disabilities Act, state disability policy information, disability statistics, and local disability resources, contact:

    Texas Governor's Committee on People with Disabilities
    P.O. Box 12428
    Austin, Texas 78711
    512-463-5739 or 512-463-5746 (TDD)

    The Texas Department of Licensing and Regulation reviews construction documents for the construction or substantial renovation, modification, or alteration of buildings or facilities defined as public or commercial accommodations for architectural barriers. This review is mandated through the Americans with Disabilities Act. For additional information on architectural barriers, contact:

    Texas Department of Licensing and Regulation
    E.O. Thompson State Office Building
    P.O. Box 12157
    Austin, Texas 78711
    512-463-6599 or 800-803-9202

    DRUG-FREE WORKPLACE

    Advice is available to Texas employers with 15 or more employees who maintain workers' compensation coverage. Employers must comply with certain drug-free workplace requirements, and are also subject to federal regulations. These federal regulations include the Drug-Free Workplace Act of 1988 and U.S. Department of Transportation regulations requiring drug and alcohol testing. For information, contact:

    Texas Drug-Free Workplace Initiative
    2525 Wallingwood, Bldg. 5
    Austin, Texas 78746
    512-328-1144 or 800-343-3822

    EQUAL EMPLOYMENT REQUIREMENTS

    See listing under Federal Requirements for general explanation. For information regarding state equal employment requirements, contact:

    Texas Workforce Commission, Civil Rights Division
    101 East 15th St., Room 144-T
    Austin, Texas 78778
    512-463-2642

    NEW HIRE PROGRAM

    New Hire Reporting may be accomplished online. It is mandated by federal law under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and requires employers to report new hires and rehires within 20 days.
    For more information about the State of Texas New Hire Program, how and when to report, visit Office of the Attorney General's New Hire website or contact the Texas Employer New Hire Reporting Operations Center at:

    Phone: 1-888-TEX-HIRE (1-888-839-4473)
    Fax: 1-800-732-5015
    E-mail: employer.newhire@cs.oag.state.tx.us
    Mail: Texas Employer New Hire Reporting
    Operations Center
    Post Office Box 149224
    Austin, Texas 78714-9924

    PLANT CLOSURES

    The Worker Adjustment and Retraining Notification Act (WARN), Public Law 100-379 (29 U.S.C. 2101 et seq.), requires certain employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. Notice must be made to either the affected workers or their representatives (e.g., a labor union), to the Dislocated Workers Unit at TWC, and to the appropriate unit of local government. For more information or a copy of the Act, contact:

    Services for Dislocated Workers
    Texas Workforce Commission
    101 East 15th St., Suite 212T
    Austin, Texas 78778-0001
    512-463-2245

    SAFETY REQUIREMENTS

    The Occupational Safety and Health Consultation (OSHCON) program is administered by the Texas Department of Insurance, Division of Workers’ Compensation.  The program conducts free on-site safety and health consultations to help small, private sector employers understand and comply with Occupational Safety and Health Administration (OSHA) regulations.  The program is geared toward employers in high hazard industries with 250 or fewer employees per worksite and less than 500 employees nationwide.  

    Free services include identification and evaluation of safety and health hazards; industrial hygiene services, such as noise level monitoring and air sampling; hazard correction assistance; hands-on training; technical updates on OSHA standards; safety and health management program assistance; and safety training audiovisual loans and publications.

    For more information regarding state and federal occupational safety and health requirements, contact:

    OSHCON
    Texas Department of Insurance
    Division of Workers' Compensation
    7551 Metro Center Dr., Ste. 100, MS 22
    Austin, Texas 78744
    800-687-7080

    WAGE AND LABOR REQUIREMENTS

    The Texas Workforce Commission is charged with investigating and notifying appropriate county and/or district attorneys regarding all labor law violations. The Labor Law Department is charged with the enforcement of state and federal labor laws as well as the prosecution of offenders of these laws. State statutes include the Pay Day and Child Labor laws. For additional information, contact:

    Labor Law Department
    Texas Workforce Commission
    101 East 15th St.
    Austin, Texas 78778
    512-837-9559 or 800-832-9243

    The Texas Workforce Commission provides a general employer information package for employers. To obtain this package, contact:

    Employer's Representative
    Texas Workforce Commission
    101 East 15th St.
    Austin, Texas 78778
    512-463-2826 or 800-832-9394

    For information relating to labor questions, please contact:

    Labor's Representative
    Texas Workforce Commission
    101 East 15th St.
    Austin, Texas 78778
    512-463-2829 or 800-832-2829

    Standards for apprenticeship training programs in Texas follow guidelines set forth by the U.S. Department of Labor, Bureau of Apprenticeship and Training. Specific details on these programs may be obtained by contacting:

    Bureau of Apprenticeship and Training
    U.S. Department of Labor
    525 Griffin St., Ste. 628
    Dallas, Texas 75202
    214-767-9263

    WORKERS' COMPENSATION INSURANCE

    In Texas, private employers can choose whether or not to carry workers’ compensation insurance coverage.  Texas employers who carry and who do not carry workers’ compensation insurance coverage are required to comply with certain reporting and notification requirements under the Texas Workers’ Compensation Act.  Refer to the Texas Workers’ Compensation Employer Requirements/Resources webpage for more information.    

    Texas Department of Insurance
    Division of Workers’ Compensation
    7551 Metro Center Dr., Ste. 100
    Austin, Texas 78744
    512-804-4000

    For information on purchasing workers' compensation insurance, contact:

    Texas Department of Insurance
    333 Guadalupe
    Austin, Texas 78701
    512-322-3493

     

    LABOR POSTER REQUIREMENTS

    Certain federal and state labor posters are required to be posted at a place of business. The Texas Workforce Commission maintains current, comprehensive information about workplace poster requirements.