How to start a business in Texas: Step-by-step guide

Published 25 November 2025

Table of contents

• How to start a business in Texas
• Mistakes to avoid when starting a business in Texas
• Launch your Texas business with Xero
• FAQs on starting a business in Texas

Key takeaways

• To start a business in Texas, you need to meet local, state, and federal requirements.
• You must register LLCs and corporations with the Secretary of State.
• Get “doing business as” (DBA) names from your county clerk.
• If needed, obtain an EIN from the IRS.
• Check with your local government for local business requirements.
• Set up tax accounts and review compliance requirements.

How to start a business in Texas

Setting up a business in Texas requires multiple steps at the local, state, and federal levels. The exact process depends on your location and the type of business you want to start, but here are the seven main steps.

1. Choose your business structure

Once you know what type of business you want to open and where you want to operate, it's time to choose your business structure:

• Sole proprietorship – one person doing business on their own, who has personal liability for all business debts and taxes
• Partnership – two or more people (or entities) doing business as a group, with varying liability levels depending on the way the partnership is set up
• Limited liability company (LLC) – one or more people (or entities) using a business structure that protects the owner(s) from liability for the business's debts or lawsuits but generally makes them personally liable for the business's taxes.
• Corporation – one or more shareholders owning a business that's separate from themselves and liable for its own taxes and debts

The Texas Secretary of State has more guidance on the different types of business structures and resources for business start-ups.

2. Complete your Texas business registration

The registration requirements vary based on your business structure.

Set up corporations or LLCs through the Secretary of State – you can apply online (the fastest method) or through the mail.

If you're operating as a sole prop or partnership, you don't have to register unless you want to use a fictitious name. In that case, get a “doing business as” (DBA) at the Office of the County Clerk in the county where you're based.

If you don't have a set premise and plan to operate in multiple counties, you need to register your DBA in all of them.

3. Get an EIN

Almost all businesses need an employer identification number (EIN) from the IRS. You use this number to:

• File your payroll, excise, and partnership or corporate income tax returns with the IRS
• Open bank accounts in the business's name

Generally, the only businesses that don't need an EIN are sole props with no employees. Even then, you might want to get an EIN so you don't have to use your Social Security Number on business tax forms – like 1099 forms for contractors or sales tax forms for the state.

You can get the number right away if you apply online on the IRS website. Otherwise, apply through the mail or hire a professional to help you.

4. Check professional and occupational license requirements

There's no general Texas business license, but you might need an occupational or professional license depending what your business does.

For instance, you need a license to work as an electrician, esthetician, or mortician. If you want to open a restaurant, bar, or bakery, you'll need a permit from the local health department.

The State of Texas has more tips on starting a business, which includes information on professional and occupational license requirements.

5. Set up a sales tax account

You need a sales tax license to sell taxable goods or services in Texas.

Most tangible personal property is subject to sales tax, as are some services, such as laundry, non-residential property repair, and personal property maintenance and repairs.

The Texas Comptroller has a complete list of taxable services.

• Register for sales tax online through eServices – the State will send you your sales tax permit within 2 or 3 weeks.
• Texas state sales tax is 6.25% of sales, and local governments may add on up to 2%.
• Reporting methods and payment options vary according to how much sales tax you collected in the past year – businesses with over $50,000 in annual sales tax must e-file their tax returns, and businesses that owe more than $10,000 annually must pay electronically.

6. Check with your local government for any general business licenses you need

You might need a general business license or other permits to operate in your area. For instance, in most municipalities you need a Certificate of Occupancy before you can use new construction for business purposes.

You could also need to meet zoning requirements for your business – check with your local government for guidance.

Reach out to the municipal government if you plan to operate in a city or town, and contact the county if you're outside the town limits

7. Prepare for other tax obligations

There are tax and reporting requirements that almost all businesses in Texas need to comply with

Texas franchise tax

All businesses (corporations, LLCs, partnerships) must pay the Texas franchise tax – except for sole proprietorships and general partnerships where all the partners are natural persons. The tax is based on the entity's taxable margin, which may be calculated as:

• Total revenue times 70%
• Revenue minus COGS
• Revenue minus compensation
• Revenue minus $1 million

As of 2025, you don't have to file or pay this tax if your revenue is under $2.47 million. But you must file either Form 05-102 (Public Information Report) or Form 05-167 (Ownership Information Report).

You can find the Texas franchise tax forms here.

Income tax

All businesses must report their income to the IRS. Depending on your business structure, you’ll need to file different information using different forms:

• If you’re a sole proprietorship (including single-member LLCs), you file Schedule C of your 1040 individual income tax return
• Partnerships (including multi-member LLCs) file using Form 1065
• LLCs that have chosen to be taxed as S-corps file Form 1120-S
• Corporations file Form 1120

You can search for IRS tax forms here.

Other tax obligations

• If you hire employees, you also need to file and pay federal and state payroll taxes.
• Texas doesn't have a state income tax, so you don't have to worry about withholding state income taxes, but you must register for an account with the Texas Workforce Commission (TWC) and pay unemployment premiums to the state.

To learn more about taxes, visit the Texas Comptroller.

Mistakes to avoid when starting a business in Texas

Keep these tips in mind as you launch your business in the Lone Star State.

• Don't overlook the benefits of Texas LLC formation – LLCs give you liability protection and have built-in flexibility for ownership changes, different management structures, and tax options down the road.
• Do the Texas EIN application online – apply for an EIN online and you’ll get the number right away (instead of waiting days or weeks if you apply by fax or through the mail).
• Check all permits and license requirements – Texas small business compliance requires you to check on permits and licenses at multiple levels of government.

Launch your Texas business with Xero

Tracking expenses starts even before you make your first sale – Xero can help you stay on top of the numbers you need to file your business's Texas and federal tax returns. Built for small businesses, Xero syncs with your bank account and point-of-sale software, making it easy to track business income and expenses.

It also lets you generate invoices, calculate sales tax across multiple jurisdictions, track asset depreciation, and even handle payroll so you spend less time on admin, and more on your business.

Get one month free

FAQs on starting a business in Texas

Here are a few questions often asked by entrepreneurs setting up in Texas.

How much does it cost to register a business in Texas?

As of 2025, the fee for most entities is $300, but it's $750 for professional associations and limited partnerships.

Does every business need a Texas business license?

No – there's no general state business license. Licensing requirements vary according to your industry and location.

Should I register my business name with the Secretary of State?

It depends. You register an LLC or corporation name with the Secretary of State when you set up your business. But if you‘re a sole props and or in a partnership, you should register your “doing business as” name (fictitious names) with the county where you plan to operate.