How to start a business in Texas

Published Wednesday 10 June 2026

Table of contents

• How to start a business in Texas in 10 steps
• Mistakes to avoid when starting a business in Texas
• Start your Texas business with Xero
• FAQs on starting a business in Texas

Key takeaways

• Starting a business in Texas involves registering with the Secretary of State, getting an EIN, and setting up state and federal tax accounts.
• Operating in Texas means keeping more of your earnings, since the state is income-tax-free and exempts businesses earning below $2.65 million from franchise tax.
• Checking permits at the state, county, and city level is essential, because Texas regulates businesses through industry-specific licenses rather than a single general license.
• Choosing the right business structure early protects your personal assets and simplifies your tax obligations as you grow.

How to start a business in Texas in 10 steps

Texas is one of the most popular states for new businesses. Texas is income-tax-free and has a business-friendly regulatory environment. These 10 steps will help you set up your business the right way.

1. Develop your business idea and plan

Before you file any paperwork, take time to define what your business will do and how it will make money. Understanding your startup costs early helps you plan realistically. A solid business plan helps you clarify your goals, identify your target customers, and map out your finances.

Keep your plan concise. Focus on these core elements:

• A description of your products or services
• Your target market and how you plan to reach them
• Startup costs and how you plan to fund them
• Revenue projections for your first year

A clear plan also makes it easier to secure funding from lenders or investors. The U.S. Small Business Administration offers free templates and guides to help you get started.

2. Choose your business structure

Your business structure affects your taxes, personal liability, and paperwork requirements. Choose the structure that best fits your goals before you register.

The most common options in Texas include (learn more about S corp vs LLC structures):

• Sole proprietorship: one person doing business on their own, with personal liability for all debts and taxes.
• Partnership: two or more people doing business together, with liability levels that vary by partnership type.
• Limited liability company (LLC): one or more owners with liability protection for personal assets, while profits pass through to individual tax returns.
• Corporation: a separate legal entity owned by shareholders, responsible for its own taxes and debts.

The Texas Secretary of State provides more guidance on business structures and how each one works.

3. Name your business

Your business name is how customers find and remember you, so choose something distinctive and easy to search for. Before you commit, check that your name is available.

If you form an LLC or corporation, the Secretary of State checks name availability during registration. You can also search the Texas Comptroller's database to see if another entity already uses your preferred name.

Operating under a name different from your legal name requires a "doing business as" (DBA) certificate. File your DBA with the county clerk in the county where your business operates. If you plan to work across multiple counties, file in each one.

4. Register your business in Texas

Registration requirements depend on your business structure. LLCs and corporations must register with the Texas Secretary of State by filing a certificate of formation.

You can file online through the SOSDirect portal for faster processing, or submit your forms by mail. The Secretary of State typically reviews online filings within a few business days.

Filing fees for most entities are $300, while limited partnerships and professional associations cost $750. Sole proprietors and general partnerships are exempt from state registration, unless they file a DBA.

5. Get an EIN

An employer identification number (EIN) is a federal tax ID issued by the IRS. Almost every business needs one to file taxes, hire employees, and open a business bank account.

The only businesses that may skip this step are sole proprietorships with no employees. Even then, getting an EIN keeps your Social Security Number off business tax forms like 1099s.

The fastest way to get your EIN is to apply online through the IRS. You will receive your number immediately. Applying by mail or fax takes several weeks.

6. Apply for licenses and permits

Texas allows most businesses to operate without a general state license. You may still need industry-specific licenses or permits at the state, county, or city level.

For example, electricians, cosmetologists, and healthcare professionals need occupational licenses from the relevant state board. If you plan to serve food or alcohol, additional permits apply. Contact your local health department and the Texas Alcoholic Beverage Commission.

Check with your city or county government for local requirements like a Certificate of Occupancy, zoning permits, or signage regulations. Visit the State of Texas website for more tips on starting a business, including professional licensing requirements.

7. Set up your Texas tax accounts

If you sell taxable goods or services, you need a Texas sales tax permit. Register online through the Texas Comptroller's office and you will typically receive your permit within two to three weeks.

Texas state sales tax is 6.25%, and local jurisdictions may add up to 2% more. Your reporting frequency depends on the amount of sales tax you collect each year.

Most businesses in Texas also need to file an annual franchise tax report. This applies to LLCs, corporations, and partnerships. Sole proprietorships and general partnerships with only natural person partners are exempt.

As of the 2026 to 2027 reporting period, you owe no franchise tax if your total revenue is below $2.65 million. You must still file a Public Information Report or Ownership Information Report each year.

8. Open a business bank account

A separate business bank account keeps your personal and business finances apart. This is especially important if you form an LLC or corporation, because mixing funds could weaken your liability protection.

You will typically need three things to open an account: your EIN, certificate of formation or DBA filing, and a government-issued ID. Compare fees, minimum balances, and online banking features before you choose a bank.

Connecting your business bank account to Xero Accounting Software lets you automatically import and categorize transactions. That means less time on data entry and more time running your business.

9. Get business insurance

The right insurance protects your business from unexpected costs. Texas gives you flexibility on general business insurance, though certain coverage types are mandatory depending on your situation.

If you have employees, Texas law requires you to carry workers' compensation insurance or formally opt out. General liability insurance protects you if a customer suffers an injury on your premises or from your products. Professional liability insurance is worth considering if you provide consulting or specialized services.

Review your risks early and talk to an insurance agent who specializes in small business coverage.

10. Understand your ongoing tax obligations

Once your business is up and running, you need to stay on top of federal and state tax filings. The forms you file depend on your business structure.

• Sole proprietorships (including single-member LLCs) report income on Schedule C of your personal 1040 return.
• Partnerships (including multi-member LLCs) file Form 1065.
• S corporations file Form 1120-S.
• C corporations file Form 1120.

Texas is income-tax-free, so employee paychecks carry no state income tax withholding. However, if you hire employees, you must register with the Texas Workforce Commission and pay state unemployment insurance premiums.

Keep your records organized throughout the year to make tax season less stressful. Understanding your small business tax deductions can also help you keep more of what you earn.

Mistakes to avoid when starting a business in Texas

A few common missteps can slow you down or create problems later. Keep these tips in mind as you launch your business in the Lone Star State.

• Skipping the LLC option: an LLC gives you personal liability protection and flexibility for tax elections, ownership changes, and management structures as your business grows.
• Applying for your EIN by mail: apply online through the IRS and you will get your number immediately, instead of waiting days or weeks for a mailed response.
• Forgetting to check all permit levels: Texas requires you to verify permits and licenses at the state, county, and city levels, so check with each authority before you open your doors.
• Mixing personal and business finances: without a separate business bank account, you risk weakening your LLC liability protection and making tax filing more complicated.

Start your Texas business with Xero

Getting your finances organized from day one makes everything easier, from filing taxes to tracking how your business is growing. Xero Accounting Software syncs with your bank account and point-of-sale system. Xero automatically sorts your income and expenses so they are ready when you need them.

You can generate invoices, calculate sales tax across Texas jurisdictions, track asset depreciation, and handle payroll, all from one place. That means less time on admin and more time building your business.

Ready to get started? Try Xero and get one month free.

FAQs on starting a business in Texas

Here are some frequently asked questions about starting a business in Texas.

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

The filing fee for most entities, including LLCs and corporations, is $300; professional associations and limited partnerships pay $750. Sole proprietors filing a DBA typically pay a county clerk fee between $15 and $50.

Does every business need a Texas business license?

Most Texas businesses can open without a general state license. Check the Texas Department of Licensing and Regulation for a searchable list of licensed professions in your area.

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

If you form an LLC or corporation, the formation process automatically registers your business name. Sole proprietors and partnerships using a different name must file a DBA with the county clerk. File in each county where you do business.

Is an LLC worth it in Texas?

For most small business owners, yes. An LLC protects your personal assets from business debts and lawsuits, with flexible tax options and a low $300 formation fee.

What taxes do businesses pay in Texas?

Texas is income-tax-free. If you are self-employed, plan for quarterly estimated federal tax payments to avoid penalties at year-end.

Do I need a registered agent in Texas?

Yes, if you form an LLC or corporation in Texas. A registered agent receives legal documents on your behalf and must have a physical Texas address.