How to start a business in Texas

Published on Thursday 15th May 2025

Table of contents

• Why start a business in Texas?
• Choose your business structure
• Register your business
• Get the licenses and permits
• Set up your business finances
• Know your Texas taxes
• Business insurance and compliance
• Find funding for your small business
• FAQs on starting a business in Texas

Key takeaways

• Texas has many advantages as a place to do business – economic strength, a skilled workforce, a business-friendly tax system, and a range of industries with growth potential.
• Choose a business structure that makes sense for your industry and plans for your business.
• Register your corporation or LLC with the Secretary of State or set up a business name with your county clerk.
• Most businesses also need to get an EIN from the IRS for business bank accounts and federal tax forms.
• Find out the licenses you need for your business, location and industry, and start applying for them.
• Know the taxes you’ll have to pay – the Texas Comptroller’s taxes and fees page is a good place to start.

Why start a business in Texas?

Texas offers businesses with many advantages:

• A large and strong economy
• A Skilled workforce.
• Low business taxes – Texas has no individual or corporate income tax, the lowest gross receipts tax in the country, and a competitive rate of sales tax
• A range of major industries like energy, defense, tech, healthcare, manufacturing, and agriculture – all potential growth areas!
• Convenient access to global markets

Here’s what the Texas Economic Development Corporation says about starting a business in Texas.

Choose your business structure

Starting a small business in Texas means choosing the type of business you want. Your business structure affects your taxes and your personal liability for business debts, so choose one that suits your business’s stage of growth and your financial goals.

The most common structures for small businesses in Texas are:

• Sole proprietor – the simplest option for a sole trader, who is personally liable for the business’s debts
• Partnership – for multiple people, each of whom can have different liability levels
• Limited liability company – protects you from business debts and gives you flexibility in your tax arrangement

There’s also the corporation – a complex legal structure that protects you from business debts and has tax advantages, but comes with complex compliance requirements and costs.

When choosing your business’s legal structure, think about the tax you’ll pay and how – sole proprietors and partnerships, for example, are taxed differently from LLCs and corporations. Also weigh the benefits of simplicity against the liability protection but administrative and reporting burdens (and costs) of more complex structures.

The Texas Secretary of State has more info on business structures.

Register your business

How do you register a business name in Texas? The process depends on your business structure.

• Sole proprietors and unincorporated partnerships register business names with their local county clerk's office. In most counties, you fill out an Assumed Name Certificate that the clerk certifies. You generally just need basic business details, but the process varies – contact your county clerk for details.
• Limited partnerships, LLCs, and corporations register online with SOS Direct. The website prompts you to create a Certificate of Formation – just enter basic information like your business name, address, start date, purpose, names of directors, and number of shares (if applicable).

As part of the registration you nominate a registered agent – someone (or a business) who’s the point of contact for your business.

Once you're done, you'll receive a Certificate of Fact that shows you're authorized to do business in Texas.

The fees vary by business structure and range from $200 to $750. The Texas Secretary of State sets out the fees.

Get an EIN if you need one

Your EIN number identifies your business in your correspondence with the IRS in relation to your taxes. You need an employer identification number (EIN) for your Texas business if you do any of these:

• Form a corporation, partnership, or multi-member LLC
• Hire employees
• Open a business bank account
• Pay excise taxes
• Organize as a sole proprietorship but don't want to use your Social Security Number on documents

If you’re in business as a sole trader and don’t do any of these things, you use your Social Security Number on tax forms.

Get an EIN for free from the IRS's website. You can also send the IRS Form SS-4 by mail, or have your tax pro get you an EIN.

Get the licenses and permits you need

There is no general business license in Texas, but you’ll need specific licenses for your industry and local area, and possibly for your business activities.

Key Steps

1. Figure out which licenses you need

The Texas Comptroller has a detailed list of the licenses needed for different types of industries and where to get them from.

2. Get a sales tax permit if needed

If you sell retail goods or taxable services (amusement services, cable TV, or laundry services, say), you need a Sales and Use Tax Permit. Register online with the Texas Comptroller or file Form AP201 – it takes 2–3 weeks to get your sales permit.

3. Check into local license requirements

You might need specific licenses to do business in your area (a home business permit or for compliance with zoning rules, say). Contact city hall or the county clerk's office.

4. Check federal requirements for activity licences

You also need federal licenses for activities related to agriculture, alcohol, aviation, firearms, fish and wildlife, maritime transportation, operating heavy vehicles, and other things.

First, check the SBA’s list of licensed activities and responsible agencies, then contact the federal agency that licenses your activity.

Set up your business finances

Start off the right way by setting up the foundations that help you manage your money.

Open a business bank account

Make sure you separate business and personal expenses – this helps you track profitability and comply with tax laws.

Find a bank with the features you need, like low-cost business bank accounts, checks, and payment processing. You’ll need your ID, business registration docs, and an EIN to open an account.

Set up accounting software

Xero is powerful, flexible accounting software that simplifies your finances and helps you manage your business admin. For help, connect with a Texas-based Xero advisor.

Fund your business

Look for loans, grants, and investors to get your business off the ground and to support operations until your revenue starts rolling in. Check out

• small business funding options listed with the Texas Economic Development & Tourism Office, and the SBA's funding resources

Set up payroll

Payroll is a bit easier in Texas than other states, since you don't have to worry about state income tax. But you still need to withhold and pay federal payroll, income, and unemployment taxes. Payroll software or a third-party payroll provider can help you.

Start planning ahead

Set short- and long-term financial goals, and forecast your revenue and expenses to make sure you can cover your operational and staff costs while your business grows.

Here’s some help on small business budgeting and forecasting, and a free business plan template.

Find funding options

Whether you're still dreaming about entrepreneurship or ready to jump in with a great business idea, you need money - consider these options.

Self-funding (bootstrapping)

Starting your business with personal savings puts you in control. But before draining your retirement accounts or borrowing against your home, write a plan and make sure you're ready for the financial risk.

SBA-backed loans

SBA loans are designed for small businesses. You get the loan from a participating lender, but it's guaranteed by the SBA, making the approval process easier. For best results, go in with a high credit score, a solid business plan, and as much collateral as you can. Find SBA-approved lenders here.

Texas small business grants

The Texas Workforce Training Commission offers small business grants focused on education and training. Or check out Grants.gov for details on federal grants.

Crowdfunding & alternative financing

Sites like Kickstarter, GoFundMe, and peer-to-peer lending platforms let you harness your social network to fund your business. Get friends, relatives, or other fans of your business idea involved.

Know your Texas taxes

The taxes you have to pay vary according to your business structure, what you sell, whether you have staff, your revenue, and other factors. Here's a summary.

1. Sales tax

Texas state sales tax is 6.25% and local governments can add up to 2% more. Check the rates in your area and charge accordingly – most point-of-sale software can automate this. Then file your return (there’s only one) and pay with the Comptroller's office.

Read about Texas business taxes on the Comptroller's website.

2. Franchise tax

Businesses (except sole proprietors and general partnerships) must pay franchise tax but only if your gross receipts are above $2.47 million as of 2025.=

Check out the Comptroller's FAQs on franchise tax.

3. Payroll taxes

Payroll taxes kick in as soon as you hire your first employee. Once you have an EIN, set up an IRS account to deposit Social Security, Medicare, and income tax on behalf of your employees. You also need to pay Federal unemployment tax (FUTA) to the IRS and State Unemployment Tax (SUTA) to the Texas Workforce Commission.

4. Property taxes

If you own commercial property or have a triple-net lease, you need to pay property taxes to the local government.

5. Excise taxes

If you manufacture alcohol, sell or distribute firearms, or operate certain types of heavy vehicles, for example, you need to pay federal excise taxes.

For more, check out the IRS page on taxes for self-employed people, and the Texas Comptroller’s taxes and fees page.

Get the business insurance you need

Don’t forget your insurance! It’s not mandatory (Texas is the only state where business insurance isn’t required), but if you’re serious about business it’s essential.

• Think about a general liability plan to protect your business from work-related lawsuits.
• Workers’ compensation insurance (“workers’ comp”) is optional for private employers in Texas, but if you want to protect your staff (and yourself from employee lawsuits), it's essential. The Texas Department of Insurance has details.

Depending on your industry, you might want coverage for property, commercial vehicles, or other areas where your business is exposed to risk

Find funding for your small business

Here are some fundraising options for your great business idea.

Self-funding (bootstrapping)

Your own cash puts you in control. But before draining your retirement accounts or borrowing against your home, write a plan and make sure you're ready for the financial risk.

SBA-backed loans

SBA loans help small businesses get going. A participating lender makes the loan, which is guaranteed by the SBA, making the approval process easier. Be ready with a high credit score, a solid business plan, and as much collateral as you can. Here are some SBA-approved lenders.

Local and federal small business grants

• The Texas Workforce Training Commission offers small business grants that prioritize education and training.
• Grants.gov has details on federal grants.

Crowdfunding and alternative financing

Get friends, relatives, or other fans of your business idea involved! Sites like Kickstarter, GoFundMe, and peer-to-peer lending platforms help you harness your social network to fund your business.

Here’s more on how to finance your business.

FAQs on starting a business in Texas

Do I need a physical address to start a business in Texas?

Yes – you need to register a physical address, but you can use a PO box for mail. And if you're operating out of your home, use that address.

Can I run a business from home in Texas?

Yes – but check local zoning and permit laws, and any HOA (Homeowners association) rules. There could be restrictions on operating certain types of businesses, especially if you're bringing in customers or lodgers, or producing certain types of goods.

Do I need a separate business phone number and email?

No, but it's a good idea. It looks much more professional than using your personal phone and email, and it’ll help you organize your business by keeping your business and personal correspondence separate.

How do I trademark my business name in Texas?

You can get a state-specific trademark by filing a trademark application with the Texas Secretary of State. And if you want to make sure no one in the country can use your business name, register it with the U.S. Patent and Trademark Office

What is a registered agent and do I need one?

A registered agent is an official point of contact for your business. The agent is an individual or another business entity who receives legal and tax documents (and other correspondence) on your business’s behalf. You authorize this person or business entity by naming them when you register with the state or the county clerk.

How long does it take to register a business in Texas?

It depends on the way you register. If you register online with SOSDirect you’ll get immediate confirmation and access to your Certificate of Fact (known as a Certificate of Good Standing in other states) – the official document that authorizes you to do business in Texas. If you apply through the mail, the certificate takes a few weeks. Sales tax permits typically take 2–3 weeks.

Once you’re registered, you secure funding and get ready for your first customer.

How do I get a minority- or woman-owned business certification in Texas?

The Texas SBA offers certification for businesses that are at least 51% owned by ethnic minorities or at least 51% owned by women. Just make sure your business is registered in the state of Texas.

What are the best networking opportunities for new business owners in Texas?

Organizations like SCORE, Small Business Development Centers (SBDCs), or the local Chamber of Commerce are great places to network, find mentors, and get access to small business resources.

Are there special incentives for veteran-owned businesses in Texas?

Yes. Texas offers tax exemptions and funding opportunities for veteran entrepreneurs through the Texas Veterans Commission. The state also offers certifications for veteran-owned businesses.

How do I close my business in Texas if I decide to shut it down?

To formally close your business with the authorities, file dissolution papers with the Texas Secretary of State and notify the IRS and Texas Comptroller to cancel your tax accounts.

You also need to wind up your business properly:

• Pay off any business debts
• Close your business bank accounts
• Take care of unsold inventory
• Cancel business leases
• Dispose of business property or convert it to personal use

Check out the SOS's FAQs for terminating a business in Texas.