How to start a business in Texas: steps, fees, taxes

Published Friday 27 February 2026

Table of contents

• Plan your business
• Choose your business structure
• Register your business
• Get the licenses and permits you need
• Understand your tax responsibilities
• Set up your business finances
• Find funding options
• Get your Texas business running
• FAQs on starting a business in Texas

Key takeaways

• Choose an LLC business structure for most small businesses since it protects your personal assets from business debts while offering tax flexibility and requiring less paperwork than corporations.
• Register your business through the Texas Secretary of State's SOS Direct portal for $300 (LLCs and corporations) or file an Assumed Name Certificate with your county clerk for $25-$50 (sole proprietorships and partnerships).
• Apply for a Sales and Use Tax Permit through the Texas Comptroller if you sell retail goods or taxable services, as you'll need to collect 6.25% state sales tax plus any local taxes.
• Open a separate business bank account immediately after registration to keep personal and business finances separate, which simplifies tax filing and protects your personal assets.

Plan your business

A business plan outlines your goals, target market, competitive advantage, and financial projections. While Texas doesn't require a formal business plan to register, having one helps you make smarter decisions and attract funding.

A good business plan addresses several key areas. Your business plan should cover:

• Business concept: What you're selling and what problem it solves
• Target market: Who your customers are and how you'll reach them
• Competitive analysis: How you'll differentiate from existing businesses
• Financial projections: Startup costs, revenue forecasts, and break-even timeline
• Funding needs: How much capital you need and where it will come from

Keep your plan simple and focused. You can always expand it later as your business grows.

Download Xero's free business plan template to get started.

Choose your business structure

Your business structure determines how you pay taxes and whether you're personally liable for business debts. Choosing the right structure is one of the first decisions you'll make when starting a business in Texas.

Texas recognizes several business structures. The most common structures for small businesses in Texas are:

• Sole proprietorship: The simplest structure where you're personally liable for business debts. Best for single owners testing a business idea.
• Partnership: Shared ownership where partners can have different liability levels. Best for businesses with two or more owners.
• Limited liability company (LLC): Protects your personal assets from business debts and offers tax flexibility. Best for most small businesses seeking liability protection.
• Corporation: Provides liability protection and potential tax advantages but requires more paperwork and compliance. Best for businesses planning to raise investment or go public.

Several factors affect which structure is right for you. When choosing your structure, consider:

• Tax treatment: Sole proprietors and partnerships report business income on personal tax returns. LLCs and corporations have more tax options.
• Liability protection: LLCs and corporations shield your personal assets from business debts. Sole proprietors and general partners are personally liable for business debts.
• Administrative burden: Simpler structures like sole proprietorships require less paperwork. Corporations have the most compliance requirements.

Learn more about business structures on the Texas Secretary of State website.

Register your business

Registering your business in Texas makes your business official and authorizes you to operate in the state. The process depends on your business structure.

For sole proprietors and unincorporated partnerships:

1. Contact your local county clerk's office
2. Complete an Assumed Name Certificate (DBA filing)
3. Provide basic business details like your name, address, and business name
4. Pay the filing fee (varies by county)

For LLCs, limited partnerships, and corporations:

1. Go to the Texas Secretary of State's SOS Direct portal
2. Create a Certificate of Formation
3. Enter your business name, address, start date, purpose, and director names
4. Pay the filing fee ($300 for LLCs, $300 for corporations)

As part of registration, you'll nominate a registered agent who receives legal and tax documents on your business's behalf.

Once approved, you'll receive a Certificate of Fact (called a Certificate of Good Standing in other states) authorizing you to operate in Texas.

Here are the filing fees by business structure:

• LLC: $300
• Corporation: $300
• Limited partnership: $750
• Assumed name (DBA): $25–$50 (varies by county)

Get an EIN if you need one

An Employer Identification Number (EIN) is a federal tax ID that identifies your business to the IRS. You need an EIN if you:

• 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.

You can get an EIN for free from the IRS's website. Note that the online tool is available only during specific hours (Eastern Time). Be prepared to complete the form in one session, as the application expires after 15 minutes of inactivity. The IRS limits applications to one EIN per day for each responsible party. You can also send the IRS Form SS-4 by mail, or have your tax professional get you an EIN.

Get the licenses and permits you need

Texas doesn't require a general business license, but you may need industry-specific licenses, local permits, and activity-based registrations depending on your business type and location.

Key steps

Here's how to get the licenses and permits you need:

1. Identify required licenses: Check the Texas Comptroller's license guide to find industry-specific requirements for your business type.
2. Apply for a sales tax permit: If you sell retail goods or taxable services, register for a Sales and Use Tax Permit through the Texas Comptroller or by filing Form AP201. Processing takes 2–3 weeks.
3. Check local requirements: Contact your city hall or county clerk's office about zoning compliance, home business permits, or location-specific licenses.
4. Review federal license requirements: Some activities require federal licenses, including agriculture, alcohol sales, aviation, firearms, and transportation. Check the SBA's list of licensed activities to find the relevant agency.

Understand your tax responsibilities

Texas has no state income tax, which is a major advantage for business owners. However, you still have state and federal tax obligations to manage.

Here are the Texas state taxes you may need to pay:

• Franchise tax (margin tax): Businesses with revenue over $2.47 million owe 0.375%–0.75% depending on business type. Most small businesses fall below this threshold.
• Sales and use tax: If you sell taxable goods or services, collect 6.25% state sales tax plus any local taxes (up to 2%).

You'll also need to manage these federal taxes:

• Income tax: Reported on your personal return (sole proprietorships, partnerships, S-corps) or corporate return (C-corps)
• Self-employment tax: 15.3% on net self-employment income for sole proprietors and partners
• Employer taxes: FICA (7.65%) and Federal Unemployment Tax Act (FUTA) (6%) if you have employees
• Estimated quarterly payments: Required if you expect to owe $1,000 or more in taxes

Accounting software like Xero helps you track income, categorize expenses, and prepare for tax deadlines throughout the year.

Set up your business finances

Getting your finances in order from the start helps you track profitability and stay compliant. Here's what to set up.

Open a business bank account

A business bank account separates your personal and business finances, making it easier to track profitability, simplify tax filing, and protect your personal assets.

You'll need to gather some documents to open a business bank account. Here's what to bring:

• Government-issued ID
• Business registration documents (Certificate of Formation or Assumed Name Certificate)
• EIN (or Social Security Number for sole proprietors)

Look for accounts with low fees, free transactions, and integrated payment processing.

Set up accounting software

Accounting software helps you track income and expenses, send invoices, and stay on top of tax obligations from day one. Xero connects to your bank, automates reconciliation, and gives you real-time visibility into your cash flow. For personalized setup 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
• SBA's funding resources

Set up payroll

Since Texas has no state income tax, payroll is simpler compared to other states. However, you still need to handle federal payroll obligations:

• Federal income tax withholding: Based on employee W-4 forms
• Social Security and Medicare (FICA): 7.65% employer contribution
• Federal unemployment tax (FUTA): 6% on first $7,000 of wages per employee

Payroll software like Xero automates calculations, filings, and payments to help you stay compliant.

Start planning ahead

Set short- and long-term financial goals to guide your decisions as your business grows. Forecasting revenue and expenses helps you anticipate cash flow gaps and plan for major purchases or hiring.

Get started with Xero's guide to small business budgeting and forecasting.

Find funding options

Starting a business requires capital for registration fees, equipment, inventory, and operating expenses. Here are the main funding options for Texas small businesses.

Self-funding (bootstrapping)

Self-funding (bootstrapping) means using personal savings, credit cards, or assets to start your business. You maintain full control and stay debt-free, though you're responsible for all the financial risk. Create a detailed budget before committing personal funds.

SBA-backed loans

SBA-backed loans are government-guaranteed loans issued through participating banks and lenders. The SBA guarantee reduces lender risk, making approval easier for small businesses that need additional support to qualify for traditional loans.

SBA loans have specific requirements. To improve your chances of approval:

• Maintain a credit score above 680
• Prepare a detailed business plan
• Gather collateral documentation

Find SBA-approved lenders through the SBA's Lender Match tool.

Texas small business grants

Texas small business grants provide funding that's yours to keep. Options include:

• Skills for Small Business:Texas Workforce Commission grants for employee training
• Texas Enterprise Fund: Incentives for businesses creating jobs in Texas
• Federal grants: Search Grants.gov for industry-specific opportunities

Most grants have specific eligibility requirements and competitive application processes.

Crowdfunding and alternative financing

Crowdfunding platforms like Kickstarter, Indiegogo, and GoFundMe let you raise money from supporters who believe in your business idea. Peer-to-peer lending platforms offer another option beyond traditional bank loans.

Get your Texas business running

Once you've registered and set up your finances, you're ready to launch. Here's what to focus on next.

Complete these tasks before opening day:

• Set up your workspace or storefront
• Stock inventory or prepare service offerings
• Create your website and social media profiles
• Set up payment processing

Stay on top of these ongoing compliance requirements:

• File annual reports with the Texas Secretary of State (for LLCs and corporations)
• Renew licenses and permits as required
• File and pay taxes on schedule
• Keep accurate financial records

Focus on these areas to grow your business:

• Build your customer base through marketing and referrals
• Track your cash flow and adjust pricing as needed
• Consider hiring when demand exceeds your capacity

Xero helps you manage finances, track expenses, and stay on top of compliance as your business grows. Get one month free to see how it works for your Texas business.

FAQs on starting a business in Texas

Still have questions about starting a business in Texas? Here are answers to some common concerns.

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

Startup costs depend on your business structure and industry. Basic registration costs include:

• LLC filing: $300
• Corporation filing: $300
• DBA (Assumed Name): $25–$50
• Sales tax permit: Free
• EIN: Free

Additional costs may include business licenses ($50–$500+), insurance, equipment, and initial inventory. Most Texas small businesses can complete basic registration for under $500.

What is the $10,000 grant for small business in Texas?

Several Texas programs offer grants up to $10,000 for small businesses, including local economic development initiatives and industry-specific programs. The Texas Workforce Commission's Skills for Small Business program provides training grants, while some cities offer microenterprise grants for qualifying businesses.

Grant availability and amounts change frequently. Check your local Small Business Development Center (SBDC) or economic development office for current opportunities in your area.

Do I need a lawyer or accountant to start a business in Texas?

Starting a business in Texas is straightforward without a lawyer or accountant, but professional help can be valuable for complex situations.

A lawyer can help with complex legal matters. Consider hiring one if you:

• Have multiple business partners and need an operating agreement
• Work in a heavily regulated industry
• Need to protect intellectual property

An accountant can help with financial planning and taxes. Consider hiring one if you:

• Have complex tax situations or multiple income sources
• Need help with financial projections for investors

For basic bookkeeping and tax preparation, accounting software like Xero can handle most small business needs at a fraction of the cost.

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

Yes, you must register a physical street address with the state. You can use your home address if you operate from home, and a separate PO box for business mail.

Can I run a business from home in Texas?

Yes, Texas allows home-based businesses. Check local requirements to make sure you're compliant:

• Local zoning laws: Some areas prohibit certain business activities in residential zones
• HOA rules: Your homeowners association may have additional restrictions
• Permit requirements: Businesses with customer traffic, inventory storage, or production may need permits

Do I need a separate business phone number and email?

It's not required, 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. For nationwide protection of 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 a person or company designated to receive legal and tax documents on your business's behalf. LLCs, corporations, and limited partnerships must have a registered agent in Texas. Sole proprietors only need one if they file a DBA. You can serve as your own registered agent if you have a physical Texas address.

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

Registration timelines vary by method and business type:

• Online filing (SOSDirect): Immediate confirmation for LLCs and corporations
• Mail filing: 5–7 business days for processing
• Sales tax permit: 2–3 weeks
• Assumed name (DBA): Same day to a few days, depending on county

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. Your business must be registered in 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 dissolve your Texas business, file termination documents with the Texas Secretary of State and cancel your tax accounts with the IRS and Texas Comptroller.

You'll need to wrap up your business affairs before filing dissolution documents. Complete these steps first:

• Pay off all business debts
• Close business bank accounts
• Liquidate or transfer unsold inventory
• Cancel business leases and contracts
• Dispose of or convert business property

See the Texas Secretary of State's FAQs for terminating a business in Texas for detailed instructions.