In case you are still uncertain about which state you can easily start your Business, then Texas might be the ideal state to kick start your business. With a fast growing population, low regulation business climate and no state taxes on corporate or personal income, it is of no doubt why Texas has long been considered a top state to operate a business.
If you have made up of your mind to start your business in this amazing state, then be sure to begin your venture on the right legal footing. In this article, we will discuss on the steps one needs to take in order to register a business in Texas.
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What is a Business License?
A business license is an official permit issued by a government authority that allows individuals or companies to operate a business legally within a specific jurisdiction.
This license serves as a regulatory tool to ensure that businesses comply with local laws, regulations, and safety standards while conducting their operations.
Business licenses are often mandatory for most types of businesses and may vary in requirements depending on the location and type of business activity.
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5 Steps to Register Your Business in Texas
Similar to many other states, registering a business in Texas requires a little amount of patience and a bit of research. This step-by-step guide will give you a perfect idea of what it takes for you to register your business in Texas.
1. Choose Your Business Structure
The very first thing you need to do is to decide on your Business structure, which is also known as a business entity, that best fits your liability requirements, operational needs, and plans for employees.
The business structure you choose will also determine where you register your business and the estimated cost of registering the business.
Here are some common Texas Business structures:
- General Partnership: A partnership as the name implies, it is designed for two or more individuals joining in business. All parties involved are equally liable for the business but they enjoy exclusion from the state franchise tax. In Texas, general partnerships are able to register with the secretary of state for $200 per general partner.
- Sole Proprietorship: This mostly involves individuals that run their businesses on their own and want to own all of the business assets without liability protection, sure this is the structure you need. In Texas, a sole proprietorship is not subject to the state franchise tax.
- Limited Liability Company: This is business structure is often abbreviated as LLC, and this puts together features from several business structures, making it a common choice for business owners, most especially those with employees. To setup an LLC in Texas, you need a certificated of formation filed with the Texas secretary of state at a cost of $300. Unlike the other business structures, LLC is subject to the state franchise Tax in Texas.
- S- or C-Corporation: In Texas, all for-profit businesses are required to register with the secretary of state. The certificate of formation requires a $300 filing fee. State franchise taxes also apply to corporations. Considering that companies are seen as distinct legal entities from their owners, this corporate structure provides more protection against personal liability.
Sole proprietorships and partnerships can register with their local county clerk’s office. LLCs and corporations must register through the secretary of state.
2. Choose a Business Name
If you are operating as a sole proprietorship, you can make use of your name for your business, though this is not much advisable incase you will need to sell your business later. If you do not want to use your name, then you need to carryout some research to see if your desired business name is available. You can conduct a quick Google search and then check the Texas Department of state: Division of Corporations database to ensure another business in Texas is not registered under a similar name.
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3. Obtain an Employer Identification Number (EIN)
For businesses, obtaining an EIN is a free yet essential step. Using an EIN, you can open a business checking account, apply for employee tax withholdings, and build business credit. The IRS uses an EIN to track your business's transactions.
It should be noted that a lone proprietor can utilize their social security number as identification in place of an EIN. On the other hand, an EIN can aid your small business in a number of ways, including making it easier for you to be approved for a loan and safeguarding your assets from identity theft.
4. Apply For Business Licenses and Permits
The state of Texas does not require a general license for new businesses, but the country or city out of which a business plans to operate will have its own peculiar requirements that vary with respect to business type.
It is good you keep in mind that there are a variety of small fees associated with different types of business fillings. You can view a list of associated fees here so as to get an estimated of what it may cost to get your business legally off the ground.
5. Consider Additional Requirements
As soon as you have registered, there may be other legal requirements to consider, such as business insurance and unemployment tax. You can find more information on unemployment tax in the Governor’s Small Business Handbook.
Have in mind that this page is for informational purposes only and is not intended to be relied upon as legal, financial, or accounting advice. Please do well to consult your own professional if you have any particular questions.
Final Thoughts: How to Register A Business In Texas
Registering a business in Texas involves several steps, each critical for establishing a solid legal foundation. By carefully navigating through these steps, you ensure that your business is compliant with state regulations and well-positioned for success.
Be sure to consult with legal and financial professionals if needed to ensure you meet all requirements for your specific business type. Good luck on your entrepreneurial journey in the Lone Star State!