Complete Guide to Starting a Business in Texas

Starting a business in Texas requires navigating multiple state and federal registration processes, each with specific forms, fees, and timelines. Texas does not require a general business license, but businesses must complete entity formation, obtain tax registrations, secure industry-specific permits, and maintain ongoing compliance. This comprehensive guide provides step-by-step instructions using exclusively official government resources from Texas state agencies and federal departments.

Choosing the Right Business Entity Type in Texas

The Texas Secretary of State recognizes nine primary business structures, each offering different levels of liability protection, tax treatment, and operational requirements. Your choice fundamentally affects taxation, personal asset protection, and administrative obligations throughout your business lifecycle.

Step-by-Step Formation Process

Texas business formation follows a standardized process through the Secretary of State's SOSDirect system, available 24/7 for online filing with immediate processing confirmation and expedited service options.

Forming an LLC in Texas

1. Check name availability through SOSDirect for $1 per search or calling (512) 463-5555. Your chosen name must be distinguishable from existing entities and include "Limited Liability Company," "LLC," or "L.L.C." Reserve the name using Form 501 for 120 days at $40 if needed.
2. Access SOSDirect at sos.state.tx.us and create an account to file Form 205 online. The certificate requires the LLC name, registered agent information including consent and physical Texas address, initial members or managers with addresses, and management structure designation.
3. Select perpetual duration unless specifying a termination date. Pay the $300 filing fee plus 2.7% credit card convenience fee or use electronic check. Add $25 for same-day expedited processing if needed.
4. Receive confirmation - you receive immediate filing confirmation with the certificate returned within 2 hours for SOSDirect orders. The system generates a file number and certificate of formation serving as legal proof of LLC existence.

Forming a Corporation in Texas

Corporate formation follows similar steps but requires additional governance information. After name verification ensuring inclusion of "Corporation," "Corp.," "Incorporated," or "Inc.," file Form 201 through SOSDirect with the $300 base fee.

The certificate must specify the number of authorized shares, par value if applicable, initial director names and addresses (minimum three for standard corporations), and registered agent consent. Corporations planning S-election should authorize only one class of stock. Professional corporations file Form 203 instead, listing professional services and compliance with licensing board requirements.

Following formation, hold an organizational meeting to adopt bylaws, elect officers, issue initial stock certificates, and establish corporate records. Document all actions in meeting minutes maintained at the principal office. Texas doesn't require filing bylaws with the state, but they govern internal operations including meeting procedures, officer duties, and stock transfer restrictions.

Federal EIN Requirements from the IRS

Every business structure except sole proprietorships without employees requires a Federal Employer Identification Number serving as the business's federal tax identifier. The IRS provides EINs free through multiple application methods with varying processing times.

Alternative application methods include faxing completed Form SS-4 to 855-641-6935 for 4-business-day processing, mailing to Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999 for 4-week processing, or calling 267-941-1099 for international applicants only.

Your EIN activates immediately for most business purposes including bank accounts and state registrations. However, wait two weeks before e-filing tax returns with the new EIN to allow IRS systems to update. Each business entity should maintain only one EIN throughout its existence, even when changing structure or ownership.

Texas State Tax Registration with the Comptroller

Texas imposes two primary business taxes requiring Comptroller registration: sales tax for retailers and service providers, and franchise tax for most formal business entities.

Sales and Use Tax Permit Registration

Businesses selling tangible personal property, providing taxable services, or exceeding $500,000 in Texas revenue from out-of-state sales must obtain a sales tax permit before making taxable sales. Apply online through the Texas Online Tax Registration Application System at comptroller.texas.gov/taxes/permit/, providing:

• Social security numbers for all owners
• Federal EIN
• Texas Secretary of State file number
• NAICS code
• Anticipated first sale date

The Comptroller issues permits free of charge within 2-3 weeks, though permits typically print the next business day and arrive within 7-10 days. The 11-digit Texas taxpayer number assigned during registration serves as your identifier for all tax filings and correspondence. Display the permit prominently at your business location and begin collecting 6.25% state sales tax plus applicable local taxes immediately upon making taxable sales.

Franchise Tax Obligations

Corporations, LLCs, limited partnerships, professional associations, and financial institutions automatically become subject to franchise tax upon formation or beginning business in Texas. No separate registration exists; entities must file annual Public Information Reports (Form 05-102) and franchise tax reports by May 15.

Entities with annualized total revenue below $2,470,000 owe no tax but must still file information reports. Tax rates vary by business type: 0.375% for retail/wholesale or 0.75% for other businesses, calculated on margin rather than gross revenue. First-year entities with less than a full year of operations may file a no-tax-due report through the Comptroller's Webfile system.

The Webfile system at comptroller.texas.gov requires creating an eSystems account and adding taxpayer access using your 11-digit taxpayer number and Webfile number (XT-prefix for franchise tax). Electronic filing becomes mandatory for no-tax-due reports and businesses paying over $100,000 annually. Late filing incurs a $50 penalty even when no tax is owed.

Business Licenses and Permits

Texas maintains a decentralized licensing system with no general business license requirement. Instead, specific industries require licenses from various state agencies while local jurisdictions impose their own permit requirements.

State-Level Licensing

The Texas Department of Licensing and Regulation oversees 39 industries requiring state licenses, accessible through tdlr.texas.gov. Construction trades including electricians, HVAC contractors, and plumbers need TDLR licenses with varying fees and continuing education requirements. Personal service providers like cosmetologists, massage therapists, and laser hair removal facilities require both individual practitioner and establishment licenses.

Professional services maintain separate licensing boards: physicians through the Texas Medical Board, attorneys through the State Bar of Texas, CPAs through the Texas State Board of Public Accountancy, and engineers through the Texas Board of Professional Engineers. Each board establishes specific education, examination, and experience requirements with typical initial licensing fees ranging $200-1,000.

Food service businesses obtain permits through the Texas Department of State Health Services at dshs.texas.gov/foodestablishments, with requirements varying by operation type. Retail food establishments, food manufacturers, and mobile food units each follow different permit processes. Alcohol-related businesses require Texas Alcoholic Beverage Commission licenses through tabc.texas.gov, with permits ranging from $25 for beer retail to several thousand dollars for manufacturing licenses.

Local Permit Requirements

Cities and counties impose location-specific requirements without standardization across jurisdictions. Major cities like Houston, Dallas, Austin, and San Antonio don't require general business licenses but mandate various operational permits. Common local requirements include:

• Assumed name certificates filed with county clerks for unincorporated businesses ($15-50 depending on county)
• Zoning compliance verification
• Building permits for renovations
• Fire department permits for assembly occupancies
• Health permits for food service
• Signage permits for business identification

Contact your city's business development office and county clerk to identify specific local requirements. Houston businesses call (832) 394-8803, Dallas (214) 948-5353, Austin uses the AB+C Portal online, and San Antonio provides assistance at (210) 207-3924.

Texas Workforce Commission Requirements

Employers must register with TWC within 10 days of becoming liable when paying $1,500+ in quarterly wages or employing someone during 20 different calendar weeks.

Register online through the Unemployment Tax Registration system at apps.twc.texas.gov/UITAXREG/security/logon.do, completing the 20-minute process providing business ownership information, payroll data, and NAICS code classification. TWC issues an immediate tax account number with the official Employer Liability Notice arriving within 2 weeks.

New employers pay unemployment tax at their NAICS industry average rate or 2.7%, whichever is higher, applied to the first $9,000 of each employee's annual wages. After six quarters, TWC calculates an experience rating based on former employees' unemployment claims, potentially lowering rates for employers with minimal claims.

Quarterly Reporting

File quarterly wage reports using Form C-3 and Form C-4 electronically through Unemployment Tax Services by the last day of the month following each quarter. Report and pay taxes on April 30, July 31, October 31, and January 31. TWC requires electronic filing for all employers under rules 815.107 and 815.109.

New Hire Reporting and Workers' Compensation

Report all new and rehired employees within 20 days to the Texas Attorney General's office through employer.oag.texas.gov/employerportal/s/. Submit all employees hired within the last 90 days for first-time reporters. Failure to report risks federal and state penalties supporting child support enforcement.

Texas uniquely makes workers' compensation coverage optional for private employers, though government contractors must provide coverage for those projects. Employers choosing coverage purchase policies from licensed insurers or self-insure with state approval. Those opting out must post notices informing employees about lack of coverage and lose legal protection from workplace injury lawsuits. All employers report coverage status annually to the Division of Workers' Compensation between February 1 and April 30.

Industry-Specific Requirements

Ongoing Compliance Requirements

Texas businesses maintain several continuing obligations beyond initial formation and registration.

• Annual franchise tax reports due May 15 require all corporations, LLCs, and limited partnerships to file Public Information Reports and tax returns through the Comptroller's Webfile system.
• Registered agent maintenance remains mandatory for all entities filed with the Secretary of State. Update agent or office address changes promptly using Form 401 with a $15 fee.
• Sales tax returns follow monthly or quarterly schedules based on tax liability, due the 20th of the following period.
• Employer quarterly reports to TWC continue throughout employment relationships, with Form C-3 wage reports due the last day following each quarter.
• Entity governance demands corporations hold annual shareholder meetings with documented minutes, while LLCs operate under their operating agreements with less formal requirements.

Costs and Timeline