Starting a business in Texas is an excellent choice for entrepreneurs since it has the second-largest economy in the United States and the highest ranking for economic growth. Start your business today by following these simple steps, and you'll be on your way to financial and personal freedom in no time.
Business structure
A business structure is the most important thing when it comes to starting your own business. Your business's legal, for-profit entity hinges on a few variables. This includes your business type, whether you'll have staff, and your comfort with liabilities. Some structures are free to register, whereas others have a nominal price and are taxed.
Many people choose:
A sole proprietorship: The most popular and simplest business structure for one individual who owns all firm assets. This person has total business liability. Their sole proprietorship uses their name unless they file a "DBA certificate" in all counties where they do business. These constructions aren't taxed.
General Partnership: Like sole proprietorship, but with more people. It's a separate company entity from the partners, but creditors can still go for their personal assets. State franchise tax doesn't apply.
Limited Liability Company or LLC. It's a flexible unincorporated business entity with limited liability and pass-through tax benefits. LLCs pay a $300 formation fee and a state franchise tax. This is different from a limited liability partnership, a general partnership registered with the secretary of state that costs $200 per general partner in Texas to create.
Corporations. Corporations have limited liability, centralized management, permanent existence, and easy ownership transferability. Shareholders own companies, and directors manage them. To legally operate in Texas, for-profit businesses must file paperwork with the Secretary of State's office, for which they must pay a $300 formation fee and a franchise tax.
Your company must file a "Foreign Entity" form with the Texas secretary of state if it was formed in another jurisdiction.
Name your company
Choose a business name. If you're starting a sole proprietorship, you can use your own name as the business name; otherwise, you'll need to register under an Assumed Name (which comes via the DBA certificate). Consider these steps if you're stuck on a name:
Search Google
Consider a searchable, easy-to-pronounce name.
Search trademarks
Before choosing a name, be sure it isn't trademarked. Start by browsing U.S. Patent & Trademark Office trademarks. This database shows registered names and their classifications.
Texas' business name database
Check the Texas Division of Corporation's database once you've Googled a name and determined it's not trademarked. This ensures your business name isn't the same as another Texas-registered company.
Get an EIN (employee identification number)
EINs, or business tax identification numbers, are used to track business transactions. It helps create business credit, open business checking accounts, and file employee tax withholdings. IRS EIN applications are available. You may get an EIN for free, and if you'd like, LegalZoom will handle all your compliance needs, including helping you obtain an EIN.
You must also grasp your state and local tax obligations. Most small firms are free from franchise taxes imposed by the Comptroller of Public Accounts.
Businesses with fixed assets must pay county inventory tax. If relevant, you'll need an inventory and fixed asset management system to determine how much you invested in equipment and machinery.
Get licenses and permits
Depending on your business, you may need a license or permit. See if your profession qualifies with the Texas Department of Licensing and Regulation. If you're unsure, contact your local county or city administration.
Check for employer requirements
This depends on the business you're beginning in Texas, including if you have employees. Labor, safety, and tax obligations, such as the Americans with Disabilities Act, Equal Employment, and security, wage, and labor regulations. You may need a tax or business lawyer to ensure compliance and further grow your business.
If you have employees, there are a few extra economic hurdles to cross when starting a business in Texas. Here is a handful of the most essential, but consult the state guidebook for more.
Insurer
Most private businesses in Texas aren't required to have workers' compensation insurance, but those that do are protected from lawsuits by injured workers. Those are lacking workers' comp must also notify the Texas Department of Insurance annually.
When renting or leasing a facility, it is recommended that businesses obtain property insurance, such as tenant coverage.
While Texas law does not mandate that businesses of any kind provide health insurance to their workers, those that do must provide coverage to anybody who puts in 30 or more hours per week, on average, during the calendar year. 75% of eligible employees must join an insurance company's health plan.
EITC (Earned Income Tax Credit)
"Liable employers" must pay Texas unemployment tax. Non-liable employers include those that hire exclusively independent contractors and those whose employees are compensated through a professional employer association.
As soon as a company has employees subject to state unemployment tax, the clock starts ticking, and the company must register with the TWC.
Third-party programs and lenders
Texas isn't a lonesome state. The U.S. Small Company Administration offers business guidance, low-interest loans, grants, and more. Their programs aid veteran-owned businesses, minority-owned businesses, and women-owned businesses.
The Small Business Handbook suggests non-profit lenders, the Lift Fund, People Fund, BCL of Texas, and local credit unions for working capital. Lack of working capital is a common concern for small business owners. Never leave home without it.
Business banking registration
Separate your personal and business bank accounts if you're a new business owner. First, open a business account. Many free business banking accounts exist if you want to avoid fees. Consider how often you'll make transactions and how much you can carry monthly. Start with our guide to the finest Texas business banks.
A company credit card can help you build credit and provide extra funds if needed. A 0% introductory rate might be an interest-free loan if you qualify.
Conclusion
Starting a business in Texas is easy: Low entrance hurdle and abundant resources. Summers are hot, but that's a tiny price to get into the small company world.
With SYP.net you can make your business dream in Texas come true. However, don't take Texas' seeming interest in your success for granted. Keeping afloat in the current economic climate is challenging enough; having the support of one's state government is a boon few can refuse.