Choosing to start a new company is both exhilarating and terrifying. It’s the first of many choices you’ll have to make along the path. Depending on where you reside, you may need to register your company at the state, municipal, and federal levels. This article will lead you through the steps of registering your company in Texas.
Getting a Texas Business License
Table of Contents
1. Give Your Texas Business a Name
There is one crucial step you must do before registering your new business: you must choose a name. While naming your new company may seem simple on the surface, it is really one of the most important and time-consuming activities you will do throughout the business launch process.
Your company’s name should be unique and capture customers’ attention, but it also conveys much more. It should provide a clear message about the things you sell and/or the services you provide. The name of your firm exposes the public to your brand and may convey a message about your company and what it stands for.
Considering Your Name
While many entrepreneurs are inclined to speed through the name process, you should take your time and investigate all naming options. Take multiple brainstorming sessions and utilize the free internet business tools available today to assist you come up with a variety of choices, narrowing them down as you go.
Texas Name Lookup
Once you’ve narrowed down your options, you’ll need to determine whether any of them are already being used by another company in your state.
To determine whether your concept has already been taken by another firm in the state, you may use either the Texas Comptroller of Public Accounts’ taxable entity search tool or the SOSDirect business name search tool. You should also make sure that your name isn’t too similar to any existing firm in your state. This will assist to prevent future misunderstanding and legal problems.
It’s time to start legitimizing your firm once you’ve chosen a name that appropriately portrays your brand. These following procedures will differ based on your company structure and the legal requirements of your state. The next section will go through the various company structures.
If you decide to utilize a “doing business as” (DBA) name, often known as an assumed name in Texas, our DBA guide will assist you in ensuring that you are legally registered at the state, county, and/or local levels. There are a number of advantages to registering your assumed name with the state. It provides an additional layer of security against other Texas firms, establishes your company’s validity, and may be needed by certain suppliers, banks, and lenders.
2. Select a Business Structure for Your Texas Company
Now that you’ve picked a good name for your brand, it’s time to start the legalization process. Before you begin the registration procedure, you must decide which company structure is appropriate for you. Each has its own set of perks, drawbacks, and tax advantages.
The sole proprietorship
A single proprietorship is the simplest straightforward business form. This informal corporation was created for entrepreneurs who do not want to work with others. It provides no personal asset protection and does not need state filing.
If you determine that a sole proprietorship is suitable for you, you will automatically operate under your surname. You may, however, apply for an assumed name with the county or counties in where you operate. As a result, the cost of registering a DBA in Texas, as well as the renewal requirements, will vary by county. For further information, contact your county clerk in Texas.
Partnership
A general partnership, like a sole proprietorship, is an informal structure established for entrepreneurs who form a partnership with at least one other person. You and your partners’ surnames may be used for the firm, or you can get a DBA name. Profits and losses would be reported on your (and your partners’) personal tax return, and no personal assets would be protected.
Some partnerships (such as limited partnerships and limited liability partnerships) in Texas are required to submit formal documentation with the state, along with a filing fee.
LLC
If you do not intend to go public in the foreseeable future, a limited liability corporation (LLC) may be the best option. It provides more freedom and protects your personal assets in the case of a lawsuit.
The state of Texas requires all LLCs to choose a registered agent who will receive legal paperwork on the organization’s behalf. Your registered agent must be a qualified Texas citizen or a company allowed to do business in Texas. Many new LLCs choose to use a registered agent service, which costs between $29 and $300 each year.
Texas also requires you to follow specific name rules and submit a Certificate of Formation, which contains important information about your business.
Corporation
A corporation is a kind of business entity for those who have (or want to have) shareholders. So, if you want to go public in the future, this may be the greatest alternative for you.
Corporations, like LLCs, must designate a registered agent to receive paperwork, compliance papers, and government communication on the organization’s behalf. Your registered agent, like an LLC, might be a professional service, a corporate organization, or a person.
You will also need to submit a Certificate of Formation with the state in addition to obtaining a registered agent.
3. Determine Whether You Need to Register Your Texas Business
Once you’ve decided on your formal company structure and registered your new business name, you need check with your state to see what the criteria are for business registration. Each state has its own set of rules, which must be strictly followed.
Most informal company arrangements, such as sole proprietorships and general partnerships, do not need to be registered with the State of Texas. Check with your local government to discover whether your sole proprietorship or general partnership has to be registered at the county or municipal level.
Furthermore, certain firms (for example, sole proprietorships and single-member LLCs with no workers) are exempt from registering and filing for a Tax ID Number, also known as an Employer Identification Number (EIN), with the IRS. Even if this is not a necessity for your company, you should consider registering regardless since there are various legal and tax advantages.
Even though you are not compelled to register your firm, it is important to recognize that creating an LLC has several legal and financial advantages. Your business debts are considered personal debts if you are a single proprietorship or a partnership. This implies that in the case of a lawsuit, your personal assets might be taken. Personal protection is provided through LLCs, which legally shield your personal assets and minimize your personal liabilities.
Aside from personal protection, LLCs have various additional advantages, including:
Profit distribution, decision-making, and company management flexibility
“Flow-through” taxes permits the LLC’s revenue and costs to pass through to the owners’ personal income tax returns, with no limits on the number and type of owners.
If you don’t have the time or skills to organize your own LLC, there are a variety of trustworthy LLC filing services that may assist you. We analyzed and selected the five finest LLC registration services because we realize how difficult it can be to navigate through the thousands of accessible alternatives. Our LLC service review compares each to ensure you associate with a service that saves you both time and money.
4. Register Your Texas Business for Taxes
EINs are used by the IRS to identify firms for tax purposes. Every company with workers is obligated to have one. Our EIN guide will assist you in determining the EIN requirements for your company structure and will coach you through each stage of the procedure.
Along with federal tax obligations, your Texas firm will be subject to a variety of state taxes. Aside from employer taxes, all taxable companies in the state are required to pay a yearly franchise tax. Product-selling businesses must additionally register for state sales tax.
Depending on your business, you may be required to register for extra state taxes such as the hotel tax, motor fuel tax, or crude oil tax. Visit the Texas Comptroller’s website for help in assessing your tax responsibilities.
5. Obtain Texas Business Permits and Licenses
You may be needed to apply for particular licenses and permissions depending on the type of your company and the county in which you operate. A dental practice, for example, will need to seek licensure from the State Board of Dental Examiners. We suggest visiting the Texas Economic Development website to acquire the most recent Comprehensive Permit Guide and contacting your local government offices to verify you meet all licensing requirements in your region.
Furthermore, certain businesses are governed by a federal agency and need federal licenses and/or permits. A liquor company, for example, would be subject to FDA standards and recommendations. Visit the Small Business Administration (SBA) website to learn more about federal permit requirements and costs.