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How to Start a Business in Texas: A Step-by-Step Legal Guide

The Lone Star State is a great place to be an entrepreneur. If you soon plan to start your business here, you’ve chosen a place with a business-friendly climate that offers entrepreneurs many opportunities to succeed. Our guide for how to start a business in Texas will reveal the steps you need to take before you open.

 

Registration

Assuming you already know what kind of business you’ll be starting and have created your business plan, the next step will be to register your business as a legal entity. Doing so requires deciding under which business structure you’ll be operating, and what name your business will have. There are four types of business structures to choose from.

  • The most basic structure is the sole proprietorship. This option leaves you as the only person responsible for the debts and profits your business generates.
  • If you will be sharing the personal liability for your business with one or more others, a general partnership is the structure for you.
  • By choosing a corporation, you are separating your business from its owners. As its own legal entity, a corporation can own property and enter into contracts. It can also be held liable for profits and debts, and it is required to pay taxes.
  • The LLC or limited liability company is the ideal option if your shareholders, partners, or owners wish to limit their personal liability but still get the benefits of partnership where flexibility and taxes are concerned.

 

Where to Register

If you are choosing a sole proprietorship or partnership, you will need to visit your local county clerk’s office to register your name and business structure. If you’re choosing a corporation or LLC, then your business must be registered with the Texas Secretary of State.

 

Obtain an EIN

The EIN or employer identification number is your next step after determining your business structure. However, not all businesses are required to get an EIN. For example, if your business structure is a single-member LLC with no employees or sole proprietorship, only the business owner’s social security number is needed.

 

Apply for Permits and Licenses

The state of Texas requires all businesses to acquire certain permits and licenses to conduct business legally.

 

Sales Tax Permit

You’ll need to apply for a Texas sales tax permit if you’ll be selling or leasing tangible personal property or taxable services. Tangible personal property includes items like computers, clothing, vehicles, and jewelry. Because virtually all physical products sold at the retail level in Texas are taxable, a sales tax permit will be required.

No sales tax permit is required for most items related to food or health. If you’re selling digital items in a physical format, such as music or audiobooks, these are taxable. Although the majority of services in Texas are not taxable, businesses offering short-term lodging, repair, remodeling, or personal property maintenance all require a sales tax permit.

The same is true if you are running an amusement business, like a golf course or movie theater, or providing certain types of labor, such as sewing, photography, or catering.

If you operate your business out of more than one location, a separate permit for each location will be required. The Texas sales tax number is offered at no cost. Registration is only required one time with no renewals needed.

 

Open Bank Accounts and Get Credit

Many new business owners wonder whether or not they should open a business bank account. In having a separate account for your business, you—or your accountant—will spend a lot less time trying to separate personal from business expenses.

A bank account also adds legitimacy to a business, even if your chosen business structure doesn’t require you to open one by law. It communicates that your business is a legal operation that is making money.

Having an account for your business also provides the IRS with clear and undeniable information about the profits and expenses of your business, which makes their job easier, too.

 

Business and Other Licensing

Texas Sales Tax NumberIt’s important to be aware that to successfully apply for licenses and permits, you will have had to register your business with the state or county first.

Although there’s no state requirement for business licenses, several cities require one. Contact your city to be sure. If you plan to run a therapy clinic, food establishment, tattoo studio, or another type of professional business, you will require a license from the state to operate your business legally.

The state of Texas has over 200 types of licenses available for issue, so it’s important to visit their website and conduct a search to confirm you have all of the business licenses you’ll need.

In addition to business permits, you may also need permits for zoning and licensing from the city in which your business is located. This will allow legal business operations within city limits. The best way to know more is to contact the local city hall.

 

Business Owner and Employer Responsibilities

Business owners need to do much more than simply register their business and obtain a Texas employment identification number. As a new business, you’ll also have responsibilities and obligations to the state and county and your employees if you have them.

In obtaining a sales tax permit, you will be responsible for collecting tax legally, but you’ll also be responsible for keeping your books up to date, declaring all of your taxes, and filing on time.

If you have employees, you are, of course, obligated to pay them, but being an employer also makes you subject to the laws of the state and country. Additionally, you’ll also need to adhere to certain laws about things like employee safety, fair wages, and equal opportunity employment.

 

Insurance

Another aspect of your responsibility as an employer is to make sure you are covered for as many of the risks associated with operating your business as possible. Getting business insurance for things like workers’ compensation will help you put your energy into improving and growing your company, and it will offer protection to your business and its employees.

 

Costs

Although some items like the sales tax permit can be obtained at no cost, you should be prepared to pay for other items that are necessary for the legal operation of your business.

For example, setting up an LLC here will cost you around $300. Businesses are also required to file an annual report with the state of Texas each year. This report provides updated information about your business’s location and operations, and it must be filed on time, or late fees will apply.

 

How to Get the Important Documents You Need—Faster

Being a new business owner, having to complete several pages to apply for licensing and completing other official paperwork can be confusing and overwhelming.

If that weren’t enough, neglecting to include even one piece of the required information can be enough for your application to be rejected. Each time you apply, you’ll have to wait two or more weeks, which can cause long and unexpected delays for the opening of your business.

Thankfully, there is a way to avoid rejected applications and delayed openings; all you need is help with filling out your paperwork. FastFilings is a private service that assists with filing your sales tax permit and other required licensing.

Because it’s all we do, we know what information agencies need to approve your seller’s permit application. Our experts review your documents, checking for errors and making sure everything is complete before ordering permits directly through the district office near you. Don’t wait in long lines or phone queues; eliminate the hassle today by contacting FastFilings.com.

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