What You Need to Know About Starting a Business in Texas
Starting a business in Texas is an exciting venture, given the state’s robust economy, business-friendly environment, and diverse market opportunities. Texas consistently ranks as one of the best states for entrepreneurship thanks to its low taxes, minimal regulatory burdens, and access to a large workforce.
However, launching a successful business requires careful planning, compliance with state regulations, and an understanding of the local market.
At Pakis, Giotes, Burleson & Deaconson, P.C. in Waco, Texas, we can help you with everything you need to know about starting a business in Texas, from choosing a business structure to traversing legal requirements and leveraging local resources.
Why Start a Business in Texas?
Texas offers a unique combination of economic advantages that make it an attractive destination for entrepreneurs. The state has no personal or corporate income tax, which allows businesses to retain more of their earnings.
Its diverse economy encompasses industries such as technology, energy, healthcare, agriculture, and manufacturing, offering opportunities for various types of businesses. Major cities like Houston, Dallas, Austin, and San Antonio are hubs for innovation and commerce, with access to talent, funding, and infrastructure.
Additionally, Texas has a growing population, resulting in a large consumer base and a steady labor pool. The state’s pro-business policies, including streamlined permitting processes and incentives for specific industries, further enhance its appeal.
However, success in Texas requires understanding the legal, financial, and operational steps involved in starting a business. Reach out to a business attorney for assistance.
Develop a Business Idea and Plan
Every successful business starts with a solid idea and a well-thought-out plan. Begin by identifying a product or service that meets a market need. Research your target audience, competitors, and industry trends to confirm your idea is viable.
Texas’s diverse economy supports a wide range of businesses, from tech startups in Austin to agricultural enterprises in rural areas. Once you have a business idea, create a detailed business plan. This document should outline your business goals, target market, competitive analysis, marketing strategy, operational plan, and financial projections.
A strong business plan serves as a roadmap for your business and is essential when seeking funding from investors or lenders. Resources like the U.S. Small Business Administration (SBA) or local Small Business Development Centers (SBDCs) in Texas can provide templates and guidance for crafting your plan.
Choose a Business Structure
Selecting the right business structure is a critical decision that affects your taxes, liability, and operational flexibility. Texas offers several business entity options, each with its advantages and requirements:
Sole proprietorship: This is the simplest structure, ideal for solo entrepreneurs. You have full control, but you’re personally liable for business debts and obligations. No formal registration is required, though you may need to file a “Doing Business As” (DBA) name if operating under a name other than your own.
Partnership: Suitable for businesses with multiple owners, partnerships can be general or limited. A partnership agreement is recommended to outline responsibilities and profit-sharing. Like sole proprietorships, partners are personally liable unless it’s a limited liability partnership (LLP).
Limited liability company (LLC): An LLC combines the flexibility of a partnership with the liability protection of a corporation. It’s a popular choice in Texas due to its simplicity and protection of personal assets. You’ll need to file a Certificate of Formation with the Texas Secretary of State and pay a filing fee (typically $300).
Corporation: Corporations offer strong liability protection but involve more intricate regulations and tax requirements. You can form a C corporation or an S corporation, depending on your tax preferences. Filing Articles of Incorporation with the Secretary of State is required, with fees starting at $300.
Nonprofit corporation: If your business serves a charitable, educational, or community purpose, you can form a nonprofit. Nonprofits must comply with state and federal regulations to obtain tax-exempt status.
Consult with a legal or financial advisor to choose the structure that best suits your business goals. Once decided, register your business with the Texas Secretary of State (except for sole proprietorships or general partnerships). A business attorney could also assist you with your business venture.
Register Your Business
After choosing a structure, register your business to operate legally in Texas. The registration process varies by entity type:
Choose a business name: Your business name must be unique and not already in use. Check name availability through the Texas Secretary of State’s SOSDirect portal. If using a DBA, file an Assumed Name Certificate with the county clerk’s office where your business operates.
File formation documents: For LLCs, corporations, or nonprofits, file the appropriate formation documents (e.g., Certificate of Formation for LLCs) with the Texas Secretary of State. Fees range from $300 to $750, depending on the entity.
Obtain an employer identification number (EIN): An EIN, issued by the IRS, is required for tax purposes, hiring employees, or opening a business bank account. Apply for free on the IRS website.
Register for state taxes: If your business sells goods or services subject to sales tax, register for a Texas Sales and Use Tax Permit through the Texas Comptroller of Public Accounts. Other taxes, like franchise tax, may apply to certain entities.
Completing these registration steps makes sure that your business complies with state laws and is set up for success in Texas. A business attorney can help you through this process.
Secure Licenses and Permits
Texas has relatively lenient licensing requirements compared to other states, but specific permits may be necessary depending on your industry and location. Common requirements include:
State Licenses: Professions like healthcare, law, or construction may require state-issued professional licenses. Check with the Texas Department of Licensing and Regulation (TDLR) for industry-specific requirements.
Local Permits: Cities and counties in Texas may require permits for zoning, health, safety, or signage. For example, restaurants in Houston need a food service permit, while home-based businesses in Dallas may require a home occupation permit.
Federal Licenses: Businesses in regulated industries like aviation, agriculture, or alcohol sales need federal permits from agencies like the FAA or ATF.
Use the Texas.gov Business Permits and Licenses page to identify requirements for your business. Local chambers of commerce or Small Business Development Centers (SBDCs) can also provide guidance.
A Breakdown of Texas Taxes
Texas is known for its low tax burden, but businesses must comply with state and local tax obligations:
Sales and use tax: If you sell taxable goods or services, collect and remit sales tax to the Texas Comptroller. The state sales tax rate is 6.25%, with local jurisdictions adding up to 2% for a maximum of 8.25%.
Franchise tax: Most businesses with revenues above a certain threshold (e.g., $1.23 million in 2025) must pay the Texas franchise tax. Rates vary based on revenue and industry.
Property tax: If your business owns real estate or tangible property, you’ll owe property taxes to local counties.
Payroll taxes: If you have employees, withhold federal income tax, Social Security, and Medicare taxes, and pay state unemployment insurance contributions.
Work with an accountant and a business attorney to verify compliance with tax filings and deadlines. The Texas Comptroller’s website offers tools and webinars to help businesses understand their tax responsibilities.
Secure Financing
Funding is often a hurdle for new businesses. Texas offers several options to help entrepreneurs access capital:
Personal savings or loans: Many entrepreneurs start with personal funds or loans from family and friends.
Bank loans: Traditional banks and credit unions offer small business loans, often backed by the SBA. The SBA 7(a) loan program is popular for startups.
Venture capital and angel investors: Cities like Austin and Dallas have thriving startup ecosystems with access to venture capital firms and angel investors, particularly for tech and innovation-driven businesses.
Grants and incentives: Texas offers incentives like the Texas Enterprise Fund (TEF) and Skills Development Fund for businesses that create jobs or invest in workforce training. Local economic development corporations may also provide grants or tax abatements.
Create a detailed financial plan to determine the amount of funding you need and explore all available options. Networking events and pitch competitions in Texas can connect you with potential investors.
Set Up Operations
Once your business is registered and funded, set up the operational structure:
Open a business bank account: Separate your personal and business finances by opening a dedicated bank account. Most banks in Texas require an EIN and formation documents.
Purchase insurance: Protect your business with appropriate insurance, such as general liability, property, or workers’ compensation insurance (required if you have employees). Consult an insurance agent to identify coverage needs.
Hire employees: If you plan to hire, comply with federal and state labor laws. Register with the Texas Workforce Commission (TWC) for unemployment insurance and follow hiring regulations, including I-9 and W-4 forms.
Set up accounting systems: Use accounting software or hire a bookkeeper to track income, expenses, and taxes. Maintaining proper financial records is essential for both tax compliance and business growth.
Establishing these operational components helps make sure that your business runs smoothly, remains compliant, and is prepared for growth in Texas. For assistance, reach out to a business attorney.
Market Your Business
Effective marketing is crucial to attract customers in Texas’s competitive market. Develop a marketing strategy that includes:
Online presence: Create a professional website and leverage social media platforms like X to reach your audience. Optimize your site for search engines to attract local customers.
Local advertising: Use local media, such as radio, newspapers, or billboards, to promote your business in cities like Houston or San Antonio.
Networking: Join local chambers of commerce, industry associations, or business groups like the Texas Association of Business to build relationships and gain visibility.
Branding: Develop a strong brand identity with a memorable logo, consistent messaging, and excellent customer service.
Consider hiring a marketing consultant or agency for professional assistance.
Contact a Business Attorney
Starting a business in Texas is a rewarding endeavor with significant opportunities for success. By developing a solid business plan, selecting the right structure, adhering to legal requirements, and utilizing local resources, you can establish a thriving enterprise. Our business attorneys are ready to help you. Contact Pakis, Giotes, Burleson & Deaconson, P.C. in Waco, Texas, for more information.