How to Start a Business in Texas: Your Complete Step-by-Step Guide for 2025

"A born Texan has instilled in his system a mindset of no retreat and no surrender. I wish everyone the world over had the dominating spirit that motivates Texans." — Billy Clayton, Texas political and business leader.

Starting a business in Texas has never been more appealing. With no state income tax, a business-friendly regulatory environment, and access to one of the largest economies in the United States, the Lone Star State continues to attract entrepreneurs from around the world. But here's the problem: navigating the maze of requirements, licenses, and legal structures can overwhelm even the most determined business owner.

The good news? You're about to run through a proven roadmap that nails every essential step, from choosing your business structure to securing the right permits. Whether you're launching a tech startup in Austin, opening a restaurant in Houston, or starting a consulting firm in Dallas, this comprehensive guide will save you time, money, and costly mistakes.

Why Texas is the Ultimate Business Destination

Texas consistently ranks among the top states for business formation, and for good reason. As of January 2025, Texas has 2,928,688 registered business entities - 125,329 more than the previous year, with 2 million of these being in-state limited liability companies. The state's economy would rank as the 8th largest in the world if it were an independent nation. Here's what makes Texas so attractive:

• No state income tax for individuals or businesses
• Low corporate tax rates and business-friendly policies
• Diverse economy spanning technology, energy, agriculture, and manufacturing
• Strategic location with access to major markets and international trade
• Skilled workforce from top universities and technical schools
• Minimal bureaucratic red tape compared to other states

But there's more. Texas processed over 400,000 new business filings in 2023 alone, making it one of the fastest-growing business ecosystems in America. In fact, LLC formations have almost tripled since 2015, with LLCs now representing about 85% of all new business entities formed in Texas.

Step 1: Choose Your Business Structure

Your business structure determines everything from your tax obligations to your personal liability protection. Here are the most common options in Texas:

Limited Liability Company (LLC)

An LLC offers the perfect balance of simplicity and protection for most small businesses. In Texas, forming an LLC costs $300 in state filing fees, and you'll enjoy:

• Personal asset protection from business debts and lawsuits
• Tax flexibility - choose how you want to be taxed
• Minimal paperwork compared to corporations
• No residency requirements - you don't have to live in Texas to form a Texas LLC

Corporation (C-Corp or S-Corp)

Corporations work best for businesses planning to raise investment capital or go public. The filing fee is $300, but corporations require more complex record-keeping and formal board structures.

Partnership

If you're starting a business with others, a partnership might be appropriate. Texas recognizes general partnerships, limited partnerships, and limited liability partnerships.

Sole Proprietorship

The simplest structure requires no formal filing, but offers no personal liability protection. You'll operate under your own name or file a DBA (Doing Business As).

Here's why this matters: Your choice affects your taxes, liability, and growth potential. Most experts recommend LLCs for new businesses because they're simple to manage while providing strong legal protection.

Step 2: Name Your Business and Check Availability

Your business name is more than just a label - it's your first marketing tool. In Texas, you must choose a name that:

• Isn't already in use by another Texas business
• Includes required designators (LLC, Inc., Corp, etc.) if applicable
• Doesn't mislead customers about your business type
• Complies with trademark laws

You can search existing business names using the Texas Secretary of State's SOSDirect database. Pro tip: Even if a name is available for your business entity, check domain name availability and social media handles to ensure consistent branding.

Reserving Your Name

Texas allows you to reserve a business name for 120 days for $40. This gives you time to complete your formation paperwork without losing your preferred name.

Step 3: Register Your Business Entity

Once you've chosen your structure and name, it's time to make it official. Here's the process:

File Formation Documents

For LLCs, you'll file a Certificate of Formation with the Texas Secretary of State. The document must include:

• Business name and type
• Registered agent information
• Management structure
• Duration (perpetual or specific end date)

You can file online through SOSDirect, by mail, or in person. Online filing is fastest, typically processing within 10-15 business days for SOSDirect or 13-15 business days for SOS Upload. Expedited processing is available for an additional $25 fee.

Appoint a Registered Agent

Texas requires every business entity to have a registered agent - someone who can receive legal documents on behalf of your business. Your registered agent must:

• Have a Texas street address (no P.O. boxes)
• Be available during normal business hours
• Be either a Texas resident or a business authorized to operate in Texas

You can serve as your own registered agent, hire a professional service, or ask someone you trust.

Step 4: Obtain Your Federal Tax ID (EIN)

An Employer Identification Number (EIN) is like a Social Security number for your business. You'll need it to:

• Open a business bank account
• File tax returns
• Hire employees
• Apply for business licenses

The good news? Getting an EIN is completely free through the IRS website. Beware of third-party services that charge fees for this free service.

Step 5: Understand Texas Tax Requirements

One of Texas's biggest advantages is its tax-friendly environment. Here's what you need to know:

State Taxes

• No state income tax for individuals or businesses
• Franchise tax applies to LLCs and corporations with revenues over $2.47 million (as of 2025)
• Sales tax ranges from 6.25% to 8.25% depending on location
• Property tax varies by county and municipality

Federal Taxes

You'll still need to comply with federal tax requirements based on your business structure and income level.

Step 6: Secure Required Licenses and Permits

Texas operates on a "general rule" that businesses don't need state licenses unless specifically required. However, many industries do require special permits:

State-Level Licenses

Common industries requiring state licensing in Texas include:

• Professional services - doctors, lawyers, accountants, architects, engineers, real estate agents
• Food service and retail - restaurants, food trucks, grocery stores, catering businesses
• Alcohol sales and distribution - bars, liquor stores, breweries, distributors
• Transportation and logistics - trucking companies, taxi services, moving companies
• Construction and contracting - general contractors, electricians, plumbers, HVAC technicians
• Healthcare and medical services - hospitals, clinics, dental practices, veterinary services
• Financial services - banks, credit unions, insurance agencies, investment firms
• Childcare and education - daycare centers, private schools, tutoring services

Local Permits

Most cities and counties require basic business permits. Common local permit requirements include:

• General business license - permits you to operate within city limits
• Zoning compliance certificate - ensures your business type is allowed at your location
• Building permits - required for any physical modifications or new construction
• Signage permits - regulates outdoor signs and business displays
• Fire department inspections - safety compliance for public-facing businesses
• Health department permits - mandatory for food service establishments
• Home occupation permits - if operating a business from your residence

Federal Requirements

Certain businesses need federal licensing, including:

• Transportation - DOT registration for interstate commerce, CDL requirements
• Communications - FCC licensing for radio, television, or telecommunications
• Agriculture - USDA permits for meat processing, organic certification
• Finance - banking licenses, investment advisor registration, insurance licensing
• Import/Export - customs registration, international trade licenses
• Firearms and explosives - ATF licensing for dealers and manufacturers
• Aviation - FAA certification for aircraft operations and maintenance

Let's break it down: Start by checking with your city and county for local requirements, then verify if your industry needs state or federal licensing.

Step 7: Open a Business Bank Account

Separating your personal and business finances is crucial for legal protection and tax compliance. To open a business bank account in Texas, you'll typically need:

• Certificate of Formation or incorporation documents
• EIN confirmation letter from the IRS
• Operating agreement (for LLCs) or bylaws (for corporations)
• Personal identification for account signers
• Initial deposit (varies by bank)

Shop around for banks that offer business-friendly features like low fees, online banking, and good customer service.

Step 8: Set Up Accounting and Record-Keeping

Proper financial management from day one prevents headaches during tax season and helps you make informed business decisions. Consider:

Accounting Software Options

• QuickBooks - industry standard with robust features
• Xero - cloud-based with excellent integration capabilities
• FreshBooks - user-friendly for service-based businesses
• Wave - free option for small businesses

Record-Keeping Requirements

Texas law requires businesses to maintain records for at least four years, including:

• Financial statements and tax returns
• Bank statements and receipts
• Payroll records (if you have employees)
• Important contracts and agreements

Step 9: Obtain Business Insurance

While Texas doesn't require most businesses to carry insurance, it's essential for protecting your investment. Common types include:

General Liability Insurance

Protects against claims of bodily injury, property damage, or personal injury caused by your business operations.

Professional Liability Insurance

Essential for service-based businesses, covering errors, omissions, or negligence claims.

Workers' Compensation

Texas is unique among states - workers' compensation insurance is optional for most private employers. However, it's strongly recommended because:

• Only about 28% of private employers in Texas don't carry workers' comp
• Without coverage, you lose legal protection from employee lawsuits
• Public employers and businesses contracting with government entities must provide coverage
• Non-subscribers must file annual notices with the Texas Department of Insurance and inform employees in writing

Commercial Property Insurance

Protects your business equipment, inventory, and physical location from theft, fire, or natural disasters.

Here's why this matters: A single lawsuit or natural disaster could destroy an uninsured business. Insurance premiums are a small price to pay for peace of mind.

Step 10: Understand Employment Law

If you plan to hire employees, Texas has specific requirements:

Required Registrations

• Texas Workforce Commission for unemployment insurance
• Workers' compensation insurance (optional but recommended)
• New hire reporting within 20 days of employment

Employment Standards

Texas follows federal employment laws, including:

• Fair Labor Standards Act for minimum wage and overtime
• Equal Employment Opportunity laws
• Family and Medical Leave Act (for businesses with 50+ employees)

Key Statistics and Current Requirements

Based on the latest data from Texas state agencies:

• 2,928,688 active business entities as of January 2025 (Texas Secretary of State)
• 125,329 new registrations in 2024 alone
• $300 LLC filing fee with the Texas Secretary of State
• $2.47 million franchise tax threshold for 2024-2025 reports
• No annual registration fees for Texas LLCs
• 10-15 business day processing for online LLC formations

Frequently Asked Questions

How much does an LLC cost to start in Texas?

The basic cost to start an LLC in Texas is $300 for the state filing fee. Additional costs may include registered agent services ($100-300/year), legal assistance ($500-2,000), and any required licenses or permits specific to your business type.

What is required to start a business in Texas?

To start a business in Texas, you need to: choose a business structure, select and register a business name, file formation documents with the Secretary of State, obtain an EIN from the IRS, secure required licenses and permits, and open a business bank account.

Is it worth getting an LLC in Texas?

Yes, forming an LLC in Texas is typically worth it for most businesses. The $300 filing fee provides significant personal asset protection, tax flexibility, and credibility with customers and vendors. The benefits far outweigh the modest cost for most business owners.

How much does a business license cost in Texas?

Texas doesn't require a general business license. Costs vary by industry and location. Professional licenses can range from $50-500, while specialized permits (like food service) may cost $100-1,000 depending on your city and business type.

Do I have to pay for my LLC every year in Texas?

Texas LLCs must file an annual Public Information Report, but there's no fee. However, if your LLC generates more than $2.47 million in revenue (as of 2025), you'll owe franchise tax. Most small businesses won't reach this threshold.

How much does it cost to get an EIN number?

Getting an EIN (Employer Identification Number) is completely free when you apply directly through the IRS website. Avoid third-party services that charge unnecessary fees for this free government service.

What happens if you start a business without an LLC?

Without an LLC or corporation, you're operating as a sole proprietorship. This means you have unlimited personal liability for business debts and lawsuits. Your personal assets (home, car, savings) could be at risk if your business faces legal problems.

How much can a small business make before paying taxes in Texas?

Texas has no state income tax, so there's no state threshold. For federal taxes, sole proprietors must file if they earn $400 or more. For franchise tax, businesses with revenues under $2.47 million are exempt as of 2025.

At what point do you have to have an LLC?

Texas doesn't require businesses to form an LLC. However, it's recommended before you start operations, sign contracts, or face any liability exposure. Many entrepreneurs form their LLC as soon as they decide to start a business.

Is it illegal to run an unregistered business?

Operating without proper registration isn't automatically illegal, but it can violate local ordinances and industry regulations. You may face fines, be unable to enforce contracts, or lack legal standing in disputes. Always check local requirements.

How do I set up an LLC in Texas by myself?

You can form a Texas LLC yourself by: choosing an available name, appointing a registered agent, filing a Certificate of Formation online through SOSDirect, obtaining an EIN from the IRS, and creating an operating agreement (recommended but not required).

What permits are needed for an LLC in Texas?

LLCs don't need special permits just for being an LLC. However, depending on your business type, you may need industry-specific licenses, city business permits, sales tax permits, or professional licenses. Requirements vary by location and business activity.

How quickly can I start an LLC in Texas?

Texas LLC formation typically takes 10-15 business days when filed online through SOSDirect. You can pay an additional $25 for expedited processing. After approval, you can immediately begin operating, though you should obtain your EIN and open a business bank account first.

Do I need an LLC to start a business?

No, you can operate as a sole proprietorship without forming an LLC. However, an LLC provides personal asset protection, tax benefits, and business credibility that make it worthwhile for most entrepreneurs.

Should I create an LLC before starting a business?

Yes, it's generally recommended to form your LLC before you start operations, sign contracts, or incur any business expenses. This ensures you have liability protection from day one and can properly separate business and personal finances.

How much does an LLC cost in Oklahoma?

While this guide focuses on Texas, Oklahoma LLCs cost $100 to form. Texas LLCs cost $300 but offer advantages like no state income tax and a more business-friendly environment that often justify the higher initial cost.

Essential Business Startup Checklist for Texas

Use this comprehensive checklist to ensure you don't miss any critical steps when starting your Texas business:

This checklist ensures you cover all essential aspects of starting a business in Texas. Take your time with each item, as proper preparation now will save you significant time and money later.

Your Next Steps

Starting a business in Texas doesn't have to be overwhelming. By following this comprehensive guide, you're well on your way to launching a successful venture in one of America's most business-friendly states.

Remember, the most important step is the first one. Choose your business structure, register your entity, and start building the business of your dreams. Texas is ready to support your entrepreneurial journey - now it's time to take action.

Need additional guidance? Consider consulting with a Texas business attorney or accountant to ensure you're making the best decisions for your specific situation. Your business success starts today.