Texas is one of the best states in the country to start a business — and it's not just the BBQ and friendly people. With no state income tax, business-friendly regulations, and a diverse economy spanning tech, energy, healthcare, and manufacturing, the Lone Star State gives entrepreneurs a real shot at success.
Whether you're launching a food truck in Austin, a consulting firm in Dallas, or an e-commerce brand from your Houston apartment, this guide walks you through everything you need to legally start your business in Texas.
Step 1: Choose Your Business Structure
Before you register anything, you need to decide how your business will be legally organized. This affects your taxes, personal liability, and paperwork requirements. Here are the most common options in Texas:
Sole Proprietorship — The simplest structure. You and your business are legally the same entity. There's no formal registration required with the state (though you may need local permits). The downside: you're personally liable for all business debts.
Limited Liability Company (LLC) — The most popular choice for small businesses. An LLC protects your personal assets from business liabilities while offering flexibility in how you're taxed. In Texas, LLCs are formed by filing a Certificate of Formation with the Secretary of State.
Corporation (C-Corp or S-Corp) — More complex structures typically used for businesses seeking investors or planning to go public. Corporations have stricter requirements for record-keeping and governance.
Partnership — If you're starting a business with one or more partners, you can form a General Partnership, Limited Partnership (LP), or Limited Liability Partnership (LLP).
For most small businesses and solo founders, an LLC offers the best balance of liability protection and simplicity. If you're unsure, it's worth a quick consultation with a business attorney or accountant.
Step 2: Register with the Texas Secretary of State
Once you've chosen your structure, it's time to make it official. If you're forming an LLC, corporation, or partnership, you'll need to register with the Texas Secretary of State.
For LLCs: File a Certificate of Formation (Form 205) online at sos.texas.gov. You can file online through SOSDirect, which is the fastest option. Check the current filing fee on the Secretary of State website, as fees can change.
What you'll need:
- Your business name (must include "LLC" or "Limited Liability Company")
- A registered agent with a Texas address
- The names and addresses of organizers or members
- The purpose of your business (can be general)
Name availability: Before filing, search the Secretary of State's database to make sure your business name isn't already taken. You can reserve a name for 120 days if you're not ready to file yet.
Sole proprietors: If you're operating as a sole proprietor under a name other than your legal name, you'll file an Assumed Name Certificate (DBA) with your county clerk instead of the state.
Step 3: Get Your EIN from the IRS
An Employer Identification Number (EIN) is like a Social Security number for your business. You'll need one if you:
- Have employees
- Operate as an LLC, corporation, or partnership
- Open a business bank account
- File certain tax returns
The good news: getting an EIN is free and takes about five minutes. Apply online at irs.gov/ein. You'll receive your EIN immediately after completing the application.
Even if you're a sole proprietor with no employees, getting an EIN is smart — it keeps your Social Security number off business documents and invoices.
Step 4: Handle Texas-Specific Licenses and Permits
Texas doesn't have a general business license, but depending on your industry and location, you may need specific permits.
Sales Tax Permit: If you're selling tangible goods or certain services, you'll need a Texas Sales and Use Tax Permit from the Texas Comptroller of Public Accounts. This is free to obtain and allows you to collect and remit sales tax (currently 6.25% state rate, plus local taxes).
Industry-Specific Licenses: Certain professions require state licensing — including contractors, healthcare providers, food service businesses, and many others. The Texas Department of Licensing and Regulation (TDLR) oversees many of these.
Local Permits: Cities and counties often have their own requirements. Check with your city's business office for local permits, zoning requirements, and health department approvals (especially for food businesses).
Home-Based Businesses: If you're running a business from home, verify that your residential zoning allows it. Some HOAs also have restrictions on home businesses.
Step 5: Open a Business Bank Account
Mixing personal and business finances is one of the most common mistakes new entrepreneurs make. A dedicated business bank account:
- Keeps your records clean for tax time
- Protects your LLC's liability shield
- Looks more professional to clients
- Makes it easier to track expenses
To open a business bank account, you'll typically need:
- Your EIN (or SSN for sole proprietors)
- Certificate of Formation or DBA filing
- Government-issued ID
- Initial deposit
Shop around — many Texas banks and credit unions offer free or low-fee business checking accounts for small businesses.
Step 6: Find Your Workspace
Where you work matters. Whether you need a professional address, meeting rooms, or just a change of scenery from your kitchen table, Texas has excellent options for entrepreneurs.
Coworking spaces are particularly popular among startups and solo founders. They offer flexible month-to-month memberships, networking opportunities, and amenities like high-speed internet, conference rooms, and coffee (lots of coffee).
Here are coworking options in Texas's major cities:
- Coworking spaces in Houston — Texas's largest city with a thriving energy and healthcare startup scene
- Coworking spaces in Austin — The state's tech hub with a strong startup ecosystem
- Coworking spaces in Dallas — A major business center with diverse industries
- Coworking spaces in San Antonio — Growing entrepreneurship community with lower cost of living
Many coworking spaces also host events, workshops, and networking nights — a great way to connect with other founders and potential collaborators.
Step 7: Find Funding for Your Texas Business
Starting a business takes capital. Fortunately, Texas offers several funding options for entrepreneurs:
Small Business Grants: Unlike loans, grants don't need to be repaid. Texas has grant programs for small businesses, particularly those owned by women, minorities, and veterans. Browse available small business grants to find programs you qualify for.
Texas-Specific Programs: Look into the Texas Enterprise Fund, which supports job-creating projects, and the Product Development and Small Business Incubator Fund for early-stage companies. Many cities also have their own economic development incentives.
SBA Loans: The U.S. Small Business Administration backs loans through partner banks, making it easier for small businesses to qualify. SBA 7(a) loans and microloans are popular options for startups.
Local Accelerators: Texas is home to dozens of startup accelerators that provide funding, mentorship, and resources. Cities like Austin and Houston have particularly active accelerator scenes. Check out accelerator programs in your area.
Step 8: Get Free Mentorship and Support
You don't have to figure everything out alone. Texas has a strong network of free business support resources:
SCORE: A national nonprofit that provides free mentoring from experienced business professionals. Texas has SCORE chapters in every major city, offering one-on-one mentoring and workshops.
Small Business Development Centers (SBDCs): Funded by the SBA and hosted by universities and colleges across Texas, SBDCs offer free consulting on business planning, financing, marketing, and more.
Women's Business Centers: If you're a woman entrepreneur, Texas WBCs provide training, counseling, and networking opportunities specifically designed for women-owned businesses.
Find SBA resources near you to connect with these free programs. The guidance you'll receive can save you from costly mistakes and help you move faster.
You're Ready to Start
Starting a business in Texas isn't complicated, but it does require attention to detail. Here's your quick checklist:
- Choose your business structure
- Register with the Texas Secretary of State
- Get your EIN from the IRS
- Obtain necessary licenses and permits
- Open a business bank account
- Set up your workspace
- Explore funding options
- Connect with mentors and resources
The hardest part isn't the paperwork — it's deciding what business to start in the first place. If you're still figuring that out, or you want help turning your idea into an actionable plan, try SparkLocal's free business builder. Answer a few questions about your skills, budget, and goals, and we'll generate personalized business ideas with market research, financial projections, and a step-by-step launch checklist.
Texas is waiting. Time to start something.