How to Register Your Business in Texas: A Step-by-Step Guide

1. Choose Your Business Structure

The first step is deciding how you want your business to be structured. Your business structure can affect your taxes, liability, paperwork, and how your business operates.

Common structures include:

• Sole proprietorship
• Limited Liability Company (LLC)
• Partnership
• Corporation
• S Corporation election for federal tax purposes

For many small-business owners, an LLC is a popular option because it can provide liability protection while offering flexibility in how the business is taxed. However, the best structure depends on your specific situation.

2. Choose and Check Your Business Name

Once you have selected your business structure, you will need to choose a business name. If you are forming an LLC or corporation through the Texas Secretary of State, the name generally needs to be distinguishable from existing registered entities. Texas recommends checking name availability before submitting your formation documents.

It is also a good idea to research whether the name is already being used as a trademark or by another business, even if the name appears available with the state. Tip: Before ordering signs, business cards, uniforms, websites, or other materials, make sure you have properly researched your business name.

3. Decide Who Will Be Your Registered Agent

If you form an LLC or another entity that requires a registered agent, you will need to designate one. A registered agent is responsible for receiving certain official documents and legal notices on behalf of the business.

For a Texas LLC, the registered agent can generally be an individual Texas resident or an eligible business entity registered to do business in Texas. The LLC cannot serve as its own registered agent. The registered office must also be a physical street address in Texas where service of process can be made. Make sure the person or company you designate has agreed to serve as your registered agent.

4. File Your Formation Documents

If you are forming an LLC in Texas, you will generally file a Certificate of Formation with the Texas Secretary of State. For an LLC, this is Form 205.

The filing includes important information such as:

• Business name
• Registered agent
• Registered office
• Governing authority
• Initial mailing address
• Other required information

Texas allows business formation documents to be submitted through options such as SOSDirect and SOSUpload, as well as by mail, courier, or in person. Your fastest option will generally be through SOSDirect.

5. Get an EIN From the IRS

After establishing your business, you may need a Federal Employer Identification Number, commonly called an EIN. An EIN is issued by the IRS, not by the Texas Secretary of State.

An EIN may be needed for purposes such as:

• Hiring employees
• Opening a business bank account
• Filing certain business tax returns
• Operating a corporation or partnership
• Certain LLC tax situations

The IRS provides the EIN application process separately from your Texas business formation. Important: Forming your company with the Texas Secretary of State does not automatically give you an EIN.

6. Register for Texas Taxes

After forming your business, you should determine which Texas tax accounts and permits apply to your business. Depending on what your company does, you may need to register with the Texas Comptroller of Public Accounts.

Sales and Use Tax: If your business sells taxable goods, leases or rents taxable goods, provides taxable services, or has certain taxable purchases from out-of-state suppliers, you may need a Texas Sales and Use Tax Permit. Not every business needs a sales tax permit, so it is important to determine whether the products or services you provide are taxable.

Franchise Tax: Texas also has a franchise tax system that applies to certain taxable entities. The Texas Secretary of State specifically directs businesses to the Comptroller for information regarding franchise tax requirements. Your business may have reporting obligations even when no franchise tax is ultimately due, so don't assume that forming your business is the end of your tax responsibilities.

You can find more information through the Texas Comptroller of Public Accounts.

7. Check for Required Licenses and Permits

Registering your business with the Texas Secretary of State does not automatically give you every license or permit you may need. Depending on your industry, you may need additional federal, state, county, or city licenses and permits.

For example, requirements can vary for:

• Food businesses
• Construction companies
• Contractors
• Professional services
• Childcare businesses
• Transportation companies
• Beauty and personal-care businesses
• Restaurants
• Alcohol-related businesses
• Healthcare-related businesses

Your location and industry can determine which additional requirements apply. Before opening, research the licensing requirements for your specific type of business.

8. Register as an Employer if You Have Employees

If you plan to hire employees, there are additional responsibilities you need to consider.

These can include:

• Payroll withholding
• Federal employment taxes
• New-hire reporting
• Unemployment taxes
• Workers' compensation considerations
• Payroll records
• Required employment forms

The Texas Secretary of State provides information directing employers to agencies such as the Texas Workforce Commission and Texas Department of Insurance for employer-related requirements. If you are hiring your first employee, it is a good idea to make sure your payroll system is set up correctly before issuing your first paycheck.

9. Open a Business Bank Account

Once your business is established, consider opening a separate business bank account. Keeping your personal and business finances separate can make bookkeeping and tax preparation much easier.

You may need documents such as:

• EIN confirmation
• Certificate of Formation
• Business formation documents
• Government-issued identification
• Business license or other documentation

Your bank will determine which documents it requires. Tip: Avoid using your personal bank account for business expenses whenever possible. Separating your finances from day one can make your records much easier to manage.

10. Set Up Your Bookkeeping

One of the most overlooked steps when starting a business is setting up a bookkeeping system. Don't wait until tax season to start organizing your finances.

Your bookkeeping system should allow you to track:

• Business income
• Business expenses
• Payroll
• Bank transactions
• Credit card transactions
• Equipment purchases
• Vehicle expenses
• Contractor payments
• Loans
• Owner contributions and distributions

Whether you use accounting software or work with Catalina Services LLC bookkeepers, keeping accurate records throughout the year can make tax preparation significantly easier.

11. Keep Your Business Information Updated

Registering your business is not a one-time task. As your business grows, you may need to update information such as your:

• Registered agent
• Registered office
• Mailing address
• Business name
• Ownership information
• Management structure
• Tax accounts

Texas provides resources for making changes to existing business entities and maintaining business records. Keeping your information current can help ensure that you receive important notices and remain in good standing.

Common Mistakes New Texas Business Owners Make

Starting a business can be overwhelming, and many new owners make avoidable mistakes. Some of the most common include:

• Choosing a business structure without considering taxes. The structure you choose can affect how your business is taxed and operated.
• Assuming an LLC automatically protects everything. An LLC can provide liability protection, but it does not eliminate every legal or financial responsibility.
• Forgetting about sales tax. Not every business needs a sales tax permit, but businesses selling taxable products or services may need one.
• Mixing personal and business expenses. Separate accounts and accurate records make bookkeeping much easier.
• Waiting until tax season to organize records. Good bookkeeping should happen throughout the year.
• Assuming the Secretary of State handles everything. Business formation, EINs, sales tax, franchise tax, payroll taxes, licenses, and permits can involve different government agencies.