Sole Proprietorship in Texas

Texas presents just the right business and economic platform for entrepreneurs and new business owners to transform their ideas into business. Entrepreneurs prefer to start a sole proprietorship in Texas as the state constitutes a strong entrepreneurial spirit, which is one of the drivers of innovative thinking. The state is also home to innovation corridors, innovation districts, and business incubators that are integral to the $1.7 trillion economy of Texas. When you think in terms of business resources and support then state agencies like the Texas Economic Development Corporation, the North Texas Small Business Development Center, and the office of the Texas Secretary of State among others are instrumental in providing meaningful guidance on how to start a sole proprietorship in Texas.

What is a sole proprietorship in Texas?

A sole proprietorship in Texas is a type of entity that is owned and run by an individual. Since it is operated by a single person, there is no distinction between the business and the owner. This doesn’t imply that a sole trader is a one-man organization as they can hire employees. If you start a sole proprietorship in Texas then you can use a business name or a trade name, which is also known as DBA (Doing Business As) and is different from the legal name. If you search for a sole proprietorship in Texas, you will be surprised to find that most ong>home-based businesses and several internet-based businesses are sole proprietorships.

Important features of sole proprietorship in Texas

A sole proprietorship is considered as the most basic type of business. There are several features that make it beneficial to start a sole proprietorship in Texas especially if you are a first time business owner. The key features are:

• A sole proprietorship can be started from home or from a commercial space. The greatest advantage of this form of business is that it has less capital requirements and hence the overall cost to start a sole proprietorship in Texas is low.
• This is a single owner business and hence all operation and management related decisions will be made by the individual or the sole owner without any interference as faced in corporations and LLC’s
• If you are wondering how to start a sole proprietorship in Texas then as compared to other forms of business entities; you are not required to register with the office of the Secretary of State (SOS).
• There are no annual maintenance requirements and lower Compliance requirements with the office of the secretary of state and hence no recurring costs or filing fees.
• If you file a sole proprietorship in Texas then you will have to file the profit and loss report of the business along with your individual income tax return.
• A sole proprietorship business is not required to pay any unemployment or payroll tax.
• The profits earned through this form of business go to the owner or sole proprietor and doesn’t have to be split amongst shareholders or partners like in other forms of businesses.

Steps to Start Sole Proprietorship in Texas

Sole proprietorship is one of the simplest forms of business that one can undertake and this simplicity is in terms of formation and operation. To start a sole proprietorship in Texas, you will require fulfilling certain state-based requirements, which are almost basic in nature. We have considered certain aspects of the business and worked out a step-by-step approach that will provide an insight into how to start a sole proprietorship in Texas.

1. Prepare a business plan

A business plan is an integral aspect of any form of business whether a sole proprietorship or a business corporation. A business plan helps the business owner in identifying the areas to focus on in order to make the business operational and successful. Depending on the type of business activity, an entity may have several components and identifying them before you file a sole proprietorship in Texas can be highly beneficial.

• Executive summary: A summary of what you expect to accomplish through your business
• Company Description: This will include key information pertaining to the business, objectives, and target customers
• Market Analysis: The analysis covers an in-depth study of the market you wish to launch your product or services in
• Competitive Analysis: This section analyzes your competition in the current market or around the location of your company
• Products and Services: Detailed information pertaining to the product or services offered by your company
• Marketing Plan & Sales Strategy: This section focuses on the promotion of your products or services and throws light on how to achieve sales targets
• Financial Projections: This section focuses on the financial goals and expectations along with anticipated revenue in the first 12 months of business operation

2. Choose Texas business name

A business name is an integral part of any business as it is what prospective customers would recall. A business name helps in creating a brand image of the company. If you start a sole proprietorship in Texas then you can use your own name as the name of the business or choose to use a trade name, which is also known as a DBA (doing business as) name. Once you have identified a business name, you need to conduct a name search for sole proprietorship in Texas. You can check name availability with the Texas Comptroller of Public Accounts and also the Trademark Electronic Search System (TESS) of the U.S. Patent & Trademark Office.

3. File Assumed business name

An assumed business name is considered to be a business name, which is different from its legal registered name. It is also known as a DBA (Doing Business As) or fictitious business name and is often used to file a sole proprietorship in Texas. In order to ensure legal right of using this type of business name, you will need to apply for an assumed name certificate Texas using Form-503.

Do you want to start a Sole Proprietorship business in Texas?

4. Get EIN

EIN or Employer Identification Number is also known as the Federal Employer Identification Number (FEIN) and is a unique number that is assigned by the Internal Revenue Service (IRS) to business entities. According to the IRS, a sole proprietorship will require an EIN if the following are valid:

• If you have employees
• If you file tax returns related to Excise, Employment, Alcohol, and Tobacco and Firearms
• If you have a Keogh plan
• If you are involved with certain types of organizations like Non-profits, Estates, Trusts, or Farmers’ cooperatives among others

5. Obtain necessary licenses and permits

After you start a sole proprietorship in Texas, the immediate requirement would be a business license. Different states have different licensing requirements but the common factor is that without a license or permit, businesses cannot become operational. You can conduct a business activity search for sole proprietorship in Texas as the type of license and the fee varies according to the type of activity and location of the entity.

6. Open a bank account for your Texas business

To file a sole proprietorship in Texas means your company is not a separate identity legally. Hence, it becomes extremely important to open a bank account in the name of the business. This will ensure your personal account including expenses and gains are separate from that of the company. This type of account is also known as a checking account and it has certain benefits like:

• The account will help in keeping your company finances separate and organized
• A business bank account will legitimize your business
• It will organize your accounting records and create a clear audit trail
• The account will ensure easy filing of your tax return
• You can leverage business debit cards and enjoy overdraft protection

7. Report and pay taxes

One of the important aspects of the process of how to start a sole proprietorship in Texas is submitting reports and filing taxes. There are two types of annual reports in Texas and they are Public Information Reports and Ownership Information Reports. If you start a sole proprietorship in Texas then you may be required to file the Ownership Information Reports (OIRs). This report has to be filed with the Texas Comptroller’s office.

Ready to Start a Sole Proprietorship Business in Texas

A sole proprietorship also known as an individual entrepreneurship or sole trader is one of the simplest forms of Texas business. It is a type of unincorporated entity and you can start a sole proprietorship in Texas without having to register with the office of the Secretary of State. If you are wondering how to start a sole proprietorship in Texas then IncParadise can provide meaningful assistance by helping you in starting your sole proprietorship business in Texas.

Texas Corporation

Corporations are one of the most common business entities formed in Texas. You can form a corporation in Texas as it offers several advantages over other forms of businesses. You can even register a Texas Corporation online or offline with the office of the Secretary of State. Some of the top corporations in the state include ExxonMobil, Dell Technologies Inc., AT&T Inc., Phillips 66 Company, and Airbus Helicopters, Inc. among others. There are primarily three types of corporation you can form in Texas and they are:

• For-Profit Corporations
• Nonprofit Corporations
• Special-Purpose Corporations

What is Texas Corporation?

A traditional corporation is normally known as a C Corporation and for the purposes of taxation; it is sometimes converted to an S Corporation. A Texas C Corporation is a type of legal entity, which is separate from its owners. This simply means that even if the owner exists from the company or dies, the corporation will continue to exist. One of the primary benefits of incorporating in Texas is that a C Corporation will enjoy the rights and responsibilities that sole proprietors or individuals possess like hiring employees, owning assets, taking a loan or financial assistance, and entering contracts among others.

What are the benefits of incorporating in Texas?

There are several reasons why entrepreneurs prefer to form a corporation in Texas and these include a strong infrastructure, growth oriented industry, and trade zones. Whether you are planning to incorporate or converting an existing business to a corporation in Texas; there are significant benefits of incorporating in Texas. Let’s look at some of the top benefits:

• Advantages over other entities: A C or S Corporation has several advantages over other forms of business entities and they are:
  • Easier to raise capital
  • Ownership can be easily changed or transferred
  • Enjoys pass through taxation
  • Offers liability protection for personal assets of the owners
• Perpetual Existence: One of the top benefits of incorporating in Texas is that unlike an LLC or a sole proprietorship; a corporation has perpetual existence. This means that it will survive even if the original owner dies.
• Tax Climate: The tax climate is one of the primary reasons why entrepreneurs prefer to register a corporation in Texas. The business tax is low as compared to some of the other states and there is no personal tax.
• Business incentives: The state of Texas provides a variety of business incentive programs that assist small businesses in numerous ways. Some programs are administered by different state departments. Some of the top programs include:
  • Sales and Use Tax Exemption Program
  • Franchise Tax Credit for Qualified Research
  • Texas Leverage Fund (TLF)
  • Product Development & Small Business Incubator Fund (PDSBI)
  • Business Expansion Incentive Program of Austin
  • Research & Development Tax Credit
  • Texas Enterprise Zone Program
  • Texas Enterprise Fund (TEF)
  • Opportunity Zone Program

Starting a Texas Corporation

The central location of the state of Texas along with a state-of-the-art transportation and logistics network ensures timely access to national and international markets via sea, air, and land. If you are planning to incorporate in Texas then the first question you may ask is how to form a corporation in Texas? There are several steps involved towards helping your company become state compliant and business wise operational. Let’s look at the important aspects of the incorporation process.

1. Name Texas Corporation

A company name is one of the primary and important requirements in the how to form a corporation in Texas guide. A business name helps in creating a brand or providing a company with an identity. A business name is required in order to register a corporation in Texas. It is governed by the Texas Administrative Code, Title 1 – Administration, Part 4 – Office of the Secretary Of State, Chapter 79 – Business Entity Filings, Subchapter C – Entity Names. Some of the important guidelines while choosing a name for a Texas corporation are:

• The chosen name should include the phrase “Corporation”, “company” or any abbreviations like Inc. or Corp.,
• You can incorporate in Texas with the chosen name if it is distinguishable from any other name in the records of the Texas Secretary of State pursuant to 1 TX Admin Code § 79.38.
• It is important to ensure that your chosen name as governed by 1 TX Admin Code § 79.33, doesn’t falsely imply any governmental affiliation.
• There are certain words, prohibited or restricted pursuant to 1 TX Admin Code §79.34. They cannot be used at all.

2. Appoint Texas registered agent

The Texas Business Organizations Code (BOC) and the Texas Finance Code makes it mandatory for all businesses planning to incorporate in Texas or conduct their business in the state to hire and maintain a Texas registered agent. A registered agent can provide a variety of services and fulfill several duties like:

• Providing you guidance on how to form a corporation in Texas and also assisting you with the formation process
• Accepting or receiving on behalf of the corporation, any notice, process, or demand served by the state or state authorities
• Maintaining communication with the State of Texas related to annual compliances for businesses they represent including filing of Franchise Tax, certificate of good standing, and annual reports

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3.Choose Texas Corporation’s initial directors

Before you form a corporation in Texas, it is important to understand corporation-specific requirements like choosing the initial directors. Who chooses the directors? The incorporator or the person signing the incorporation documents (Certificate of Formation) is responsible for appointing the initial corporate directors. These directors will then serve on the board till the time of the first annual meeting of the company’s shareholders.

4.File Texas certificate of formation with Texas SOS

The most important step towards setting up a new business is Texas is applying for formation with the Texas Secretary of State. In order to incorporate in Texas, you will be required to file the Certificate of Formation – For-Profit Corporation (Form-201) with the office of the Secretary of State pursuant to TX Bus Orgs § 21.051 – § 21.059 (2019). You can register a Texas Corporation online through SOSDirect or you can mail it to P.O.Box 13697, Austin, Texas 78711-3697. You can also have it delivered to the Secretary of State, James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701.

Are you thinking of incorporating in Texas?

5.Prepare bylaws for Texas Corporation

When you register a corporation in Texas, one of the first tasks undertaken by the board of directors is to create the corporate bylaws. It is an important document that is created specifically focusing on the industry your business belongs in and the needs of the company. It also helps in protecting the rights as well as responsibilities of owners, shareholders, executives, and directors of the corporation. Corporate Bylaws can be formally adopted only through voting by the members of the board and can only be changed by making an amendment. Since bylaws provide a type of road map for running a corporation, it includes information on the following areas:

• Basic corporate information including name and address of the business
• Number of people serving on the board (Board of Directors) and their tenure
• Officers responsible for running day-to-day operations of the business
• How and who will issue stock certificates
• Number of shares to be issued
• If a corporation forms committees then bylaws should identify such committees and outline their responsibility
• Timeline of annual and special meetings held by board of directors
• Conflicts of interest
• Procedures for amendment

6. Get EIN

One of the important aspects of how to form a corporation in Texas is tax ID. Every business needs to file taxes and for that purpose, a corporation will be required to apply for an Employer Identification Number (EIN). This is a unique 9 digit tax ID number also known as the Federal Employer Identification Number (FEIN) that is issued by the Internal Revenue Service (IRS). The EIN is often required for opening business bank accounts, and disbursing payment to employees along with filing business tax returns. If you form a corporation in Texas and if it is a new business then obtaining an Employer Identification Number is necessary.

7. Hold an organizational meeting

One of the important aspects of how to form a corporation in Texas and operate it is holding an organizational meeting. This meeting has to be held by the incorporators, owners or initial directors to discuss the following agenda:

• Appoint directors if none have been named in the articles or Certificate of Formation
• Appoint corporate officers
• Adopt the bylaws
• Authorization for the issuance of stock
• Setting the accounting year or the fiscal year for the corporation
• Adopt a stock certificate form
• Designating a bank or opening a business bank account
• Selection of the corporate seal

8. Open a bank account

For first time entrepreneurs and those who incorporate in Texas, having a business account can make a lot of difference. In fact, opening a business bank account will ensure your company is always on track. You can open a bank account after you register a Texas Corporation online and the benefits of this type of account are:

• It will help segregate cash flows in your personal and business account
• It will make accounting easier
• It aids in accurate and clean bookkeeping thus ensuring proper tax returns are filed
• It protects you from any legal liability
• It provides proof to the IRS that your company is not a ‘hobby business’
• It helps you to receive credit card payments

9. Comply with other tax and regulatory requirements

There are many benefits of incorporating in Texas but it is important to ensure your business complies with all tax and regulatory requirements of the state. In order to be compliant, you need to first identify the tax and other regulatory obligations your corporation has and complete registrations wherever necessary. Some of the areas to consider after you form a corporation in Texas are:

• If your Texas Corporation has employees then you will be subject to Texas employment tax. You can register for the same using the Texas Employer Portal.
• Whenever you hire an employee, you will need to inform the IRS as well as the State of Texas.
• If you choose to provide workers’ compensation coverage then you will need to register with the Texas Department of Insurance, Division of Workers’ Compensation.
• It is mandatory to file franchise taxes if you incorporate in Texas. The tax rate is 1% of income and is applicable for businesses having gross revenues more than $300,000
• You may have to file sales taxes in the state where the state-level rate is 6.25% and can be as much as 8.25% in certain areas
• You will be required to apply for business licenses, regulated licenses, and permits depending on the type of business activity.

Know more about forming a Texas Corporation

If you are planning to register a corporation in Texas, you may be confronted with several questions pertaining to various aspects of new business formation, maintenance, cost, and annual reports among others. This section has been created specifically to answer some of the common queries that entrepreneurs and business owners may have in the early stages of forming a corporation.

What is an S-Corporation?

An S corporation is a type of entity that has selected the IRS Code Subchapter S taxation. This type of entity is formed specifically for taxation purposes. A Texas S corporation is simply another corporation that enjoys pass-through taxation on their business profits. This is one of the major benefits of incorporating in Texas as an S Corp. This type of entity passes income along with deductions, credits, and losses to the shareholders and thus is not required to file any federal corporate tax. In order to choose S Corporation status, you will first have to register a corporation in Texas in accordance with the appropriate Texas Business Organizations Code. You will also be required to file ‘Form 2553 and Form 1120-S’ with the IRS.

What is a close corporation? What are some benefits of close corporation?

A close corporation is a traditional corporation with a specific type of management structure that is mostly utilized by small businesses where select individuals hold the shares of the corporation. The shareholders in this type of Texas Corporation are normally closely associated with the business. If you want to incorporate in Texas as a close corporation then it will be created under special provisions and will be known as a “statutory close corporation”. The formation of a close corporation is governed by TX Bus Orgs § 21.703 – § 21.706 (2019).

• The shareholders of a close corporation will not be personally liable for the debt of the business
• Since there are fewer shareholders, the corporate structure is more relaxed and provides each shareholder more control over their shares
• There are fewer rules and formalities including no requirement for annual meeting
• There is higher freedom of management, which means the decision-making processes will not be impacted by any public shareholders as there are no public shareholders
• There is higher freedom of financial structuring

How do I form a “C” corporation, an “S” corporation, or a “501(c)(3)” corporation in Texas? – H3

A C Corporation is known as the traditional corporation while an S Corporation is a special tax election status of a traditional corporation. A 501(c)(3) corporation in Texas is also known as a non-profit corporation. The formation process of all three type of corporation is as follows:

• C Corporation: You can form a corporation in Texas by filing the Certificate of Formation – For-Profit Corporation (Form-201) with the office of the Secretary of State.
• S Corporation: You have to first incorporate in Texas and then file an election with the Internal Revenue Service using Form 2553 for S corporation status.
• 501(c)(3) corporation: This type of entity is a non-profit corporation that can be formed by filing a Certificate of Formation – Nonprofit Corporation (Form-202) with the office of the Texas Secretary of State.

How much does it cost to start a corporation in Texas?

If you are planning to form a corporation in Texas then there are certain costs attached to it. Some costs are initial and one-time while others are recurring or annual costs. The initial cost of incorporation includes:

• There is a fee of $300 for filing a certificate of formation. The fee is the same to register Texas Corporation online
• A convenience fee of 2.7 percent if the fee for filing certificate of formation is paid using credit card
• If you are registering a foreign corporation then the fee for filing the Application for Registration of a
• Foreign For-Profit Corporation will be $750
• There will be an initial fee of $40 for reservation of business name
• You will need to apply for and obtain a business license or permit depending on the business activity and physical location (city/county) of the entity. This is a variable fee and dependent on the type of license being issued.

For example: The fee for food establishment permit (restaurants/mobile food unit) can vary from $250 to $750 depending on the gross annual volume of sales.

What is the management structure of a Corporation?

There are different types of management structures of a Corporation that a new owner or entrepreneur can choose from. You can incorporate in Texas with the most common type of management structure, which consists of a board of directors, owners, administrators, staff members, or shareholders. There are 4 different corporate structures prevailing are:

• Functional Structure
• Flat or Horizontal Structure
• Hierarchical structure
• Divisional Structure
• Matrix Structure
• Team-based structure
• Network organizational structure

Can one person be the sole shareholder, director, and officer of a corporation?

The Texas Business Organizations Code (BOC) has specified that professional and for-profit corporations in the state should have at least one president, one director, and one secretary to become operational. In such a scenario, a single person or individual can be the sole shareholder, director, president, secretary, and officer of the said corporation.

How do I look up a corporation in Texas?

In order to incorporate in Texas, you will need to ensure your business name is unique. This search can help you to look up an existing corporation in Texas. The search can be performed using the database of the Texas Secretary of State through the website of the Texas Comptroller of Public Accounts.

Who has to file a Texas Public Information Report?

Different states have different requirements when it comes to filing an annual report, which is also known as the Public Information Report in the state of Texas. Business entities in Texas like Corporations, Limited Partnerships, LLCs, financial institutions, and Professional Associations have to file this report. Once you register a Texas Corporation online, you will be required to Public Information Report (PIR). The report has to be filed with the Texas Comptroller of Public Accounts annually by May 15 in the year following the date of incorporation in Texas.

How do I dissolve a corporation in Texas?

After you register a Texas Corporation online and become operational; you may want to dissolve the business or wind up operations due to several reasons. The dissolution also known as termination of a corporation is governed by TX Bus Orgs § 21.501 (2019). The process of dissolving a Texas corporation constitutes both internal procedures and external procedures as required by the state. The steps for dissolving a Texas corporation are:

• Board of directors has to first adopt a resolution for dissolution and submit for the approval of shareholders.
• Alternatively, unanimous shareholder consent will be considered as an approval for termination. Shareholders will have to sign a written consent document that indicates their approval of the said dissolution.
• The second step is the “Wind Up” procedures, which the corporation has to complete in order to dissolve. Some of the procedures are ceasing to carry on business operations, notifying each of the known claimants, completing all outstanding lawsuits, and distribution of any assets remaining to the shareholders.
• The final step is to file a Certificate of Termination and a Certificate of Account Status for Dissolution/Termination with the Texas Secretary of State. The Certificate of Account Status for Dissolution/Termination is issued by the Texas Comptroller of Public Accounts if payment for all taxes is complete.

Are you ready to start a Texas Corporation?

You can form a C Corporation, S Corporation, Professional Corporation, Close Corporation, or special purpose corporations in Texas. The process to form a corporation in Texas may require extensive documentation and this is where IncParadise can provide valuable assistance. We are one of the most reputable Texas registered agents with experience in helping thousands of companies to incorporate in Texas.

LLC in Texas

Texas as a state and Austin as a city defies stereotypes thanks to the pro-business environment that is not only progressive for entrepreneurs but fiercely competitive. You can form a Texas LLC in a state that is home to some of the top fortune 500 companies including Oracle, Texas Instruments, Dell Technologies, McKesson, Phillips 66, ExxonMobil, AT&T, Valero Energy, Sysco, and Hewlett Packard Enterprise among others. As a startup or new business, you will be able to leverage the innovation platform, deep talent pool, and a robust industrial infrastructure. If you are planning to go the “startup way” then you can file an LLC in Texas, meet compliances, obtain licenses and permits, and make the business operational.

What is Texas LLC?

A Texas Limited Liability Company is a type of business structure where the owners also known as members will not be personally liable for any liabilities or debts that the company may incur. If you are thinking of filing a Texas LLC application then it is important to understand that a limited liability company is a hybrid entity, which combines the characteristics of a sole proprietorship or partnership with that of a corporation. If you want a single-member LLC then you can start as a sole proprietorship firm. Alternatively, you can opt for a multi-member limited liability company. One of the major differences in Texas LLC filing requirements for either type of structures is the registration process. A single-member LLC or sole proprietorship is not required to file any registration documents with the state while a multi-member LLC has to file a “Certificate of Formation”.

Benefits of forming an LLC in Texas

A Texas Limited Liability Company is one of the most popular forms of business because of the many advantages it offers. The key benefits are:

• When you form a Texas LLC, one of the top benefits is limited liability protection, which ensures owners and members are not held personally liable for any debt or loss, the business suffers. In other words, it means personal assets like houses, vehicles, and bank accounts will be protected.
• A limited liability company will be subjected to pass-through taxation by default and hence the tax status will be similar to that of a sole proprietorship or a partnership entity.
• If you file an LLC in Texas you can also opt to be taxed as an S corporation and such a move can help reduce self-employment taxes and thus lower the overall tax burden.
• A limited-liability company is easy to form in Texas with less amount of paperwork as compared to some of the other states. You can opt for Texas LLC filing online or offline.
• Since, an LLC is a recognized formal business structure vis à vis sole proprietorships, it brings forth higher credibility.
• You will be able to enjoy flexibility in terms of structuring the ownership as well as management of a Texas limited liability company.
• Once you file an LLC in Texas, you will be able to apply for business incentive programs administered by the office of the Texas Governor, Texas Economic Development

Forming an LLC in Texas

Texas is a pro-business state that provides robust infrastructure, foreign trade zones, and business incentive programs for startups. If you are thinking of filing a Texas LLC application, what is the process and what Texas LLC filing requirements do you need to fulfill? There are several steps involved towards helping a startup become completely operational in the state. Let’s take a walk through the important aspects of the Texas LLC formation process.

1. Choose Texas LLC name

Choosing a business name is one of the first steps towards new business formation. The business name is a mandatory requirement of a Texas LLC application and is governed by Texas Administrative Code, Title 1 – Administration, Part 4 – Office of the Secretary Of State, Chapter 79 – Business Entity Filings, Subchapter C – Entity Names. There are certain guidelines; you are required to follow when choosing a business name like:

• The chosen name should include the phrase “limited liability company” or any abbreviations like LLC or L.L.C and is an important part of Texas LLC filing requirements.
• The chosen name should be distinguishable from any other name in the records of the Texas Secretary of State pursuant to 1 TX Admin Code § 79.38.
• The chosen name should not falsely imply any governmental affiliation pursuant to 1 TX Admin Code § 79.33
• Certain words are prohibited or restricted and cannot be used pursuant to 1 TX Admin Code § 79.34.

2. Choose Texas LLC registered agent

If you are planning to form a Texas LLC then one of the important requirements is that of a registered agent. In fact, it is mandatory for domestic and foreign LLCs or any business entity to hire and maintain a Texas LLC registered agent in the state pursuant to TX Bus Orgs § 5.201 (2019). A registered agent in Texas is someone who will accept any notice, process, or demand that has to be served to the business entity. IncParadise is one of the most reputable registered agents in the state offering a wide range of business services. We can also be your Texas LLC registered agent.

3. File certificate of formation with Texas SOS

In order to conduct business in the state of Texas, you will need to file a Texas LLC application with the office of the Secretary of state. This application is known as the Certificate of Formation for a Limited Liability Company pursuant to TX Bus Orgs § 101.0515 (2019). You have to file LLC in Texas along with a filing fee of $300. You can mail the certificate of formation form or have it delivered to James Earl Rudder Office Building, 1019 Brazos, Austin, Texas 78701. We at IncParadise can assist you with the process of filing for a Texas LLC.

4. Prepare Texas LLC operating agreement

Texas LLC filing online makes the process of new business formation easier but sometimes, it is necessary to have an operating agreement as well. It is not a mandatory Texas LLC filing requirement but it can help your business in the long run. An operating agreement helps in structuring your financial and working relationships with other owners or members in such a way that it is best suited for the business. It is important to note that if you have an operating agreement then it will help in protecting your limited liability status.

• All formation details of your Texas LLC
• The name and address of your chosen Texas LLC registered agent
• The terms of the limited liability company
• The purpose of your business
• The names of all members and managers
• The location of your business
• The process by which you admit or nominate new owners or members
• The percentage of membership interests allotted to each of the members and proposed method of valuation
• The process by which any member of the said LLC can exit

5. Obtain EIN for Texas LLC

An Employer Identification Number or EIN is also known as a Federal Employer Identification Number (FEIN). It is a unique 9 digit tax ID number that is assigned by the Internal Revenue Service (IRS) to businesses. It is primarily used for reporting employment taxes and most forms of businesses including a Texas LLC would require this number. If you form a Texas LLC with multiple members then you will be required to apply for and obtain the Employer Identification Number. You can apply for an EIN after you file for LLC in Texas or before applying for a certificate of formation.

6. File Franchise tax report and Public information report (PIR) every year

You can form different types of businesses in Texas but if you plan to form a Texas LLC then you will have to comply with annual state filings. Every entity that has a franchise tax responsibility will be required to file the Public Information Report (PIR) including a limited-liability company. The due date of the PIR coincides with the due date of the franchise tax report and they are both key to Texas LLC filing requirements. It is important to note that even if you file your franchise tax report and ensure payment of all applicable taxes, you may still lose the right to transact business in Texas if you fail to file the Public Information Report.

7. Check local licenses and permits

Once you have filed your Texas LLC application for formation, you will need to apply for business licenses or permits in the state. The type of license required is dependent on the type of business activity and a Texas LLC may require a single or multiple licenses or permits or both. Although, it is not a part of the initial Texas LLC filing requirements; without a business license, you will not be able to conduct business within the state. Business licenses or permits can be classified as under:

• Licenses or permits issued by Government Agencies or Regulatory bodies like the Texas Alcoholic Beverage Commission or Department of State Health Services
• Licenses or permits issued by cities or counties like the Houston Permitting center are responsible for issuance of the majority of licenses and permits and are governed by the City of Houston Code of Ordinances.

8. Open Texas LLC bank account

One of the first things to consider before or after you form a Texas LLC is opening a bank account. Yes, even if you have a personal banking account, you will need a business account so that your business and personal transactions don’t get mixed. It will not only be easier to track purchases or gains but also help you to manage your business finances efficiently.

• Help maintain accurate bookkeeping
• Increases business credibility and professionalism
• Creates a clear auditing path for the IRS

9. Comply with taxes and other regulations

Texas, as compared to some of the other states, has low taxes including the fact that there is no personal income tax. Yet, when a Texas LLC application has been filed, and a business formed; you will be required to ensure compliance with taxes and other state regulations. The most distinctive tax in the state is the franchise tax and it is applicable for all businesses transacting in the state.

Are you ready to form an LLC in Texas?

Know more about forming a Texas LLC

If you are planning to form a Texas LLC, there may be many questions that you will be confronted with. Questions may arise pertaining to LLC names, state information, startup costs, taxes, and much more. Hence, we have created this section of “Frequently Asked Questions” for addressing some of the most common queries that small businesses and entrepreneurs have pertaining to new business formation.

Is Texas a good state to form an LLC?

Texas has been consistently ranked as one of the states with the most favorable business climate due to its low tax burden as well as a competitive regulatory environment. The state has corporate real estate opportunities for businesses having plans for long-term expansion. A deep talent pool, business incentive programs, robust infrastructure, and trade zones make up for an excellent business climate.

How do I know if my Texas LLC name is available?

If you have identified a name for your LLC and it is in compliance with the state laws then you can conduct a Texas LLC search or a Taxable Entity Search through Texas Comptroller of Public Accounts. If your chosen name is available then it will not show up in the search. Alternatively, you can also call the office of the Texas Secretary of State at (512) 463-5555 or even email them at corpinfo@sos.state.tx.us to avail of their preliminary name availability screening service.

How much does an LLC cost in Texas?

If you file an LLC in Texas then there are one-time costs like the registration of LLC ($300). There are also recurring yearly or annual costs like the cost of a business license. There are other costs like reserving a business name ($40).

Do I need a business license for my Texas LLC?

The requirement of a business license is dependent on the type of business activity you undertake. Business licenses issued by state agencies and well as those issued by the office of the county clerk. You can obtain your Texas licensing requirements by applying for our Business License Research Report service.

Can I set up a single member LLC in Texas?

Like many other states, Texas also allows you to form a Texas LLC – single member. Single member LLCs are quite common in the state and are considered as a disregarded entity, which means they will be taxed in the same way as a sole proprietorship is.

What taxes does an LLC pay in Texas?

An LLC in Texas will not pay any federal income tax since they are a pass through entity. The state imposes a franchise tax for LLC’s and it is payable to the Texas Comptroller of Public Accounts (CPA). If your LLC has employees then you will be required to file employer taxes. If you are selling goods to Texas customers then you will have to register with the Comptroller of Public Accounts so that periodic sales tax payments can be made on goods sold.

Can I register a foreign LLC in Texas?

You can transact business in the state of Texas as a foreign entity but you will need to register under chapter 9 of the Texas Business Organizations Code (BOC). You will need to undergo foreign qualification and register your business using the Application for Registration of a Foreign Limited Liability Company (Form-304). The filing fee for foreign registration is $750.

How do I dissolve my Texas LLC?

You can dissolve your Texas LLC by filing the “Certificate of Termination of a Domestic Entity” with the office of the Secretary of State. The filing fee is $40 and you can file the termination online. You will have to attach a “Certificate of Account Status for Dissolution/Termination” issued by the Texas Comptroller along with your termination filing documents.

Ready to form a Texas LLC?

There are several types of business structures but if you are planning to form a Texas LLC then it is one of the best forms of entity to choose. The process of LLC formation can require extensive documentation and information and IncParadise can assist you with the same. IncParadise is one of the top Texas LLC registered agents and we have helped thousands of companies start their own businesses in Texas.

Texas LLC or Corporation

Texas is one of the top destinations for startups and entrepreneurs but the most popular business structures are that of a limited liability company and corporation. The overall cost to form Texas Corporation is also low as compared to some of the other states. Depending on the specific needs or requirement, entrepreneurs can opt for several other forms of business like sole proprietorship, general partnership, limited partnership, and limited liability partnership. The formation and related aspects of a new business are governed by the Texas Business Organizations Code (BOC). The annual maintenance cost of Texas Corporation is different from that of Limited Liability Company or any other forms of business.

Which business entity should I choose for Texas business?

As a new business owner, one of the most important aspects is identifying the legal structure for your company. The structure of an entity has a significant impact on several key areas like the cost to form Texas LLC, taxation, legal liability, and ownership control of the entity. The following factors will help you to make an informed choice when it comes to choosing a specific form of business entity.

• Limited Liability Protection: The term limited liability refers to a type of legal structure where the private assets of owners and investors will not be at risk if the business fails to perform. It is considered as one of the biggest advantages and can help reduce the Texas LLC cost per year. In fact, different forms of businesses like a limited liability company (LLC), limited liability partnership (LLP), and even corporations offer this advantage.
• Pass-through entities: A pass through entity is a type of business where there is no double taxation. This simply means that the taxes of an entity will actually get “passed through” to the owner of the entity and hence tax returns will be filed by the owner instead of the business. This ensures the overall cost to form Texas LLC is less than that of a corporation. The businesses that are considered as pass-through entities include sole proprietorship, limited liability companies, and S corporations.
• Startup Cost: The new business registration or incorporation fee plays a key role in determining the cost to form a Texas Corporation or LLC. A cost of forming a new business is governed by several factors including:
  • Name reservation & renewal
  • Annual reports
  • Taxes
  • Correction and amendments
  • Assumed name certificates
  • Rent or lease of commercial space
  • Employees
  • Equipment

Pros and Cons of forming an LLC or Corporation in Texas

The most adopted business structure in the state is that of a limited liability company and a corporation. The overall cost to form a Texas Corporation or an LLC is low as compared to other forms of entities. Of course, there are pros and cons of forming a Texas LLC or a corporation.

Texas LLC

A Texas limited liability has several advantages and disadvantages. Here are some of the pros and cons that will help you make an informed choice.

Pros of LLC

• A limited liability company will enjoy the flexibility of being taxed as a partnership, sole proprietor, C corporation, or S corporation
• The Texas LLC cost per year is less as compared to some of the other forms of business entities
• There is less paperwork involved for new business formation
• You can form a single-member LLC (with one person) or multiple-member LLC (several people)
• You can take advantage of flow-through taxation
• Members of a Texas LLC will enjoy limited liability protection against debts or legal issues

Cons of LLC

• Once you become a member of an LLC, you will not be able to pay wages to yourself
• One of the important costs to form a Texas LLC is the franchise tax
• An LLC vs Corporation in Texas reveals that investors would prefer a corporation over an LLC
• In a multi-member LLC, the ownership will be spread across all members

Texas Corporation

A Texas corporation is one of the most opted for structures but has its own advantages and disadvantages as mentioned below.

Pros of a Corporation

• One of the salient aspects of a corporation is limited liability. Since a corporation is seen as an entity separate from its owners and hence provides protection to them
• If you consider LLC vs Corporation in Texas then a corporation has the upper hand as it attracts investors
• A C Corporation provides employees with stock options and hence a more lucrative work place as compared to other forms of business
• The cost to form a Texas Corporation is lower than some of the other entities in the state
• Corporations enjoy continuity and can exist forever even if the company founder leaves or dies

Cons of a Corporation

• The process to incorporate in Texas is expensive and time consuming involving a lot of paperwork.
• There is a possibility of double taxation where the profit of corporation as well as dividends paid to stockholders may be taxed
• As compared to an LLC, a corporation follows a much more rigid structure and less flexibility
• Owners of corporations are not paid a salary; instead they receive dividends, which are subsequently taxed

Do you want to start a Texas LLC or a corporation?

Texas LLC Cost

A limited liability company is one of the most popular forms of business entities across the U.S. You can form a Single-member LLC (SLLC) or a Multi-member LLC depending on your requirements and to reduce the cost to form a Texas LLC. The type of limited-liability Company you want to form will depend on a variety of factors like ownership, management, personal asset protection, formation, tax treatment, and periodic and annual compliance. One of the salient aspects is that the Texas LLC cost per year is lower than the annual costs in some of the other states like California, Maryland, and Massachusetts.

Cost for forming Texas LLC

If you are planning to start a new business in Texas then a limited liability company is considered as one of the best structures for a startup. When you think about the cost to form a Texas LLC then it includes initial registration and other one-time or annual fees. The Texas LLC cost per year includes:

• You have to file Certificate of formation for a Texas LLC along with a filing fee of $300
• You have to reserve a business name prior to filing Texas LLC registration documents and the fee is $40

Annual maintenance cost for Texas LLC

When you form a new LLC in Texas it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. There is an annual maintenance cost to form a Texas LLC and this helps primarily in keeping the business active. The annual maintenance expenses include:

• Once you have applied for registration or certificate of formation you will require a certified copy of the LLC Certificate of Formation and an additional fee of $30.
• The most important aspect that keeps your Texas business operational is business licenses and permits. This is one of the important aspects of annual maintenance and is seen as Texas LLC cost per year. There are no general business licenses in the state but licenses are required according to the type of business activity. For example: If your business activity is related to Food and Beverage then the fee for a business license is approximately $200 but if you are planning to start a tattoo studio then the business license fee is $927.
• The maintenance cost to form a Texas LLC also includes a fee attached to renewing your business license or permits, which will vary according to the type of business activity.
• If you make any amendments to the certificate of formation then there is a fee of $15

Do you want to register a Texas LLC?

Texas Corporation Cost

Entrepreneurs prefer corporations as their startup business model as it is easier to attract investors. A corporation is a legal business entity that has a separate existence from the owners and this gives corporations perpetual existence. There are several other advantages like the cost to form a Texas Corporation is lower as compared to other states like Connecticut and District of Columbia. If you incorporate in Texas, you will also be able to leverage the many business incentive programs the state offers, which play a key role in providing your business with financial assistance.

Cost of forming a Corporation in Texas

If you are planning to incorporate in Texas then it is important that you identify the cost to form a Texas Corporation. The cost includes initial incorporation, which is a one-time cost. The fee that you will incur initially is:

• You have to file Certificate of formation for a Texas corporation along with a filing fee of $300
• If you file a Certificate of correction then there is a fee of $15
• If you make an amendment then the filing fee for a Certificate of amendment for Texas corporation is $150
• You have to reserve a business name and this is a part of the forming cost for a Texas Corporation. The fee is $40

Annual maintenance cost for Texas Corporation

When you file for incorporation in Texas, it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. The compliance can be kept by ensuring annual maintenance cost of Texas Corporation. The maintenance expenses include:

• There will be an additional fee of $30 if you apply for a certified copy of the Certificate of Formation of a profit corporation
• Business licenses and permits are integral to any business including a corporation in Texas. This is a key component of cost to form a Texas Corporation. The state doesn’t have general business licenses but permits and licenses are issued based on the business activity. For example: If you start a Retail Food Establishment in Texas then the licensing or permit fee will depend on the gross annual volume of food sales like the fee is $773 for a volume sale of $150,000 or more. The fee for a mobile food unit or a vehicle-mounted mobile food unit is $258 per unit.
• The annual maintenance cost of Texas Corporation also includes a fee attached to renewing your business license or permits, which will depend on the type of business activity.

Do you want to form a Texas Corporation?

Need any Assistance in Forming Your Texas LLC or Corporation

If you are planning to incorporate in Texas or want to start an LLC then there will be several aspects you need to consider pertaining to the process of new business formation. There are several formation and compliance requirements of the state that you will have to fulfill and this makes the entire process complex. We, at IncParadise can help in making the process simpler by handling your new business formation or incorporation requirements along with the state compliance.

Entrepreneur’s guide to form a business in Texas

Texas is a popular choice amongst entrepreneurs as it has inched forward towards being the 9th largest economy in the world and 2nd largest in the US based on its GDP. According to the IMF, Texas GDP in 2021 is $1.9 trillion, which is more than the GDP of Brazil ($1.8 trillion). The Lone Star State is also ranked first in the nation where business and economic growth prospects are concerned. If you are planning to start a business in Texas then as an entrepreneur or small business owner, you will be able to leverage the high-end infrastructure, competitive tax climate, skilled workforce, high quality of life, and business-friendly economic policies.

Why do companies prefer to register business in Texas?

The state of Texas has a business climate that is just perfect for entrepreneurs and small business owners. One fun fact is that top 25 Fortune 500 companies are headquartered in Texas and these include McKesson, ExxonMobil, AT&T, Dell Technologies, Phillips 66, Valero Energy, Sysco, and Oracle among others. If you are planning to start a business in Texas then it is important to first understand why the state is quite the first choice for new business formation. There are several key drivers that govern growth and success of a small business in Texas from a long-term perspective. Some of the key drivers include:

• Abundance of right talent: It is the people who drive the economy of Texas and this stands true when you look at the availability of skilled talent or dedicated professionals in the state. If you start a business in Texas then there will be no dearth of talent especially in cities like Austin, Dallas-Fort Worth, San Antonio, and Houston. There are almost 170 colleges and universities and 125 schools that offer a variety of tech programs. This ensures there is never any shortage of potential hires for a small business in Texas or medium sized enterprises.
• Significant tax benefit: Texas is one of the few states in the U.S. with a low tax burden. The state also does not levy any corporate income tax or state income tax. When you register a business in Texas, you will also be able to leverage the variety of tax incentive programs that are geared towards helping new businesses in boosting their bottom line. Some of the top programs include Research & Development Tax Credit, Ad Valorem/Property Tax Exemption, Sales and Use Tax Exemptions, Freeport Exemption, and Sales Tax Exemption or Franchise Tax Credit for Qualified Research.
• Platform for innovation: One of the important reasons for entrepreneurs to start a business in Texas is that the state provides just the right platform for innovation. Innovation by entrepreneurs not only aids in the economic activity of the state but also helps a new small business in Texas to become an integral part of that innovation. Innovation along with advanced technology has become a strong driving force for a wide array of industries including aerospace advancements in the NASA Johnson Space Center in Houston and the SpaceX South Texas launch site.

Steps to start a business in Texas

Small businesses are integral towards helping states like Texas to achieve their state mission including creating a business-friendly environment while ensuring the overall state economy flourishes. Texas does offer many benefits but how do you incorporate in Texas? There are different approaches and aspects to be considered right from creating a business plan to naming your business and finally the process to register a business in Texas. Let us look at each of the guiding steps in detail.

1.Prepare a Texas Business Plan

Before you can register a business in Texas; it is necessary to prepare a business plan. A business plan is a type of written document that defines the primary and secondary objectives of a startup. The importance of a business plan lies in the fact that it incorporates several aspects of small businesses in Texas and the steps required to make the startup successful in terms of revenue generation and growth or expansion. A well crafted business plan often helps businesses in attracting investors. Since it is a framework of your company, it should include the following according to the Texas Governor’s small business handbook.

• Executive Summary
• Business set-up and structure
• Market analysis and competition
• An outline of the development and regulatory process
• Marketing plan along with sales strategies
• Operating Plan
• Strategic Financial Plan
• Launch and delivery plan

2. Attend Entrepreneurial Training or Development Programs in Texas

One important thing that helps you to start a business in Texas by providing the right platform, knowledge, skills, and resource assistance is entrepreneurial training or business development programs. There are training programs offered by the state as well as private institutions and then there are networks that create physical hubs for imparting education and skill based programs for startups. These networks have been created to assist modern day entrepreneurs planning to start a small business in Texas. The resources offered by them include:

• Access to mentors
• In-person and virtual events
• Dedicated program for women entrepreneurs
• Co-working space
• Private conference rooms
• Networking opportunities

3. Choose a Business Structure for Texas Business

One of the most important decisions as a new business owner is selecting the right business structure. The type of structure you choose in order to start a business in Texas will have a wide variety of implications pertaining to the financial success of your business. The business structure for a small business in Texas should be chosen taking into consideration aspects like:

• Protection of personal assets
• Federal and state taxation
• Access to Capital
• Startup Costs
• Business management
• Continuity upon ownership change
• Business operations
• Transferability of ownership interests
• Structure flexibility

• Sole proprietorship
• General partnership
• Corporation
• Limited Liability Company
• S Corporation
• Limited Partnership
• Limited Liability Partnership

4. Naming Your Texas Business

A business name is one of the most crucial aspects of a startup as it not only provides an identity to the company but also helps in the creation of value for prospective customers. Hence, it is important to ensure that the name you choose to register a business in Texas is not complex. Research studies have shown that simple and easy to remember names have higher brand recall value. While ideating a business name, it is important to ensure the name is compliant with various requirements as mentioned in TX Bus Orgs § 5.053 (2019). The subchapter B – General Provisions Relating to Names of Entities suggests that your chosen name should be distinguishable from any other name existing in the records of the Secretary of State. Once you have chosen the name, you need to search for business organization name availability with SOS Direct. If your chosen name is available then you can reserve the name for a period of 120 days by filing the “Application for Reservation or Renewal of Reservation of an Entity Name” with the office of the Texas Secretary of State.

5. Choose Your Location for Texas Business

If you are planning to start a business in Texas then one of the factors defining success is the location of the business. There are specific aspects that you need to consider when choosing a location. The most common aspects are:

• Targeted Audience
• Startup Cost
• Competition
• Availability of skilled labor
• Rental rates and availability of commercial space
• Supply chain
• Visibility of the office
• Zoning regulations
• Parking facility
• Utilities and other related costs

• Dallas: More often than not, the growth and success of a business is dependent on the city where a business is being formed and operated from. Dallas is such an ideal city as it has low unemployment rates, diverse workforce, and is home to numerous Fortune 500 companies. Another important reason to register a business in Texas in the Dallas city is availability of affordable commercial real estate and its central location in the state makes handling transportation and logistics much easier.
• Houston: Famous as the home of NASA space center, Houston is home to over 1,000 information technology companies. It is one of the top cities in terms of location if you are planning to set up your small business in Texas. It is considered as the “center of technology entrepreneurship” in the state. It is also famously known as the world capital of the oil and gas industry and also has more than 10,700 manufacturing companies. The city boasts of an array of logistical as well as distribution channels that makes moving goods around the east and west coast as well as anywhere in the country easier.
• Austin: One of the cities that is one of the favorites amongst entrepreneurs and startups. The gross domestic product (GDP) of Greater Austin metropolitan statistical area was $159,361.291 million in 2019 and is ranked right at the top of the “2020 Tech Town Index Ratings”. The city has become a hotspot for innovation centers, leisure and hospitality, and R&D labs. When you register a business in Texas, Austin will play a key role in defining future growth of your company.

6. Register Your Texas Business

Once you have selected the type of business structure, the next step would be to register the business in Texas. The process for registering a new business can vary from one state to another and the application and fee may differ according to the type of business but that is not the case in Texas. For example: If you are planning to incorporate in Texas then you will be required to file the Certificate of Formation: For-Profit Corporation pursuant 2019 Texas Statutes, Business Organizations Code (BOC), Title 2 – Corporations, Chapter 21 – For-Profit Corporations, Subchapter B. The filing fee for a corporation is $300. Similarly, if you were to form an LLC then you would be required to file “Certificate of Formation—Limited Liability Company” along with a filing fee of $300. The certificate of formation has to be filed with the office of the Texas Secretary of State.

We can assist you with new business formation in Texas!

7. Get Your EIN

One of the important requirements when you start a business in Texas is the Employer Identification Number (EIN). It is also known as the Federal Tax Identification Number and is issued for identification of a business entity. Even if you register a Texas business online, you will need to apply with the Internal Revenue Service (IRS) for issuance of an EIN as it will be required when filing taxes or annual returns. Depending on the business structure chosen by you, an EIN may or may not be required. The Employer Identification Number for your Texas business may also be required when opening a business bank account, or for applying for loans.

8. Open a Business Bank Account for Texas Business

When you start a business in Texas, one of the important tasks should be opening a business bank account. You are probably thinking, “I already have a bank account then why do I need a business account?” The truth is that having a business bank account will simplify your ledger keeping and ensure business and personal expenses or gains are not mixed. Such accounts are also known as business checking accounts and you can open one before or after you start a business in Texas. The benefits of having a separate bank account for a small business in Texas are:

• The business records will be highly organized
• A business checking account will help in simplifying your tax returns
• It will help in building a business credit rating
• Such an account will make you or your business look professional
• You can avail of low cost electronic transactions and competitive interest rate on your business profit
• You will be able to set up credit acceptance or retail point of sale systems
• A business bank account can have multiple signers

9. Obtain License and Permits

You can start a business in Texas in some of the high growth and innovation based industries like Advanced Manufacturing, Aerospace, Aviation & Defense, Energy, Biotechnology & Life Sciences, and the information and computer technology industry among others. However, one of the important criteria for conducting business in the state is applying for and obtaining a business license. Only when you have acquired a license, can your business become fully operational.

If you are planning to start a Food Manufacturing or Distributing business then you may require some or all of the below mentioned licenses and permits:

• Air Permits issued by the Texas Commission on Environmental Quality
• Alcohol Licenses and Permits by Texas Alcoholic Beverage Commission
• Egg Broker/Dealer/Processor Licenses issued by the Texas Department of Agriculture
• Food Handler License issued by the Department of State Health Services
• Milk and Dairy Facilities Licenses issued by the Department of State Health Services
• Retail Food Operation Permit issued by the Department of State Health Services

Identify, and apply for the right Texas business licenses and permits!

10. Register for Taxes

One of the important aspects to consider when you start a business in Texas is taxes. When you apply for and obtain an EIN, it makes the process of filing annual returns easier. As compared to some of the other states, taxes in Texas are quite low and there is no corporate income or personal income tax. The taxes that may be applicable for a small business in Texas are:

• Franchise tax: The franchise tax is a type of tax that is levied on a state level. This tax is applicable to different forms of small business in Texas including corporations, limited liability companies (LLC), business associations, general, limited and limited liability partnerships, professional associations, business trusts, joint ventures and other forms of legal entities operating in Texas. If you register a business in Texas and qualify for franchise tax then you will have to file returns with the Texas Comptroller of Public Accounts (CPA).
• Sales and use tax: If you are operating your business in the retail industry then you may be required to file sales and use tax returns. Texas imposes a 6.25 percent tax on all businesses involved in retail sales, lease and rental of goods, and other taxable services like information services, telecommunication services, and amusement services among others. The sales and use tax has to be filed with the Texas Comptroller of Public Accounts (CPA).

11. Annual and Ongoing Requirements

Once you register a business in Texas, there are annual and ongoing maintenance requirements by the state that every business needs to be compliant with. Once you register a Texas business online, the annual requirements are:

• Public Information Report: One of the most important annual requirements is the “Public Information Report”. In some states, it is known as the annual report and in other states it is referred to as the statement of information. The Public Information Report is also known as the Ownership Information Report and has to be filed with the Texas Comptroller of Public Accounts. It has to be submitted annually on or by May 15 each year. For example: If you register a business in Texas on July 31, 2021 then your Public Information Report will be due on May 15, 2022. It has to be filed by corporations, LLC’s, limited partnerships, or professional associations pursuant to Texas Tax Code – TAX § 171.203..

Some Important Quick Resources for Texas Business

In the stage between ideating and transforming your ideas into a small business in Texas, you will require information pertaining to various aspects of company formation. Hence, it is important to find the right guidance and resources that will not only help you to start a business in Texas successfully but also achieve company objectives. We have created a list of resources that are targeted towards helping new businesses, entrepreneurs, and startups.

Texas Secretary of State

The office of the Texas Secretary of State is governed by the Texas Constitution and its primary role is to administer the Texas Election Code while maintaining public filings. The website of SOS provides an encyclopedia of information and guidance on various areas of new business formation and operation. It provides information on business services like startup information or how to start a business in Texas, forms for registration or incorporation in Texas, filing options, fee schedule, Texas business law, Texas registered agent information, and notary public & apostille among others.

• Texas Secretary of State
  James Earl Rudder Office Building
  1019 Brazos
  Austin, Texas 78701
  Phone: (512) 463-5555
  Fax: (512) 463-5709
  Website – https://www.sos.state.tx.us/

Texas Comptroller of Public Accounts

The primary duty of the Texas Comptroller of Public Accounts is to collect all forms of tax revenue that is owed to the State. They are responsible for collecting 60 applicable taxes in the state right from the sales tax to the minor tax fees like the battery sales fee. If you are planning to register a business in Texas then you can find information and guidance on Texas tax rules and laws, different forms of taxation applicable to a small business in Texas, tax training resources (seminar, webinar etc.), Sales Tax Permit Application, eSystems or online filing, tax fee, and refund information among others. The contact information for Texas Comptroller of Public Accounts is:

• Texas Comptroller of Public Accounts
  Lyndon B. Johnson State Office Building
  111 East 17th Street
  Austin, Texas 78774
  Phone: 800-252-5555
  Fax: 800-531-1441
  Website: https://comptroller.texas.gov/

Texas Department of Licensing and Regulation

The Texas Department of Licensing and Regulation (TDLR) is a state agency that is responsible for licensing as well as regulating different types of businesses, occupations, equipment and facilities in the state. When you start a business in Texas, you will need to apply for and obtain different licenses and permits and TDLR can provide you the required information, guidance, and help regarding the same. You can refer to their detailed list of licenses and understand the process of applying for or renewal of such licenses. The contact information for Texas Department of Licensing and Regulation is:

• Texas Department of Licensing and Regulation (TDLR)
  920 Colorado
  Austin, Texas 78701
  Phone: (512) 463-6599
  Website: https://www.tdlr.texas.gov/

Official Government website for the State of Texas

The official government website (Texas.gov) for the state of Texas provides guidance and information pertaining to Government Services Directory, professional and occupational licensing, online payments, license renewal, state news, and how to start a business in Texas guide. You can use the website for resources before or after you register a Texas business online. The contact information for Texas.Gov is:

• Official government website (Texas.gov)
  Phone: 1-877-452-9060
  Email: support@texasgovhelpdesk.com
  Website: https://www.texas.gov/

Texas Department of Economic Development

The Texas Department of Economic Development is also known as the Texas Economic Development Corporation (TxEDC) and its primary objective is to promote and market the state of Texas nationally as well as internationally in a manner that it becomes the best place for a business to form, locate and expand. If you are planning to register a business in Texas then this department can provide detailed information and resources of various aspects of a startup. You can find resources and information on business incentives, Enterprise Zone Programs, opportunity zones, moving your company, webinars and events for small business in Texas, trade and export, and target industry clusters among others. The contact information for the Texas Department of Economic Development is:

• Texas Department of Economic Development
  P.O. Box 12428
  Austin, Texas 78711
  Phone: (512) 936-0100
  Email: smallbusiness@gov.texas.gov
  Website: https://gov.texas.gov/

Ready to Start a Business in Texas

Texas is considered a haven for entrepreneurs and new businesses as it offers a pro-business climate. The state has passed a new legislation that will provide tax relief of $4 billion for new and existing businesses. You can register a Texas business online or offline and we at IncParadise can provide meaningful assistance. We are one of the most reputable Texas registered agents with experience and expertise in new business formation. We have helped thousands of businesses in Texas to successfully form an LLC or a business corporation.

Doing Business in California

The Gross Domestic Product (GDP) of America was approximately $21.5 trillion in 2019 with California ranked number one for being the largest state economy. One of the top industries in California is manufacturing as it accounts for approximately 10.67% of the total output generated in this state, which was $316.76 billion in 2018. There are more than 35,000 entrepreneurs running a business in California in the manufacturing industry. The state is also home to some of the biggest corporations and hosts events and meets where as a first time entrepreneur you can learn how to run a California business successfully like others have before you.

Why is California good for small businesses?

There are 4.1 million small businesses in California and there are plenty of reasons why so many businesses are registering in the state. As an entrepreneur or first time business owner, you may wonder whether doing business in California is beneficial or not. The honest answer is that the state offers several small business programs, incentives, and provides an overall business and economic value that can be considered the most competitive.

• Customer Base: One of the underrated aspects related to running a business in California is the customer base. Yes, every new business forming in the state has access to over 39 million residents or prospective customers. Whether you are running a retail store, a pharmacy, a home-based business, or an online business; if you can tap into the customer base then you will never have to worry about how to run a California business successfully.
• Talent Pool: One of the challenges of running a business in California or any other state is hiring the right employees. On the bright side, California is home to some of the top universities and large research institutions, which provides businesses with the talent pool as required. Some of the top institutions include Stanford University, California Institute of Technology, University of California—Los Angeles, and University of California—Berkeley among others.
• Small Business Assistance Centers: Whether you are running a business in California or any other state; you may require assistance in a variety of areas. You can find assistance on business related areas from the several small business assistance centers located within California. They provide assistance in areas like drawing up a checklist for starting a new business, information pertaining to various state business programs, financing a startup, contracting opportunities, getting import or export licenses or permits, and small business resources like taxes and planning assistance.
• Business Incentives: If you have been wondering how to run a California business successfully then here is a tip – take advantage of the various state business incentive programs. Some of the top incentive programs include California Competes Tax Credit, New Employment Credit (NEC), Manufacturing and Research & Development Equipment Exemption, California Research & Development Tax Credit, California Small Business Loan Guarantee Program (SBLGP), California Capital Access Program (CalCAP), and the California Opportunity Zones program.

Challenges for running a California business

Doing business in California has its many benefits but at the same time, there will be hurdles and challenges to overcome. It is never easy to operate a business in any state and there are certain challenges of running a business in California that you will need to work around or overcome during various startup lifecycle stages. Although, California is the land of opportunity and innovation, the various challenges that your startup may face are:

• Tax: One of the first challenges of running a business in California is taxes. The state is known to have one of the highest state business tax rates in the nation. The sales tax is at 7.25 percent and goes up to 10.75 percent if local sales tax is included. California also has a minimum franchise tax of $800, which is the highest in the country. If you are planning to set up a small business then these taxes will increase the average cost of doing business in California significantly.
• Regulations: California is known for experimenting with new regulatory measures and this creates challenges to running a business in California. A new business in the state will have to keep itself updated with regulatory changes and also ensure regulatory compliance.
• Cost of living: This is one of the major challenges of running a business in California as it can be quite an expensive affair from a purely operational standpoint. Higher cost of living translates into higher rent for commercial property and higher wage. The cost of living and doing business in California can vary from one city to another. For instance the cost is higher in Los Angeles as compared to lower costs in Camarillo or Simi Valley.

How to Run a Business in California?

California is not just an economically strong state but is a heaven for startups as it promotes innovation and technology. If you are thinking of doing business in California then you can establish your startup in any industry as all industries and sectors are highly growth oriented. For example: The hospitality sector is one of the top industries that has a dynamic and vibrant economy with $65.1 billion in travel-related spending in 2020 while the restaurant industry shows estimated sales of over $97 billion. The question is how to run a California business successfully in any industry and the processes that will help in making your business fully operational. Let’s take a look at the fundamental requirements for starting a new business in this state.

1. Understand your target market

A target market is essentially a specific segment that constitutes your potential customers whom you can reach out to or attract using various marketing strategies. The target market is often known as the target audience and hence it is important to define your audience prior to launching and running a business in California. Let’s look at an example to understand this:

If your business believes in selling or supplying or retailing PlayStation Games then your target market will be in the age group of 18 to 40 but if your business is in the hospitality industry then your target audience can be any age group. At the same time, you have to also determine what exactly you are offering in the hospitality industry because for example, a business spa or conference center will not cater to children, teenagers, and even retired senior citizens.

2. Set revenue goals

The ultimate objective of doing business in California or any other state is generating revenue (profits) and achieving growth. Revenue and growth are interrelated as higher revenue will open the door for expansion, which is a type of growth that every business aims for. Hence, it is important to set your revenue goals early. Revenue goals will revolve around generating profits and this is possible with a strong sales and marketing strategy that will help develop a strong customer base. One of the challenges of running a business in California is to create a fine balance between generating income and controlling operational costs. An illustrative example of revenue goals is:

3. Prepare business plan

If you are wondering how to run a California business successfully then a business plan is what you need. Even before you register your business, a business plan needs to be in place. A robust business plan has the following benefits:

• It will help you to steer your business in the right direction
• It will help you in creating an effective business growth and expansion strategy
• You will be able to identify the various marketing and sales strategies for creating brand awareness
• It will help you to overcome the challenges of running business in California
• A good business plan will attract investors as well as lenders
• You will gain a higher understanding of your existing market and competition

• Company description
• Market analysis
• Description of products or services
• Marketing strategies
• Management and operational structure
• Staffing requirements
• Financial projections

4. Choose a business location

One of the rules of “how to run a California business successfully” is to always choose the right location for your business. It is important to understand that choosing a business location is like a strategy playing out and a number of factors will help you to decide the location you choose. Some of these factors are:

• Business activity: The location for retailing or selling products will be different from those in the service industry.
• Accessibility: Your business location should be accessible to customers/clients as well as vendors and suppliers
• Competition: Competition can make doing business in California challenging hence choosing a business location not saturated by competition will be beneficial
• Utilities and Rental: If the cost of rented commercial space and utilities is high then it will increase overall startup costs. Hence, you need to look for a location that is within your budget

5. Choose a legal structure for your business

A legal structure for your business is as important as operating or running a business in California. The legal structure of any entity will play a key role in influencing several aspects of the business right from day-to-day operations to filing of taxes and even asset protection. It is hence always recommended to choose a legal structure that doesn’t create challenges of running a business in California and instead provides benefits and legal protections. You can choose any of the following business structures:

• Corporation
• Limited Liability Company
• Limited Partnership
• General Partnership
• Limited Liability Partnership
• Sole Proprietorship

Do you want to form a California LLC or a Corporation?

6. Obtain necessary license and permits

If you plan on doing business in California then one of the foremost requirements is a business license. If you don’t have the necessary license or permit then you will be unable to make your business operational in the state. In California, there are business licenses or permits that are categorized under two types, they are:

• General business license
• Regulated professions and industries licensing

For example: If you plan on doing business in California and form your startup in San Francisco then licenses and permits will be issued by the Office of the Treasurer & Tax Collector. A business license has to be renewed annually or on the date as prescribed by the Ordinances or Regulations Code of the issuing city or county. The fee for general licenses vary from one city to another and the renewal fee depends on the business activity.

7. Secure funding

It is never easy running a business in California but with the right strategies you can achieve all your business objectives. Every business is unique and so are its requirements. One of the challenges of running a business in California is the high startup costs. So how do you manage the cost? The best option is to secure funding. There are several ways to secure funding or financial aid in the state and they are:

• Approach venture capital firms
• Look for Angel investors
• Find the top business incubators or accelerators
• Apply for government grants and subsidies
• There is an option for bank loans
• Apply for business incentive programs like the Small Business Loan Guarantee Program

8. Hire right employees

One of the challenges of running a business in California is finding the right employees. California is home to some of the most prestigious universities as well as a highly motivated talent pool. The first step is to introduce a formal hiring process as it will improve your chances of finding and hiring efficient and professional talent. Here is a checklist of points to consider prior to hiring employees.

• Job analysis is necessary as it will define responsibilities, skills, and outcomes of a specific job
• Have an Employee Recruiting Strategy in place
• Prepare a well structured interview using evaluation scorecards and behavior-based interviewing techniques
• Always try and look beyond the resume or CV of a probable candidate
• Ask for references of previous employers

9. Comply with taxes and other state regulations

Once you start doing business in California, you will be required to comply with state regulations and other requirements including filing of taxes. As a business owner in California you will have to comply with federal, state, and local tax requirements. California has different types of taxes including sales tax, franchise tax, corporate tax, and alternative minimum tax (AMT). You need to identify the taxes applicable for your business and ensure they are filed on time. One of the challenges of running business in California is following all state regulations. In order to do so, you will have to identify the annual business requirements and fulfill them so that the business remains in active status.

10. Keep finance in order

One of the key challenges of running business in California is keeping business finances in order. There are many small business owners who are unable to use the various technologies available in the market to keep their finances in order. One of the options of doing business in California is opening a business bank account, which can help separate your personal expenses from the expenditure and revenue earned by your business. This will also ensure that your annual tax filing is smooth. Here are some tips that will help you to maintain organized and clean financial records.

• Use accounting software like QuickBooks Online, Xero, or FreshBooks
• You can also use a custom enterprise resource planning (ERP) system for complex accounting
• You can set aside 20% to 25% of your net income for income taxes
• Use a cloud based tool for better management of payments across customers and vendors
• Hire a professional bookkeeper to ensure tax filing is correct while maintaining optimal cash flow

11. Implement right tools for business growth

Small businesses can achieve high growth quickly but it requires strategy and tools to achieve that. Running a business in California will not necessarily translate into business growth as achieving your short-term and long-term objectives may take time. There are several variables that influence business growth like:

• Customer loyalty
• Adoption of technology
• Cultural, political and economic conditions of the market
• Business location
• Brand positioning
• Marketing & sales strategies

• Business contact database tools to help grow contact or customer database
• Influencer marketing campaign tools and community intelligence marketing platforms
• Search Engine Optimization (SEO) tools to create higher visibility online
• Tools for Social Media Monitoring & Publishing
• Email and Marketing Automation tools

12. Focus on giving a great customer experience

The essential aspect of running a business in California is to create a loyalty base of satisfied customers. This is possible only when a business offers a positive customer experience. What is customer experience? It is an impression developed by your customers regarding the brand through their journey of using your product or service. This impression is basically how a customer views your brand and this can have short-term and long-term impact on the bottom line including revenue generation. The following tips will help you focus on giving a positive customer experience:

• Measure your customer experience by analyzing results of a customer satisfaction survey
• Identify the reasons and the rate for customer churn
• Create a forum for customers where they can request new features or products
• Make the process of returning a product easier
• Identify the customer’s touch point with the business
• Create promo runs offering products or services at discounted rates
• Use customer experience management tools like Zendesk, IBM Tealeaf, and Satmetrix among others.

Need any Assistance in Running Your California Business?

If you are thinking of doing business in California, online or offline then you will require leading registered agent services to help you with the formation or incorporation of your small business. IncParadise is one of the top California registered agents and we have helped thousands of companies to register their business successfully in the state.