Starting Business in Texas

There are several reasons for starting a business in Texas with one of the primary reasons being a balanced and robust economy. Reports by Forbes and Statista have revealed that the real Gross Domestic Product (GDP) of Texas in 2020 was $1.7 trillion. As a result, it has become the 9th largest economy in the world based on GDP. One of the salient reasons for choosing Texas for business is the fact that the state gives priority to small businesses and the state believes that they play a crucial role in defining the mission of the state as well as maintaining a dynamic, fair, business-friendly, and flourishing business climate and economy.

Why Choose Texas for Starting a business?

Texas is home to some of the top Fortune 500 companies in the world including Exxon Mobil, Texas Instruments, AT&T, Occidental Petroleum, Tenet Healthcare, American Airlines Group, ConocoPhillips, Baker Hughes, Hewlett Packard Enterprise, and Oracle among others. A pro-business climate along with good weather and access to venture capital is attracting entrepreneurs to establish their startups here. Starting a business in Texas seems to be en vogue and cities like Austin are gradually becoming mega tech hubs. This is more so due to the numerous benefits of a Texas business environment and abundance of skilled workforce.

• Texas contributes 8 percent to the US GDP, which ranks it #2 right on the heels of California
• One of the major benefits of Texas business is the availability of financing options for small businesses
• The state of Texas is responsible for producing approximately 10% of total manufactured goods in the country. Some of the top companies in this sector include Excalibar Minerals, LLC, Titan Manufacturing, Inc., Brandon Industries, Inc., and Aviva Metals, Inc., among others.
• An advantage of starting a business in Texas is that the state boasts of a robust Texas freight and logistics infrastructure and market, which provides businesses with value added services in freight transport, freight forwarding, courier express, warehousing, cold chain logistics, return logistics, and last-mile logistics among others.
• The state has a strong exports market that witnessed annual revenues of $315.9 billion while value of manufactured products exported was $248.1 billion
• Texas has the second-largest workforce in the nation with the workforce distribution being the highest in North Texas followed by Gulf Coast Texas and South Texas.
• The state has an extensive network of educational institutions, which play a key role in driving workforce supply as well as innovation in Texas.
• It has been ranked as the #1 producer of oil and natural gas in the country

Top Benefits of Starting a Business in Texas

Texas has been awarded top spot in 2021 by the Global Groundwork Index of the Site Selection Magazine for measurement of the state’s success in business infrastructure and end-user project investment. The state’s economic development policies and flexible business regulations are helping companies of different sizes to grow and expand in Texas. Entrepreneurs starting a business in Texas can enjoy several advantages right from business incentives to tax benefits and a diverse market to launch products or services. Let us take a look at some of the top benefits of a Texas business.

Tax benefits for Texas businesses

One of the advantages of starting a business in Texas is the different types of tax benefits available at the state and local level. These benefits are crucial towards driving the Texas tax climate although the fact that the state does not have any corporate or personal income tax makes it one of the few states having a low tax burden. The tax benefits of a Texas business are categorized under tax incentives or exemptions.

Large and diverse market

Texas boasts of a diverse, consistently growing, and constantly innovating market for new and existing businesses. Austin and Houston are fast becoming tech hubs due to availability of an educated workforce. Some of the biggest companies in the IT industry like Google, Amazon, Apple, and Facebook have made more than $1 billion in investments in the Northwestern region of Austin. An advantage of starting a business in Texas is that you can operate and achieve growth in a diverse industrial landscape, which is already home to 49 Fortune 500 companies and headquarters of more than 90 Fortune 1000 companies. The reason why Texas for business is good is the rapid growth of industries like advanced manufacturing, information technology, life sciences, energy, aerospace, aviation and defense, petroleum refining & chemical products, and biotechnology among others.

Business friendliness and supportive environment

Starting a business in Texas is a great decision because it boasts of a business friendly environment that helps in nurturing and growth of a business. There is no dearth of business support and resources in the state with government, private, and other local agencies providing the much needed financial assistance to startups. Some of the important components of the Texas business supportive environment include:

• A highly skilled workforce
• Central location of the state creating accessibility to domestic and foreign markets
• State-of-the-art infrastructure
• Extensive transportation network
• Low cost of living
• No corporate or personal income tax
• A transparent regulatory structure
• Platform for technology and innovation

Raising capital for startups

The state of Texas is famous for its strong entrepreneurial spirit, which has been inspiring a whole generation of visionary entrepreneurs and innovative thinkers. There is a distinct advantage of starting a business in Texas as a wide variety of resources are available for startup businesses and entrepreneurs including co-working spaces, accelerators, and incubators among others. These resources are important for business growth but the one thing entrepreneurs or startup businesses require in the initial stages in raising capital and this is where venture capital (VC) funding comes into the picture.

Are you ready to form your startup in Texas?

Open for innovation

Texas is one of the most promising innovation and technology markets in the nation with Austin, Houston, Dallas, and San Antonio topping the list for being centers of innovation. The lone star state is home to world-class innovation hubs as an eclectic mix of entrepreneurs, corporations, accelerators, investors, and universities come together to create an insatiable appetite for technology and innovation. Thanks to the innovation hubs, starting a business in Texas can be a highly rewarding experience. Some of the salient aspects of this innovation state are:

• There are several active innovation communities in the smaller cities and counties that work as a support system for their bigger cousins
• The innovation ecosystem in Texas is highly efficient and effective
• There is higher media attention for Texas startups focusing on innovation
• One of the benefits of a Texas business is that the innovation ecosystem takes startups from the concept stage to the seed stage and growth stage

Ownership transfer

An advantage of starting a business in Texas is the ease of transfer of business ownership. There are different methods through which transfer of business ownership is possible and the method you choose will depend on your business structure and need of your business. Ownership of your business can be transferred in Texas through the following ways:

• You can sell the business through owner financing or lender financing
• You can lease the business
• Reapportion of ownership amongst several owners
• Transfer of ownership using bequests, shares or gifts applicable mostly for a business corporation

Incentive and funding programs from government

One of the biggest advantages of starting a business in Texas is the incentive programs made available by the state. The incentive programs can be classified as:

• Financing Programs – The financing programs assist in small business development by making available a variety of loans. The benefits of a Texas business is the ease of access to various financing options for small and medium-sized enterprises (SMEs). Some of the top financing programs include Capital Access Program (CAP), Texas Enterprise Fund (TEF), and Product Development and Small Business Incubator Fund (PDSBI).
• Grants – There are a variety of small business grants available in Texas and they can vary from a job creation grant program to skill development grants. The popular grant programs include Governor’s University Research Initiative grant program (GURI), Skills Development Fund, Self-Sufficiency Fund, and Texas Enterprise Fund (TEF).
• Tax Incentives – The tax incentive programs are one of the major benefits of a Texas business as they help entrepreneurs and businesses to increase their workforce and give their bottom line the required boost. Some of the top tax incentive programs include franchise tax exemption & deduction for business relocation, wind and solar energy tax exemptions and deductions, state sales & use tax exemptions, and research & development tax credit.

Ready to Start a Business in Texas?

Texas, the rapidly growing hub of entrepreneurship and innovation is considered as one of the best states to establish your startup. The state has everything from a pro-business climate to flexible regulations, growth driven business environment, technology platform, and robust infrastructure among others. If you plan on starting a business in Texas then IncParadise can assist you with the entire process of new business formation.

Texas LLC Annual Filing Requirements

You can form a limited liability company in Texas as such a form of business has several advantages like flexibility of tax treatments, privacy protection, and limited liability for members among others. Once you have registered your startup, the active status of the company will depend on how compliant you are with the Texas LLC annual requirements. Different states in the US have different sets of annual requirements although filing of an annual report also known as Texas LLC public information report is quite common amongst most states. Let’s take a look at what this report is and how to file it.

Franchise Tax Public Information Report

One of the important annual requirements for LLC and corporations in most states including Texas is the annual report. In Texas, it is known as the Public Information Report (PIR) and the Ownership Information Report (OIR). The PIR is also known as the Texas Franchise Tax Public Information Report and is separate from all other types of Texas franchise tax return forms or reports and is one of the foremost Texas LLC annual requirements.

What does it include and how to file?

The Texas LLC Public Information Report provides basic information regarding the entity including the name and mailing address of the entity and each member. If your LLC business doesn’t owe any franchise tax, even then you will be required to file a PIR as it is one of the mandatory Texas LLC annual requirements. This report is filed with the office of the Texas Comptroller of Public Accounts (CPA). You can mail it or submit it online using the Webfile esystems. In order to file online, you would be required to create an account or profile first.

• Selecting the correct report year is important. Since a PIR report is classified under Texas LLC annual requirements, you need to create the report for the current year.
• You need to provide the “Industry Classification Code” for your limited liability company. This comprises the Standard Industrial Classification (SIC) code and the North American Industry Classification System (NAICS) code. These codes will help the office of the Texas Comptroller to identify the primary industry your LLC is transacting business in.
• You will be required to provide information regarding LLC members, owners, and managers if applicable.
• You will need to provide information on principal place of business and principal office of the said LLC
• If a limited liability company owns any other Texas business then the Texas LLC Public Information Report will contain SOS file number of such entities
• You will also need to provide contact information of Texas LLC registered agent

What is the due date for filing?

The filing of the Texas LLC Public Information Report is governed by Texas Tax Code – TAX § 171.203. As a part of Texas LLC annual requirements, the PIR or annual report has to be filed annually by May 15 in the year following the year your LLC was registered. For example: If you registered or formed your LLC on Aug 25, 2021 then the Public Information Report will be due on May 15, 2022.

Penalties if fail to file

It is important to file the Public Information Report along with the Texas franchise tax report. If you fail to file this report then the office of the Texas Comptroller of Public Accounts (CPA) may send a 45 days “notice of forfeiture”. If you fail to file the report along with penalties within the stipulated period then the comptroller can forfeit certain LLC privileges pursuant to Texas Tax Code – TAX § 171.251.

Texas INC Annual Filing Requirements

A business corporation is quite a popular form of business for entrepreneurs due to the many advantages it has like business security, personal liability protection, access to capital through investors and VCs, and continuity. Once you have incorporated your startup, it is important to identify your Texas Corporation annual requirements as failure to maintain them can lead to penalties for the company. One of the most important annual requirements is the Texas corporation annual report also known as the Public Information Report (PIR). Let’s take a look at the requirements of the Public Information Report and how to file it.

Texas Franchise Tax Public Information Report

When you form a corporation in Texas, there are several annual compliances that your company has to meet in order to enjoy active status. One of the foremost annual compliances is that of filing a Texas corporation annual report also known as the Franchise Tax Public Information Report (PIR) pursuant to Texas Tax Code Chapter 171 – § 171.203. Although a corporation or professional corporation in Texas needs to file the Public Information Report (PIR), other forms of businesses may be required to file the Ownership Information Report (OIR) and this depends on the type of business that is filing a franchise tax report.

What does it include and how to file?

The Texas corporation annual report or the Public Information Report (PIR) consists of basic information regarding a corporation. Some of the information that is provided through the report includes the name and mailing address of the entity as well as the owner, director, and managers. If a corporation reports total annual revenue generated to be less than $1,180,000 then they will be considered to be in the “No Tax Due Threshold” or No Franchise Tax Due bracket. In such a scenario, you will still be required to file the PIR as a part of your Texas Corporation annual requirements.

• It is important to select the correct Texas corporation annual report year. Unlike, a franchise tax report, which is based on the financial year; the annual report has to be submitted each year.
• You will have to provide personal information including mailing address of directors, managers, or owners of the corporation if applicable.
• You will be required to provide “Industry Classification Code” for your corporation in order to meet the Texas corporation annual report requirements. The codes will help the office of the Texas Comptroller to identify the primary industry your business is operating in.
• You will have to provide information regarding the principal place of business and principal office of the said corporation
• You will also need to provide contact information of Texas LLC registered agent

What is the due date for filing?

The filing of the Texas corporation annual report for a business corporation is governed by Texas Tax Code – TAX § 171.203. The Public Information Report has to be filed annually by May 15 in the year following the year your business was incorporated. For example: If you incorporated your startup on June 10, 2021 then as a part of the Texas Corporation annual requirements, the Public Information Report will be due on May 15, 2022.

Penalties if fail to file

The Texas corporation annual report is not the only document to be filed by a business corporation as it has to be submitted along with the franchise tax report. According to the Texas Tax Code – TAX § 171.251, failure to file the public information report along with the franchise tax report can lead to penalties and the comptroller may even decide to forfeit certain privileges of the corporation including the privilege to operate in the state.

Texas Franchise Tax

The Texas franchise tax is a type of privilege tax that is imposed on specific business entities that are formed and operate in Texas. It is simply a tax for doing business in Texas. This type of tax is applicable to corporations, limited liability companies, and partnerships and hence such entities will be required to submit a Texas franchise tax report. This privilege tax is an integral component of the Texas LLC annual requirements or corporation annual compliances and is governed by the 2005 Texas Tax Code, Chapter 171- Franchise Tax.

What is Texas Franchise tax?

Texas is one of the few states that don’t have any corporate income tax but it does have franchise tax. It is a type of tax that a state levies against any business simply operating in the said state and hence it is a state tax and not a federal tax. The tax is levied as a part of Texas Corporation annual requirements or annual compliances for most types of businesses. However, certain corporations in Texas like those engaged primarily in selling, manufacturing, or installation of solar energy devices or equipment are exempt from filing a Texas franchise tax report.

• Total revenue
• Cost of goods sold
• Compensation and benefits

Texas Franchise Tax Report due dates

Since there are no “minimum tax requirements” under the provisions of the franchise tax rules; you will be required to file a Texas franchise tax report on the revenue earned under the rates or slabs mentioned by the Texas Comptroller of Public Accounts (CPA).

How to file?

You can submit the Texas franchise tax report at the office of the Texas Comptroller at:

• Texas Comptroller of Public Accounts
  P.O. Box 149348
  Austin, TX 78714-9348

Need any Assistance in Filing Texas LLC or INC Annual Reports?

There are different types of Texas LLC annual requirements or corporation annual compliances but the most important filing is that of the Public Information Report and the Texas franchise tax report. If you are planning to incorporate or form a new business in the state then IncParadise can help you with your Texas LLC or INC annual filing requirements.

Naming your Texas LLC

A limited liability company is one of the most common forms of business in the US and Texas. There are several benefits that an LLC provides its owners or members including tax advantages and hence is an attractive entity type for first time entrepreneurs. In order to register your LLC properly, there are a few aspects you need to consider with the most important being naming of the Texas LLC. You have to identify a business name and conduct Texas LLC name search to identify and reserve the chosen name. You have to also ensure that the chosen name is in accordance with the Texas business name rules.

General LLC naming rules

The naming of a Texas LLC is fundamental towards the formation or registration of the new business in the state. When you decide to choose a name for your new LLC, it is essential to follow Texas business name rules so that the new name is accepted by the office of the Secretary of State. The Texas LLC naming and reservation is governed by Sections 5.101 to 5.106 of the Texas Business Organizations Code(BOC). The naming rules to follow are:

• Distinguishable Names – Your business name should always be unique. In other words, the name under which a limited-liability company plans to transact business in Texas should be distinguishable in the database of the secretary of state pursuant to Business Organizations Code, Title 1 – general provisions, Chapter 5 – names of entities, registered agents and registered offices, Subchapter A, general provisions, Sec. 5.053. You can check for uniqueness by conducting a Texas LLC name search.
• Name and Abbreviations – An important aspect of Texas business name rules is that the name of a Texas limited liability company and a foreign LLC should include “Limited Liability Company” or “limited company” in the name. An abbreviation of these phrases like “LLC,” “LC,” “Limited”, or “Ltd.” can also be used pursuant to Sec. 5.056 of the Business Organizations Code, Title 1, Chapter 5.
• False Implication – Prior to conducting a Texas LLC name search it is important to ensure that the name doesn’t falsely imply affiliation to any government agency as governed by 1 TX Admin Code § 79.33.

Search LLC business name availability in the Texas Comptroller’s website

Once you have chosen a name in accordance with the Texas Administrative Code and the Texas Business Organizations Code (BOC), you need to conduct a Texas LLC name search. The Texas business name availability can be checked on the Texas Comptroller’s website under the Taxable Entity Search option. This will help you to check if your chosen business name is available or already in use by another entity. If the name is not available then you will have to go through the name creation process again and then conduct name search again. If your chosen name is available then you can proceed with reserving the name.

Naming your Texas Corporation

A business corporation is one of the most popular forms of business in Texas and this is due to the several benefits or advantages it has over other forms of business. Limited liability, ease of ownership transfers, and perpetual life are some of the top benefits. Over and above all, business corporations attract investors and venture capitalists (VCs). If you are thinking of incorporating your startup in Texas then there are some aspects to consider like choosing a business name. In order to choose a name, you will be required to conduct a Texas Corporation name search to check availability of the chosen name. It is important to note that there are certain Texas business name rules that you have to consider while naming your startup.

General Corporation naming rules

The naming of a Texas corporation is one of the foremost requirements towards the incorporation of your startup. There is a process for choosing an entity name and the process includes the ideation phase, finalizing a name, conducting a Texas Corporation name search, and reserving or registering the name. When you are in the ideation phase or “finalizing a name” phase, following Texas business name rules is crucial towards acceptance of the name in the office of the Secretary of State (SOS). The naming of your corporation is governed by the Texas Business Organizations Code (BOC) and the Texas Administrative Code. The naming rules for a corporation are as follows:

• Names should be distinguishable – The principal requirement according to Texas business name rules is that your chosen name should be clearly distinguishable from any other name in the database or records maintained by the Secretary of State. In other words, your chosen name cannot be the same or similar to a name being used by any other business registered in the state. The name has to be unique. A Texas Corporation name search can help you to determine if your name is unique or not.
• Abbreviations – One of the important Texas business name rules is the use of words or abbreviations in the name of a business entity. The name of a Texas corporation, Professional Corporation, and foreign corporation must contain the words “incorporated”, “corporation”, “company”, or “limited”. You can also use abbreviations like “Inc.”, “Corp.” “P.C.”, or “Ltd.” pursuant to Sec. 5.054 of the Business Organizations Code, Title 1, Chapter 5.
• False Implication – One of the salient aspects to remember prior to conducting a Texas Corporation name search is that the chosen name should not falsely imply any affiliation to a government agency.

Search Texas Corporation name availability in the Texas Comptroller’s website

The process of identifying the correct business name is crucial towards ensuring proper reservation of the business name. A Texas Corporation name search will help you in this endeavor by showing a database or record of all business names in the state, so that you can compare and ascertain if your chosen name is unique. You can conduct Texas business name availability search through the Taxable Entity Search tool on the Texas Comptroller of Public Accounts (CPA) portal.

Need any Assistance in Texas Business Name Search?

A business name is crucial towards creating an identity for a startup, which future customers or clients can relate to. A business name also plays a significant role in marketing and brand promotion activities. There is a creative side of a business name and then there is the process of registration, which requires you follow Texas business name rules.

Texas Foreign Qualification

The state of Texas is home to approximately 2.8 million small businesses including domestic and foreign entities and these businesses are considered as one of key drivers of the state’s economic growth. One of the reasons for Texas LLC foreign registration is that the state has a pro-business environment thanks to a plethora of business incentives, grants and financial assistance, skill development training programs, and Foreign Trade Zones (FTZ) among others. A Texas foreign business registration will enable you to access all state and federal incentive and business assistance programs that will not only lower the initial startup costs but also help balance long-term operating costs.

What is Texas foreign qualification?

Foreign qualification Texas refers to the registration of a new business with the office of secretary of state. Once you complete Texas foreign business registration, your company will be able to legally pursue growth opportunities in Texas (across home state borders) without having to incorporate or form a new business entity. This is normally the first step towards expanding any business to a new state.

If you have formed a domestic corporation in New York then this will be considered as your home state for business purposes. Now, if you plan to expand your operations to Texas then will you need to incorporate again in this state? No! You will be required to undergo the process of foreign qualification in Texas, for which you will have to submit the required forms according to the type of business with the Secretary of State pursuant to TX Bus Orgs § 9.004 (2019).

Doing business in Texas

Doing business in Texas especially if your company has been formed initially in another state translates into the fact that it is a foreign company. Hence, the operation of such a company will be governed by 2019 Texas Statutes, Business Organizations Code, Title 1 – General Provisions, Chapter 9 – Foreign Entities. So what does “doing business in Texas” mean? It simply refers to the practice of transacting or conducting different business related activities in any state other than its home state or state of initial formation. When this happens, the said business has to apply for Texas LLC foreign registration or foreign incorporation.

• If your business has or owns a warehouse in Texas
• If your company owns a store in the state
• If you have an office or taken commercial space for business activities
• If your company has single or multiple sales representatives in Texas

Texas Foreign Qualification Process

If you have a business and it is already operational in any other state like Wisconsin or Georgia and you are planning to expand your business in Texas then you will need to apply for Texas foreign business registration. The process varies from one state to another and filing of foreign qualification Texas application would be different for different forms of business. It is important to note that failure to register with the state can lead to civil penalty and even injunction from doing business in Texas.

Texas foreign Corporation registration

If you are planning to form a foreign corporation in Texas then you will have to file an application for registration, which was earlier known as the certificate of authority. You will have to file Texas foreign corporation registration with the office of the Texas Secretary of State. This application will ensure you are able to “transact business” in the state. The following steps will help you to identify the requirements for Texas foreign business registration.

• Name Registration: The first step towards foreign qualification in Texas is to identify a business name and check name availability. In other words, you will have to conduct a Texas foreign entity search so that you can set forth the entity name that has to be registered. After conducting the search, you will be in a position to finalize the business name. Once confirmed, you can file the “Application for Registration of an Entity Name” pursuant to Sections 5.151 to 5.154 of the Texas Business Organizations Code (BOC). The name registration is an integral part of foreign qualification process and will be effective for a period of one year unless you file a notice of withdrawal. You will also have to provide a “Certification of Existence” along with the name registration application. The fee for filing the name registration application is $40.
• Registered Agent: An important aspect of Texas foreign corporation registration is designation of a registered agent for the service of process pursuant to TX Bus Orgs § 5.201 (2019). You can hire IncParadise as your Texas registered agent as we are familiar with the process of foreign qualification and one of our top services is assisting with Texas foreign business registration.
• Certificate of Existence or Good Standing: A certificate of existence is also known as a certificate of good standing and will be issued by the home state or the state where the foreign entity was initially formed. The certificate will be issued by the office of the Secretary of State or the Tax Department of the home state. You will be required to submit the certificate of existence along with the Texas foreign corporation registration application as well as the application for name registration.
• Foreign Corporation Qualification: The final step in the Texas foreign business registration process is to file the “Application for Registration of a Foreign For-Profit Corporation” (Form-301) pursuant to TX Bus Orgs § 9.004 (2019). Some of the important information you need to provide include name of the registered agent and their registered office, Statement of Purpose, Certification of Existence, information of foreign entity’s jurisdiction of formation and incorporation date, and federal employer identification number (FEIN) among others. The application for Texas foreign corporation registration has to be submitted in duplicate along with the filing fee of $750 to the office of the Secretary of State in Austin, Texas.

Texas foreign LLC registration

If you are an owner of a limited liability company and you want to expand your business to Texas then foreign qualification is necessary. You will need to apply for Texas foreign business registration as this certificate will ensure you can legally operate in the state. There is a process for Texas LLC foreign registration and it is as follows:

• Name Registration: Choosing a business name is an important aspect of Texas LLC foreign registration. It is important to ensure your chosen name follows the name availability rules as set by Section 5.153 of the Texas Business Organizations Code (BOC). Once you have chosen a name, you need to check name availability, which means it should be a unique name and is not being used by any other business in the database of the Texas Secretary of State. Once you have conducted your Texas foreign entity search and finalized a unique name, it is time to file the “Application for Registration of an Entity Name” pursuant to Sections 5.151 to 5.154 of the Texas Business Organizations Code (BOC). The process for name registration is fairly simple although you will be required to file a “Certification of Existence” along with the application. The filing fee for name registration application is $40 and it will be effective for a period of one year unless you file a notice of withdrawal.
• Registered Agent: One of the important aspects of the process of Texas LLC foreign registration is designation of a registered agent pursuant to TX Bus Orgs § 5.201 (2019). You can hire IncParadise as your Texas registered agent as we are familiar with the process of foreign qualification and have the necessary expertise to provide service of process as required by Texas Business Organizations Code.
• Certificate of Good Standing: The Certificate of Good Standing is an important official document that certifies the existence of a company and strengthens the fact that the said company is up to date where tax filing and state annual requirements are concerned. It is known as a certificate of existence in Texas and is a mandatory requirement for Texas foreign business registration. It is important to note that the certificate of good standing will be issued by the state of where the LLC has been originally formed.
• Foreign LLC Qualification: The culmination stage in the process of Texas LLC foreign registration is to file the “Application for Registration of a Foreign Limited Liability Company” (Form-304) pursuant to TX Bus Orgs § 9.004 (2019). Some of the important information you need to provide include Certification of Existence, name of the registered agent and their registered office, Jurisdictional Information, Federal Employer Identification Number, and name and address of governing persons among others. The application for Texas foreign business registration has to be submitted in duplicate with the office of the Texas to the office of the Secretary of State along with the filing fee of $750.

Need Any Assistance in Applying for Texas Foreign Qualification?

If you have already registered a corporation or a limited liability company but want to expand your business in Texas then you will have to apply for foreign qualification in Texas. As one of the leading Texas registered agents, IncParadise can assist you with the process of Texas foreign business registration or incorporation.

Doing Business in Texas

Doing business in Texas can bring growth and expansion for small and medium sized enterprises as it is one of the few states in the U.S with a strong economy and a pro-business climate. The real Gross Domestic Product (GDP) of Texas was $1.7 trillion U.S. dollars in 2020 and it is home to approximately 2.8 million small businesses. The state has been ranked #1 state in terms of exporting for 19 years in a row and #1 state in tech exporting for consecutive 7 years. Texas has reported a 60% increase in its export trade and the total output by businesses in June 2021 was $31.6 billion. The state is ranked amongst the top 5 in CNBC’s annual Top States for Business rankings while entrepreneurship has become the “Texas state of mind”.

Why do businesses prefer doing business in Texas?

Texas has become quite the favorite amongst first time business owners and entrepreneurs and this is owing to the numerous benefits the state offers including Texas small business grants. Texas has a vibrant economy and a robust infrastructure that supports and promotes business growth and expansion. If you plan on doing business in Texas then there are several factors and advantages that can help your business to achieve its mission, objectives, and profitability. Some of the factors are:

• A Pro Business Tax Environment – One of the top reasons for doing business in Texas is the tax environment. The state has conservative tax policies along with streamlined regulations, which makes it ideal for starting a new business. Texas does not have any personal or corporate income tax and is considered to have a really low tax burden as compared to other states in the country. Texas small business incentives related to taxes is one big advantage like the sales tax exemption for manufacturing machinery and equipment and franchise tax exemption applicable for sellers, manufacturers, or even installers of different types of solar energy devices.
• Business Innovation Platform – Texas is steadily moving forward towards a complete industry transformation as entrepreneurs doing business in Texas take advantage of the innovation and invention platform and environment. Some of the greatest industry-changing innovations have their origins deep rooted in the state and surprisingly, Texas has won more awards for a pro business climate and small business job growth than all of the 49 states combined. The state has innovation hubs, accelerator and Incubator programs, agencies that directly sponsor innovation and a host of Texas small business grants for entrepreneurs and startups.
• Small Business Financing and Capital – Startups and small business owners often need funding in the initial phase of their business. The Texas small business grants program is one such avenue that creates funding opportunities for businesses based on size, industry, and location. There are non-profit lenders, Texas angel investors, United States Department of Agriculture (USDA) financial backing, incubator funds, Texas small business funding for women, and startup business loans among others.
• Deep Talent Pools – One of the primary requirements of every new business is a skilled workforce and Texas has plenty of that. In fact, the state has a growing workforce experiencing more than 3% increase in its civilian work force. There are top tier universities in the state that keep adding to the talent pool each year. Some of the big names include University of Texas at Austin, Rice University, Texas A&M University, and University of Houston among others. There are several training programs and skill development funds for business employees and entrepreneurs as a part of Texas small business incentives program and Texas small business development programs.

Small Business Incentive Programs and Grants in Texas

When you start a new business in Texas, one of the beneficial aspects is that you will have access to a variety of Texas small business grants and incentive programs. Every business has an initial cost attached to their inception and this cost varies according to the type of business activity and setup. Some businesses like those started from home have lower initial costs but some businesses like retail stores or restaurants have higher initial startup costs. In order to manage costs, entrepreneurs can apply for loans through Texas small business funding programs and even participate in incentive programs that provide a variety of tax credits and other benefits to offset long-term operational costs.

Incentive Programs

Incentive programs are governed or administered by state agencies and the Federal government. Each state in the US offers different types of state incentives to help small businesses in achieving different objectives. For example, the Texas small business grants provide financial relief or funding to startups. Similarly, there are a host of incentive programs that are targeted at encouraging higher productivity and increasing employee retention rates among others. You can qualify for these incentive programs when you start doing business in Texas. Some of the top incentive programs in the state are:

Texas Enterprise Fund

The Texas Enterprise Fund (TEF) is a type of business incentive fund that awards Texas small business grants to business entities that are planning a new project like opening a new facility or expansion. Cash grants for each applicant are calculated based on a uniform analytical model. The analytical model takes into account several factors like:

• Average wage of all new employees
• Expected timeline of hiring
• Number of jobs being created
• Capital investment by the business
• The business sector in which the company is active

Events Trust Fund

The Event Trust Funds (ETF) program is a Texas small business incentives program, which comprises of three different funds, which are:

• The Events Trust Fund
• Major Events Reimbursement Program
• Motor Sports Racing Trust Fund

Texas Enterprise Zone Program

One of the top Texas small business incentives programs is the Enterprise Zone Program (EZP). This program is a type of sales and use tax refund program that has been specifically designed for encouraging private investment as well as job creation in some of the most economically distressed areas within the state. The refund is administered by the office of the Texas Comptroller and to qualify for this refund, your company should be situated within the Enterprise Zones. You can check the Enterprise Zone Map to identify the distressed counties or zones. As a part of the program, if you are doing business in Texas in the enterprise zone then it is important to know that the maximum allowable refund varies on the basis of capital investment and maximum number of jobs allocated.

For Example:: Your Company located in the Texas enterprise zone starts a “Half Enterprise Project” with capital investment varying from $40,000 to $5,000,000 and the maximum number of jobs allocated is 250. The maximum potential refund through this Texas small business incentives program will be $625,000 and the refund per job allocated would be $2,500.

Product Development and Small Business Incubator Fund

The Product Development and Small Business Incubator Fund (PDSBI) is a type of Texas small business grants program with the objective of providing asset-backed loans to small business incubators or accelerators and product development companies based in the state. The program consists of two separate funding programs, which are:

• Product Development
• Small Business Incubator

Skills Development Fund

The Skills Development Fund is an innovative Texas small business incentives program that has been created to assist the technical colleges and Texas public community to finance tailored job training courses for local businesses. This business incentive program is administered by the Texas Workforce Commission and the grant is provided to startups and companies. The maximum fund made available is $10 million and this Texas small business funding will allow businesses to address the training requirements of their existing and new workforce.

Are you planning to start a New Business in Texas?

Financing and Capital for Small Businesses

One of the primary requirements of new businesses is access to financing and capital and this is where Texas small business incentives programs can be quite helpful. There are two types of financing available in the majority of the states and they are business grants and the traditional funding options. The objective of both these types of financing options is to ensure small and medium sized enterprises, newly found corporations, and individuals running home-based businesses can fulfill their short-term and long-term business requirements. Let’s take a look at the different types of Texas small business funding sources available:

• U.S. Small Business Administration – The U.S. Small Business Administration (SBA) has a presence in all the states including Texas. SBA offers loans as well as training to help small businesses with growth and expansion. They also provide Texas small business funding for crisis times also known as disaster loans. It is important to note that the agency will not be lending directly to a business owner but instead set guidelines for various loans and Texas small business grants made by community development organizations, partnering lenders, and various micro-lending institutions. SBA has offices in Dallas/Fort Worth, El Paso, Harlingen, Houston, Lubbock, and San Antonio. The loans offered by the agency for small businesses are 7(a) loans, 504 loans, and Microloans.
• Texas Angel Investors – An angel investor is known by many names like a seed investor, private investor, or even angel funder. Although, they don’t specialize in Texas small business grants but assist small businesses and startups to funding and capital. Angel investors are high-net-worth individuals focusing on providing financial backing to small businesses, startups, or entrepreneurs. They provide Texas small business funding in exchange for ownership equity in a company and it can be a one-time investment or an ongoing injection of funds. The Texas angel network is divided into the following:
  • North Texas Angel Network
  • Central Texas Angel Network (CTAN)
  • Alliance of Texas Angel Networks (ATAN)
• Non-Profit Lenders – There are different types of Texas small business funding loans and lenders including banks and credit unions. The non-profit lenders or non-profit micro lenders provide loans to those small businesses that may not qualify for any other type of loan. A non-profit lender would ideally focus on loans with amounts under $50,000. Some of these loans may be no-interest or even low-interest loans. Non-profit lenders in the state that you can apply for a loan while doing business in Texas include:
  • Community Development Financial Institutions (CDFIs)
  • PeopleFund
  • BCL of Texas
  • LiftFund
• Texas Workforce Training Grants – The workforce training grants are administered by the Texas Workforce Commission (TWC). This is a Texas small business grants program that specializes in providing grants for small businesses. The primary objective of this type of Texas small business funding or grants is to ensure their employees can be inducted into various on-job training programs for skills enhancement. The training programs are provided through technical or community colleges as well as the Texas Engineering Extension Service (TEEX).
• Federal Grants – Grants are financial awards that are administered by both federal and state government agencies. The top two Texas small business grants administered by federal agencies are the Small Business Innovative Research (SBIR) program and the Small Business Technology Transfer Funding (STTR) program. The SBIR and STTR grant programs are highly competitive Texas small business funding programs, which are aimed at encouraging small businesses to engage in Federal Research and Development(R&D) with the idea of promoting commercialization. The other objectives of these federal grants programs are to stimulate technological innovation and increase commercialization of innovation among others. There are three categories of federal grants and they are:
  • Project grants
  • Formula grants
  • Block grants

Ready to Start Business in Texas?

Every business needs a little financial assistance when it comes to establishing its operations and Texas small business incentives and grants play a key role in providing the much needed funding. If you are thinking of doing business in Texas then the first step is to register a business as you can apply for these grants and incentives only after new business formation or incorporation.

Texas Business Tax

It is easy to register a new business but there are several Texas state requirements that a business has to fulfill in order to enjoy active status. One such requirement is filing of Texas business tax. Along with Florida, Washington, and Nevada; Texas is one of nine states where there is no personal income tax. The most common forms of taxes in the state are the sales tax and franchise tax and then there are business specific taxes including Texas corporation taxes. It is important to note that you need to have an Employer Identification Number (EIN) as a business and Social Security Number (SSN) as a sole proprietor to file taxes in Texas.

What taxes do businesses pay in Texas?

The truth is that no one wants to file annual tax returns but if you form a business in any state including Texas, you may have to file certain taxes. On a better note, entrepreneurs favor Texas to form their new businesses because it is a highly tax friendly state. This is more so, because the state does not have any personal Texas business tax or income tax. The state and local tax burden as a percentage of state income in Texas is 8.0% as compared to some of the other states like Indiana at 8.6%, Wisconsin at 9.4%, and Ohio at 9.2%. At the same time, there are business specific taxes like Texas LLC taxes and business activity specific taxes like the sales tax that a company may be required to file.

Franchise tax

Franchise tax is not imposed by the federal government as it is a state tax. The Texas franchise tax is different from other states that impose these taxes. The rule is that any taxable entity conducting its business in Texas is required to register with the state including limited liability companies including series LLCs, partnerships, S corporations, professional corporations, and professional associations among others are liable to pay a franchise tax. It is also important to note that sole proprietorships except for single-member LLCs are not required to file franchise taxes.

• Total revenue minus the cost of goods sold (COGS)
• Total revenue times 70 percent
• Total revenue minus $1 million effective from Jan 1, 2014
• Total revenue minus the compensation

Texas income tax

Texas has no state income tax or in other words, the Texas Constitution disallows any personal income tax (there is no income tax code). Instead, Texas relies on other forms of taxes like collecting sales and use tax as well as property tax. There are certain forms of taxes applicable only for business owners and their companies. All business structures except partnerships, which have to file an informational return, must file a Texas business tax annually. Some forms of income taxes filed in Texas are:

• Self-Employment Tax – This type of income tax is applicable for those individuals who are working for themselves like freelancers. This tax covers Social Security and Medicare taxes.
• Estimated Tax – This type of tax is filed on the income and includes self-employment tax. This is a type of Texas LLC taxes or corporation taxes.
• Employment Taxes – This is an integral part of Texas corporation taxes if a corporation has employees. Employment tax includes Social Security and Medicare, Federal income tax withholding, and Federal unemployment (FUTA) tax.
• Excise Tax – This is a form of Texas business tax applicable on those entities that use different types of equipment and facilities. This is also applicable for businesses that receive income through facilitation of certain services, and manufactures or sells specific types of products.

Texas sales tax

One of the most important types of Texas business tax is the sales tax although it is also referred to as the sales and use tax. This tax is applicable if a business sells taxable goods or services in the state. There is a state sales or use tax as well as a local sales or use tax. A business while transacting in the state has to collect 6.25% state sales or use tax.

How are Texas Businesses taxed?

If you form a new business in Texas then the tax status of the type of entity you form is an important area to consider. Different types of entities will be taxed differently and the type of tax may also vary. Some businesses may be required to file Texas franchise tax as well as sales or use tax while others may need to file property taxes as well. Let’s look at the different types of entities and their taxations.

Texas LLC Taxes

Since LLC is considered to be a pass-through entity just like an S corporation, they are not liable to pay federal Texas LLC taxes by default and instead members have to file personal tax returns. The income earned from the business gets distributed amongst the existing members of the LLC and hence each member is required to file Texas business tax calculated on the amount they have received from the business.

Taxes of a Texas C Corporation

A C corporation is also known as a traditional corporation and it is subjected to a standard business tax or the Texas franchise tax. The franchise tax is based on the revenue generated by the corporation annually.

Example: If you formed a Texas corporation and the total revenue generated in 2021 is $500,000 then it is less than the threshold of $1,130,000. Hence, your corporation will not be required to file any Texas corporation taxes or franchise taxes.

Taxes filed by Texas S Corporation

An S corporation is also known as S subchapter and it is a legal business entity. In fact, S Corporations are popular designations and existing Texas LLC or C Corporations often opt to be taxed under Subchapter S of the Internal Revenue Code (IRS). Since, it is a pass through entity; the business is not subjected to Texas corporation taxes. However, you will be required to file Texas franchise tax based on the annual revenue generated by the business. Individual shareholders are not subjected to state taxes on their income.

Texas Taxes for Sole Proprietorship

A sole proprietorship business also known as a sole trader is an unincorporated business with a single owner. A sole proprietor is required to report all business income and losses through their personal income tax return. This basically means that a sole proprietorship business is not taxed separately but the owner will be taxed on all the profits earned by the business, which is total income minus expenses. Sole proprietors in Texas are also required to make contributions towards Medicare and the Social Security systems and these contributions are classified under Texas business tax as “self-employment taxes”.

Texas Partnership and Taxes

There are different types of partnerships like limited partnerships (LPs), general partnerships, and limited liability partnerships (LLPs). If you start a partnership business in Texas then it will be subjected to Texas franchise tax. The exception to this tax is applicable for general partnership businesses that are solely and directly owned by natural persons. Whatever type of partnership you form; individual partners will not be subjected to state tax on any income distributed amongst partners.

Ready to Incorporate your Texas Company?

Whether you are planning to form a limited liability company (LLC), traditional corporation, or an S Corporation in Texas, the new business formation process can be quite extensive, and time consuming. This is where IncParadise comes in. We can provide your business with meaningful assistance as we are an expert incorporation service provider in Texas and can help to register your LLC or corporation in Texas.