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.

Business License in Texas

Texas is considered as one of the economically resilient states and has made some astounding economic recoveries in the past. It is home to 25 Fortune 500 companies including American Airlines Group, Hewlett Packard Enterprise, Energy Transfer, Valero Energy, and Dell Technologies among others. If you are planning to become a part of the growing economy then one of the important requirements is a Texas business license.

What business license do I need in Texas?

Texas is home to some of the strongest industries known for faster and higher growth include retail trade, leisure and hospitality, business and professional services, manufacturing industry, financial services, and the energy sector among others. The type of Texas business license you require will depend on the industry your business is in and the type of activity your company specializes in. The State of Texas does not require you to obtain a Texas business license or general license. If your business is transacting in the state then the certificate of formation from the office of Secretary of State along with an assumed name certificate provided by the office of the county clerk is considered as a general business license.

• Sales Tax Permit
• Licenses and Permits for specific business activities
• Professional and occupational licenses

Sales Tax Permit

There are no general business licenses applicable in Texas but a sales tax permit is a type of general Texas business license for entities that have a physical presence in the state. A sales tax permit is required if:

• You are conducting a business in Texas
• You intend to lease or sell taxable services and tangible personal property
• You maintain a physical presence in the state like distribution center, warehouse etc.
• Your company has a sales representative operating within the state responsible for direct sales of any taxable goods
• You promote an event that involves selling of taxable goods

Texas Licenses or Permits for Specific Business Activities

Different types of business activities require different Texas business licenses , and permits. Comprehensive state-level permit information and licensing requirements in Texas are provided by the Business Permit Office, which is a division of the Governor’s Economic Development and Tourism Division. The management of business licenses and permits is the responsibility of the Texas Department of Licensing and Regulation (TDLR). The licenses and permits have been divided under more than 150 categories of activities thus enabling a proper Texas business license search by entrepreneurs and new business owners. Let’s look at an example to understand this well.

Example: If you start a new business that provides a “Day Activity and Health Services (DAHS)” facility then it needs to be licensed to operate in the state. You will have to complete a Texas business license application online using the Texas Unified Licensure Information Portal (TULIP) portal. You will also be required to submit additional documents like the fire marshal inspection report and a health authority letter. The license fee is $75 and the license is valid for a 3-year period. This license is issued by the Texas Health and Human Services.

Want detailed information about Texas Business Licenses?

Texas Business Licenses for Specific Occupations and Professions

There are several businesses where the sole proprietor, single or multiple owners start a company offering a specific service. According to the type of service offered, the owners may require occupational, professional and facility business licenses in order to operate. You can conduct a Texas business license search to choose from over 250 professional, occupational, and facility business licenses available. Some of the licenses would require you to take an exam in order to get licensed.

Example: If you set up a plumbing business then you need to first obtain a Texas business license for plumbing occupation. You will have to take an examination like the “Master Plumber Examination” organized by the Texas State Board of Plumbing Examiners. The examination fee is $175 and the initial license fee is $75.

Texas Department of Licensing and Regulation

The Texas Department of Licensing and Regulation (TDLR) is one of the top state agencies and is primarily responsible for business licensing and regulating a wide variety of businesses, occupations, equipment, and facilities in Texas. You can conduct a Texas business license search based on your business activity or occupation. You can also apply for and obtain a Texas business license online, and also handle yearly renewals.

Texas Business Licenses for Home Businesses

Due to the high accessibility to the internet and the convenience of working from home, many entrepreneurs in Texas are opting for home-based businesses. The question is do you need to obtain a Texas business license for such a business. You will require licenses or permits for your home-based business depending on the type of business activity.

Example: If you start a business as a “Behavior Analyst” working or meeting your patients at your residence or providing advice and therapy to clients over the internet then you will need to apply using the Behavior Analyst / Assistant Behavior Analyst License Application. You will be required to provide your Behavior Analyst Certification Board (BACB) certificate number and expiration date. The license fee for Behavior Analyst is $165 and you will have to submit the license application along with this fee.

TDLR License Data Search (Active license only)

Once you obtain a Texas business license and want to check its expiration date and other relevant details, how do you do it? You can conduct a Texas business license search by accessing the Texas Department of Licensing and Regulation (TDLR) database. You can search this database only if your license is active. You can also access this portal to download the file format for license applications of different types of business activities.

Documents Needed for Your Texas Business License Application

When you apply for a Texas business license there are several types of documents that you may need to submit along with the application. There are some business specific documents that vary according to business activity and there are documents that are generic and applicable to all entities. The most common documents that you might need to submit in order to obtain a Texas business license are:

• Tax ID Number – Depending on the type of business, you will need to submit a copy of your tax ID number along with the Texas business license application. Businesses like sole proprietorship or home based single owner businesses require to provide Social Security Number (SSN) while LLCs and corporations require Employer Identification Number (EIN) disclosure to obtain Texas business license. If you haven’t applied for a tax ID then IncParadise can assist you with EIN application.
• Articles of organization or Articles of incorporation – In the state of Texas, you have to file a “Certificate of Formation” to register your entity with the office of the Secretary of State. The certificate of formation is applicable for LLC, For-Profit Corporation, Nonprofit Corporation, Professional Corporation, Professional Association, Professional Limited Liability Company, and Limited Partnership. A copy of the formation documents have to be submitted to obtain a Texas business license.
• Any insurance policies for your business – Depending on the type of business activity, you may need to apply for and obtain insurance policies like construction companies are required to possess general liability insurance. Some of the other types of insurance that companies may opt for includes workers’ compensation insurance, commercial auto insurance, and liability and property insurance among others. The Texas Department of Insurance (TDI) provides detailed information on the type of business insurance your company can invest in. You may need to submit certificates of insurance along with your Texas business license application.
• A statement detailing your organization’s mission – An organization’s mission statement is an integral aspect of the growth and business plan of any company. It provides a brief explanation of the reasons for the existence of the said company. The mission encompasses the organization’s purpose as well as its short-term and long-term goals and objectives. The mission statement is sometimes required during filing license or permit application and to obtain a Texas business license.
• Your tax ID for selling retail goods – A new business in Texas is required to obtain sales and use tax permits in Texas if they are selling tangible personal property, sales of taxable goods, or maintaining a warehouse in the state. The tax ID for selling retail goods is also known as the seller’s permit and you can obtain this by filing the required application with the Texas Comptroller of Public Accounts (CPA). A copy of this tax ID would be required when applying for a Texas business license.

Building & Zoning Permits

One of the key components of a Texas business license is building and zoning permits. The Department of Planning and Development of each county or city of Texas oversees, regulates, and issues building and zoning permits. Each city or county in Texas has its own Zoning and Building Code and pursuant to these codes, a business owner has to first apply for a Zoning Permit followed by application for a Building Permit if required.

Need any Assistance in Obtaining Your Texas Business License?

If you plan to start a new business in the state of Texas then there are certain requirements you have to fulfill to make your business operational. One of the most important requirements is that of applying for and obtaining a Texas business license. A business may require single or multiple licenses and permits, which is where the Business License Research Report service by IncParadise can provide you with the right information and guidance.

Doing Business As or DBA in Texas

Texas has a strong economic climate and pro-business environment and today, it is home to 2.8 million small businesses. Small businesses in Texas include corporations, LLC, sole proprietorship, partnership, and other forms of organization structure. Some of these businesses opt for a business name while others apply for a Texas DBA online. However, there are several aspects to be considered prior to applying for an assumed name certificate Texas like what a DBA really is and how it can be useful for your entity.

What is DBA in Texas?

Every business in Texas or any other state in the USA requires a legal name or a true name to become operational. This is especially true for a sole proprietorship or partnership business where the legal name is most often the name of the business owner. If an individual or company decides to conduct their business under another name, then this name is considered to be a DBA (Doing Business As) or assumed name and for such a business filing a DBA in Texas becomes necessary.

Let’s look at an example to understand this: An individual named Carol Dawn wants to form a sole proprietorship in Texas. If the name of her business is Carol Dawn’s Gourmet Services then filing a DBA in Texas is not required. However, if she opts for a name that has just the first name like Carol’s Gourmet Services then she would be required to file a Texas DBA online application. The DBA has to be filed in the second case as the new name doesn’t have her full legal name.

For Example: If Carol Dawn wants to offer different products or services like a restaurant, a mobile food truck, and a cafe then what are her options? She can set up an LLC or a corporation under a generic name like Dawn Foods Inc., and then file a Texas DBA online application for each of the businesses as in the restaurant (Dawn Fine Dining), mobile food truck (Dawn’s Hot Dogs), and cafe (Dawn’s Cappuccino). This process will help you in controlling your paperwork and costs while enabling business expansion.

Filing DBA in Texas for LLC and Corporation

There are different types of businesses to choose from if you are planning to form your new business in Texas. You can choose to form a Sole Proprietorship, Limited Liability Company, General Partnership, Corporation, Limited Partnership, and Limited Liability Partnership. Whatever the type of business you choose, you also need to create a business name for the same. Now, if you plan to operate your business under a name that is different from your own name then filing a DBA in Texas is important.

Do Texas DBA Name Search

One of the key aspects of filing a DBA in Texas is conducting an assumed name search. The search is important as it will help determine if your chosen trade name is available or not. If you are asking how do I look up a DBA in Texas then there are two options:

• You can conduct a name availability search with the Texas Comptroller of Public Accounts
• You can also conduct a search with the county office for example; you can use Tarrant County Clerk Online Services or Harris County Document Search Portal to check availability of assumed names

File Texas Assumed Name Certificate

The state of Texas requires businesses transacting in this state under any name other than the owners name to apply for an assumed name certificate Texas (Form-503) pursuant to Texas business and commerce code, TBCC Sec. 71.051 and Sec. 71.101. The filing of DBA in Texas has to be with the office of the county clerk or the Secretary of State and will be valid for a period of 10 years from the date of its filing. We at IncParadise can help you to register your DBA in Texas and also provide information pertaining to different aspects of the filing process.

• The filing of DBA in Texas takes place at the county clerk’s office and hence you will have to submit the applications with the office of the county clerk.
• You can check with the county clerk’s office or the county record office to determine the fee applicable. The forms and fee may vary from one county to another for example: the filing fee for Assumed Name Certificate in Bexar County is $14.00 for one owner and $0.50 for each additional owner while the filing fee in Travis County is $24.00 plus an additional $0.50 for each owner’s name being listed.
• If you file an assumed name certificate in Texas with the office of the Secretary of State then the filing fee would be $25.
• A Texas DBA online application will contain information as follows:
  • The assumed name under which an entity will conduct its business
  • The physical address of the business
  • Name and address of owners
  • Type of business
• Depending on the county where you are filing a DBA in Texas, it can be submitted in person or by mail. In some counties you may be able to file a Texas DBA online application.

Need Any Assistance in Filing Texas DBA?

The process of filing a DBA in Texas may look difficult as you have the options of registering with the Secretary of State (SOS) or the County Clerk Office. We at IncParadise possess knowledge and expertise regarding various aspects of DBA filing including applying for an assumed name certificate in Texas.

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

Are you looking for professional Texas Registered Agent Services?

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.