Searches for “how to start a business in Texas” continue to rise—and for good reason. Texas offers no state income tax, a large consumer market, business-friendly regulations, and a growing startup ecosystem across cities like Austin, Dallas, Houston, and San Antonio.

But while Texas is known for being entrepreneur-friendly, starting a business still requires clear decisions, proper registration, and compliance with state and local rules. Skipping steps or misunderstanding requirements can lead to fines, delays, or legal risk.

This step-by-step guide walks you through exactly how to start a business in Texas, from choosing a structure to registering, paying taxes, and launching with confidence.

Why Start a Business in Texas?

Texas consistently ranks among the top states for business formation. Key advantages include a favorable tax environment, access to talent, and strong infrastructure supporting logistics, technology, and services.

• No state personal income tax
• Large and diverse consumer market
• Lower cost of living compared to coastal states
• Strong support for small businesses and startups
• Central location for U.S. operations

These advantages reflect how regions that optimise regulation and scale attract long-term business growth, how digital platforms scale globally

How to Start a Business in Texas: Step-by-Step

Here is how to start a business step-by-step in Texas:

Step 1: Choose Your Business Idea and Model

Before paperwork, define what your business will do, who it serves, and how it makes money. Texas supports everything from local service businesses to high-growth startups, but clarity here drives every later decision.

Step 2: Pick a Business Structure

Your legal structure affects taxes, liability, and paperwork. Common options in Texas include sole proprietorships, LLCs, partnerships, and corporations.

Most first-time founders choose an LLC because it balances simplicity and liability protection.

Here's how each structure compares:

• Sole Proprietorship is the simplest option with no formation costs or paperwork filed with the state. You report business income on your personal tax return. However, you have unlimited personal liability—creditors can pursue your personal assets if the business faces legal claims or debts. Best for low-risk freelancers, consultants, or side businesses testing an idea.
• Limited Liability Company (LLC) protects your personal assets from business liabilities. LLCs offer pass-through taxation (profits taxed once on your personal return) while maintaining credibility with customers and vendors. Texas LLCs pay a $300 formation fee. Most small business owners—from retail stores to service providers—choose this structure.
• Partnership works when two or more people co-own a business. General partnerships split liability equally among partners. Limited partnerships allow some partners to invest without management responsibility or full liability exposure. Partnerships file informational tax returns but pass income through to partners.
• Corporation (C-Corp or S-Corp) provides the strongest liability protection but requires more formalities: bylaws, shareholder meetings, and separate tax filings. C-Corps face double taxation (corporate profits taxed, then dividends taxed again). S-Corps avoid this but have ownership restrictions. Corporations suit businesses seeking outside investment or planning significant growth.

Step 3: Choose and Register a Business Name

Your business name must be distinguishable from existing entities in Texas. Name availability is checked through the Texas Secretary of State.

LLCs and corporations must register their name during formation, while sole proprietors may need to file a DBA.

Checking Name Availability: Search the Texas Secretary of State's SOSDirect database before filing. Your LLC or corporation name must include "Limited Liability Company," "LLC," "Corporation," "Corp," or similar designators. The name cannot imply government affiliation or use restricted words without proper licensing.

DBA (Doing Business As) Names let you operate under a different name than your legal entity name. For example, "Smith Consulting LLC" might do business as "Austin Marketing Group." DBAs cost $25 to file at the state level or vary by county if filing locally. Sole proprietors operating under any name other than their personal name must file a DBA.

Name Reservation costs $40 and holds your chosen name for 120 days while you prepare formation documents. This prevents others from taking your name during the registration process.

Choose names that are memorable, spell easily, and reflect your business purpose. Avoid overly generic names that limit future expansion or make SEO ranking difficult.

Step 4: Register Your Business With the State

Most Texas businesses register through the Secretary of State. LLCs and corporations file a Certificate of Formation and pay the required filing fee.

Filing Process Step-by-Step:

Register online through the Texas Secretary of State's SOSDirect system or file by mail. Online filing costs $300 for LLCs and corporations. Veterans qualify for waived filing fees with proper documentation.

Your Certificate of Formation must include:

- Business name and type (LLC, corporation, etc.)

- Registered agent name and Texas street address

- Management structure (member-managed or manager-managed for LLCs)

- Purpose of business (can be general: "any lawful business activity")

- Organizer information (person filing the documents)

Processing Times:

- Online filing via SOSDirect: 13-15 business days

- Online filing via SOS Direct: 10-12 business days  

- Mail filing: 4-8 weeks plus mail delivery time

- Expedited processing: Add $25-$750 depending on speed needed

Registered Agent Requirement: Every LLC and corporation must maintain a registered agent—a person or company with a physical Texas address available during business hours to receive legal documents and official state correspondence. You can serve as your own registered agent (free) or hire a professional service ($100-$300 annually). Professional agents provide privacy by keeping your home address off public records.

Step 5: Get an EIN From the IRS

An Employer Identification Number (EIN) is required for hiring employees, opening a business bank account, and filing federal taxes. EINs are issued by the IRS at no cost.

Step 6: Apply for Texas Licenses and Permits

Texas does not have a general statewide business license, but many industries require permits at the state or local level. Requirements vary by city, county, and business activity.

Common License and Permit Types:

Health Permits are required for restaurants, food trucks, catering businesses, and any operation handling food. County health departments issue these permits after facility inspections. Costs range from $100-$500 depending on operation size.

Professional Licenses apply to contractors, electricians, plumbers, cosmetologists, real estate agents, and dozens of other professions. The Texas Department of Licensing and Regulation oversees most professional licenses. Requirements include experience verification, exams, and continuing education.

Seller's Permits let you collect sales tax from customers. Register free with the Texas Comptroller if you sell taxable goods or services. Most retail and many service businesses need this permit.

Building Permits are required for construction, renovation, or signage installation. Your city or county building department issues these based on project scope.

Zoning Approval confirms your business type is allowed at your chosen location. Home-based businesses often need zoning verification from local authorities.

Timeline: Most permits take 2-8 weeks to obtain. Start applications early—operating without required permits can result in fines from $500-$10,000 depending on violation severity and jurisdiction. Check with your city clerk's office, county clerk, and relevant state agencies to identify all permits your specific business needs.

Step 7: Register for Texas Taxes

Most businesses must register with the Texas Comptroller of Public Accounts for sales tax or franchise tax obligations. Texas franchise tax applies to many LLCs and corporations.

Texas Franchise Tax Details:

The franchise tax is a privilege tax for doing business in Texas, calculated based on your business's taxable margin. For 2026 and 2027, rates and thresholds are:

- No Tax Due Threshold: $2,650,000 in annual revenue

- Retail/Wholesale Tax Rate: 0.375% of taxable margin

- All Other Business Tax Rate: 0.75% of taxable margin

- EZ Computation Rate: 0.331% for businesses with revenue under $20 million using simplified filing

If your business makes $2.65 million or less annually, you owe no franchise tax and don't need to file a return. Over 90% of Texas LLCs fall below this threshold.

Taxable margin is calculated as the lowest of:

1. Total revenue × 70%

2. Total revenue minus cost of goods sold

3. Total revenue minus compensation (up to $450,000 deduction limit)

4. Total revenue minus $1 million

Sales Tax Registration:

Register with the Texas Comptroller if you sell taxable goods or services. Registration is free through the Comptroller's website. You'll receive a sales tax permit and account number.

Sales tax rate in Texas is 6.25% state tax plus local taxes (typically 1-2%), totaling 7.25-8.25% in most locations. File returns monthly, quarterly, or annually depending on your sales volume. Failure to collect or remit sales tax results in penalties, interest, and potential business closure.

Employer Taxes:

If you hire employees, register for:

- Unemployment Insurance Tax through Texas Workforce Commission

- Workers' Compensation Insurance (required for most employees)

- Federal Payroll Taxes through the IRS (separate from your EIN application)

Franchise tax returns are due May 15 annually with an extension available until November 15. Mark your calendar to avoid late filing penalties.

Step 8: Open a Business Bank Account

Separating personal and business finances is critical. A business bank account improves credibility and simplifies accounting.

Step 9: Set Up Accounting and Compliance Systems

Accounting software, expense tracking, and compliance reminders help avoid missed filings and penalties.

Successful businesses rely on systems that automate compliance and financial visibility from the beginning.

Step 10: Launch and Market Your Business

Once legal and financial foundations are in place, focus on customer acquisition. Local SEO, social media, and partnerships are especially effective for Texas-based businesses.

Modern founders increasingly combine automation and smart tooling to launch faster and scale sustainably.

How Much Does It Cost to Start a Business in Texas?

Startup costs in Texas vary significantly by business type, but most small businesses can launch for $500-$5,000 in initial expenses.

Required Filing Fees:

- LLC formation: $300

- Corporation formation: $300  

- DBA filing: $25 (state) or varies by county

- EIN from IRS: Free

- Veterans: $0 LLC/corporation filing fee with documentation

Typical First-Year Costs:

For Service Businesses (consulting, freelancing, coaching):

- Formation and registration: $300-$400

- Business insurance: $400-$800/year

- Website and basic marketing: $500-$2,000

- Office supplies and software: $300-$1,000

- Total: $1,500-$4,200

For Retail Businesses (storefront, e-commerce):

- Formation and permits: $500-$1,000

- Initial inventory: $2,000-$10,000

- Business insurance: $800-$2,000/year

- POS system and e-commerce platform: $500-$2,000

- Marketing and branding: $1,000-$3,000

- Total: $4,800-$18,000

For Restaurants/Food Service:

- Formation and permits: $800-$2,000

- Health permits and inspections: $200-$800

- Equipment and initial inventory: $10,000-$50,000

- Business insurance: $2,000-$5,000/year

- Buildout and signage: $5,000-$30,000

- Total: $18,000-$87,800

Ongoing Annual Costs:

- Registered agent: $0-$300/year

- Franchise tax: $0 (if under $2.65M revenue)

- Business insurance renewal: $400-$5,000

- Licenses and permit renewals: $100-$500

Money-Saving Strategies: File documents yourself instead of using formation services, serve as your own registered agent, start home-based to avoid commercial rent, and use free tools for accounting and marketing until revenue justifies paid solutions.

Common Mistakes When Starting a Business in Texas

• Choosing the wrong legal structure
• Failing to register for taxes
• Mixing personal and business finances
• Ignoring local permit requirements
• Delaying accounting setup

Final Verdict: How to Start a Business in Texas Successfully

Starting a business in Texas is straightforward when you follow the correct steps. By choosing the right structure, registering properly, and setting up strong financial systems, you create a foundation for long-term success.Texas rewards preparation and compliance. Treat the process seriously, and you position your business to grow confidently in one of the best markets in the U.S. Check out Spocket if you want to start a dropshipping business in Texas today!