Starting a Business in Texas: Comprehensive Step-by-Step Guide
This article is written by JUST, a non-profit that supports female entrepreneurs in Texas.
Why Choose Texas for Your Business Venture?
Texas boasts an immensely favorable business ecosystem within the United States. This selection is underscored by several compelling reasons:
Tax Advantages: Texas boasts a distinct advantage with its absence of state income or corporate tax. Additionally, the state extends attractive incentives, including property tax exemption, franchise tax relief, and participation in the Texas Small Business Credit Initiative.
Robust Economic Landscape: With the distinction of possessing the second-largest economy in the nation, Texas ranks 11th globally in terms of gross domestic profit (GDP) when juxtaposed with other countries. Consistently at the forefront of job growth and opportunities, Texas demonstrates a dynamic economic vitality.
Competitive Cost of Living: Texas continues to magnetize expatriates from California and New York, attributed to its affordability. In contrast with burgeoning urban affordability concerns across the country, Texas maintains its status as one of the nation's most economically accessible states.
Initiating Your Business Journey
First, identify a lucrative business opportunity that captivates your interest and exhibits market demand. Once you have made a decision, we’ve got you covered. In this article, we cover how to start a business in Texas and all of the tasks you need to tackle first.
STEP 1: Visualize it
Visualize the business of your dreams. Literally. Close your eyes and visualize yourself going through a day operating the business you want to create. Craft a mental portrayal of your clientele, workloads, and overarching vision. Grab a piece of paper and transform your visions into a tangible format through written or visual representation.
STEP 2: Strategize for Success
The saying "Fail to plan, plan to fail" reverberates significantly. Once you know where you want to go, make a plan that will take you there. At JUST, we recommend crafting a business roadmap that includes short-term, medium-term, and long-term goals. Think of all of the actions you need to take to launch and grow your business. Write them all down, classify them, and put them in order of importance. Use this as your guide and modify it along the way.
STEP 3: Pick a name
When choosing a name for your business, consider a few things. Make sure your name is not already trademarked by another business. You can verify that here by checking Texas’s business name database. If you are launching a business website, you might want to see if there is a domain name available with your business name. You can verify domain name availability here. Once you have the perfect name, you can choose to have it trademarked for $50 by filling out an application with the Texas State Secretary. In general, you want a unique name that is easy to understand and remember.
STEP 4: Determine your business structure
Here are some of the most important things to consider when choosing a business structure in the state of Texas. Contemplate the options:
Sole proprietorship
- Perfect for individual ownership of all assets
- Proprietor assumes complete business liability
- Exempt from state franchise tax
- $0 filing fee
General partnership
- Perfect for two or more owners
- Partners assume complete business liability
- Exempt from state franchise tax
- $0 filing fee
Limited Liability Company (LLC)
- Grants owner limited liability
- Pass-through tax benefits
- Subject to state franchise tax
- $300 filing fee
Corporation
- Grants owner limited liability
- Ease of ownership transferability
- Subject to state franchise tax
- $300 filing fee
STEP 5: Request an employee identification number (EIN)
An EIN, or business tax identification number, is the business equivalent of a social security number and is used to track your business dealings. An EIN is free to obtain and is useful for establishing business credit, opening business checking accounts, and, if you have employees, filing their tax withholdings. You can apply for your EIN with the IRS here.
STEP 6: Acquire business licenses and permits
While Texas does not require a “general business” license, there are some businesses that need specific licenses and permits to operate. Think about food trucks, beauty salons and clinical spas. Check out the Texas Department of Licensing and Regulation to see if your business qualifies.
STEP 7: Open a business bank account
Let this be one of the first things you do before starting to operate your business. No matter how small or personal your business is, it is always a good idea to separate personal and business finances. This will help you keep track of your business's growth and make your life a thousand times easier during tax season!
STEP 8: Finance your business
Many small businesses have trouble getting off the ground because of how difficult it can be to obtain loans from area banks. The difficulty level increases exponentially if you are a Black or Brown woman due to systematic banking procedures that classify certain communities as a risk. Since JUST is a non-profit organization, our interest rates are very low and we will never ask you for a credit score or collateral. Our business loans are part of an entrepreneurship program that includes peer-coaching and support from our community. We trust our entrepreneurs and want to see them accomplish their dreams!
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