How to register a business in Texas
To start a business, you have to start with a dream. Ideally your dream business involves doing something you are passionate about while also making profit. To make your business official, you will also need to do something you might not be passionate about – paperwork.
You might wonder if it is really necessary to register your business in Texas and if it would be easier to just start without notifying the government. Honestly, it might be at first, but depending on the type of business and permits you need to obtain, you might be better off just getting all the paperwork done from the very beginning.
All you need to do is follow a series of specific steps, and in return, you can fulfill your legal and tax obligations, which comes with other benefits. These benefits include being able to declare taxes and receive refunds if applicable, improving your banking history, accessing more loan or mortgage opportunities, and even applying for insurance to protect yourself in case of unforeseen events.
What your need to register your business
To begin this process, let’s explain the different types of businesses you can register in Texas, the costs involved, and what you need to have on hand before starting.
According to the official website of the state government, here are the seven basic steps you need to follow to open a business:
- Develop your business plan.
- Choose the location of your company.
- Finance your business.
- Decide on the business structure and register your company name.
- Determine the business’s tax responsibilities.
- Find out about the required licenses and permits.
- Learn about the requirements for being an employer.
The first two steps involve the physical and financial creation of your venture – from choosing the name and analyzing the manufacturing, sales, and distribution processes to opening a physical store or a website for selling your products.
Once you have this, the next step is to seek funding to bring these ideas to life. JUST offers small loans with very low interest to female entrepreneurs in Texas, enough to establish the foundation of your company. Moreover, it also offers support from other women who are starting their own businesses or have already established theirs.
When you have sorted out the financial aspect, it’s time to move on to the legal part, officially present your business to the government, and register your brand in Texas.
Start by defining the legal structure and figure of your company
Now that you know what your business is called, what it will sell, where it will be located, and how it will operate, it’s time to choose the legal structure under which it will be registered. Here are the most common types of companies in the United States:
- Sole proprietorship: This is a personal business where 100% of the profits go to the owner, who is also financially and legally responsible for the project. In other words, it’s your own business, and all matters rest on you.
- Partnership: In this case, it has a similar structure to sole proprietorship, but there will be more than one person responsible, though they won’t have the liability protection found in a formal business structure.
- Limited Liability Company (LLC): In this case, there are also multiple individuals involved, and it’s the most common structure for small businesses since it protects the personal assets of those involved, offers greater flexibility for formation, and provides some tax benefits like discounts, simplifying business distribution, and attracting investments.
- Corporations: This refers to a separate legal entity owned by its shareholders. Corporations have more formal regulations than LLCs and tend to be more attractive to investors since they can enjoy profits without direct involvement in the company. In some cases, LLCs can become corporations if they grow and meet the requirements, which could help achieve a nationwide or international presence.
- Non-profit organizations: These use donations to fund their actions and usually have a social cause as their goal.
Present your registration to the state of Texas
To be recognized by state authorities, you need to choose a name for your company.
We’ll explain how LLCs work and what you need to register under this legal structure.
The first step is to choose a name for your venture, which must include the phrase “Limited Liability Company” or at least the abbreviation LLC. Additionally, you must verify that there’s no other company with the same name in Texas, which you can achieve using a web checker. Also, the name cannot include words related to government entities like CIA, FBI, Agency, Treasury, Department of State, etc.
Furthermore, you’ll need to have a Registered Agent, who, in short, is the person who will be in direct contact with the tax and governmental authorities and will act as a representative. This could be you, a collaborator, or an external person who is a resident of Texas and meets the necessary requirements to manage a business in the state.
To formalize their association, you’ll need to submit a written Consent to Designation, either physically or online. This document should include the following details:
- The name of your LLC.
- An explicit statement that the designated person agrees to serve as the registered agent for the LLC.
- The name of the person designated as the registered agent.
- The signature of the registered agent.
- The execution date.
Once the agent’s formal association has been accepted and registered, you need to send the Certificate of Formation (Form 205) to the Secretary of State of Texas, notifying the existence of your LLC. For this, you only need to submit the form, a government-issued identification, and pay the $300 fee, which is the cost of registering your business in Texas.
In addition to this, you’ll need to check which operating licenses apply to your business. Keep in mind that, depending on the products you sell, you may require specific permits from government departments for construction, waste management, environmental responsibility, security, and the use of resources like gas and water, among others.
Apply for a Tax Identification Number
Also known as an Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), this is a nine-digit number provided by the Internal Revenue Service (IRS) to identify your company and track your tax-related activities. You can request this number directly from the IRS, and there is no cost for it – you just need to fill out Form SS-4. In case you don’t have a personal Social Security number, you can continue with the process by leaving the box requesting this information blank.
Open a bank account for the company
Once you have the formation registration and your EIN, you can now open a corporate bank account. This account will help you manage your finances better, file taxes, apply for credits, and receive tax refunds, if applicable, after your annual tax declaration.
To open your account, you’ll need to go to the bank of your choice with the following documents:
- Employee Identification Number (EIN) or Social Security number if you’re the sole owner.
- Certificate of registration of your company.
- Ownership agreements.
- Business license.
In some cases, they may also request personal identifications, verify your business address, and have other specific requirements, depending on each institution.
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