Every state has different laws and regulations when it comes to setting up a business. Texas is one of the fastest-growing cities, and there are countless opportunities for aspiring entrepreneurs. Texas is booming, and according to studies, it is one of the best states for setting up a business. Here is a comprehensive guide that will answer all your queries and help you understand how you can start a business in Texas.
Step 1: Choose a Business Idea
The first and the most important thing is to narrow down your interest areas. You may have multiple ideas in your mind but try to research and see which of your ideas are more executable. Consider your interest areas, resources, skills, and passion for determining the right idea. You must also look at the market opportunities and see if there are any gaps in the industry. You may conduct a survey or research to determine if your business idea resonates with your target audience. Consider the needs of your target audience to choose the right business idea.
Step 2: Write Your Business Plan
A business plan works as a roadmap that will provide you with an ideal direction and guidance. Every entrepreneur should write down a business plan that will help them set all the ideas in one place. There are various websites that offer free templates for business plans. At this stage, you should also have a plan on how you will solicit your funding and look after the operations of your business.
Step 3: Decide on Your Business Entity
The most common legal structure for every small business is as follows:
- Sole Proprietorship: The most common and easiest way to set up your business, where you are responsible for all your assets. However, we do not recommend this structure as it may leave you vulnerable to certain litigation and legal actions. You should also note that it is not subject to the state franchise tax.
- Partnership: A partnership between two or more individuals is another preferred option among business owners. It is also not subject to the state franchise tax.
- Limited Liability Company (LLC): A business structure that protects business owners' personal assets from any kind of debts or liabilities. LLCs can have an unlimited number of members. File a certificate of formation with the Texas secretary of state to set up your LLC company.
- Corporation: A corporation is a business entity that is owned by multiple shareholders and created by a group of individuals, stockholders, and shareholders. Corporations can enter contracts, own assets, and remit federal and state taxes.
Step 4: Choose the Right Business Name
LLCs and Corporations are required to choose a unique and distinguishable name. Search on SOSDirect Website to check the available names and choose a name that fits your business. File an Application for Reservation or Renewal of Reservation of an Entity Name form with the Texas SOS (Secretary of State) to reserve an available name for one hundred and twenty days. Further, register the business with the county club. Online business owners should do federal and state trademark checks to prevent any kind of infringement issues.
Step 5: Register Your Texas Business Entity
After deciding on the business structure and name, you should continue registering your entity. Here are the steps you must follow according to the type of business entity:
For sole proprietorship, you will not have to file any documents with the state.
You also do not have to file any organizational documents for partnerships, but you should ensure to have a written agreement. It may be helpful to resolve disputes and protect the rights of parties.
File a Certificate of Formation with the Texas SOS to create an LLC. Appoint a registered agent to look after the entire process. Also, prepare an operating agreement to understand the basic rules about the functioning of your organization and how it will work.
Every corporation must file a Certificate of Formation with the Texas SOS and appoint a registered agent for the service of the process. Make sure to draft bylaws to underline your corporation's internal operating rules.
Step 6: Apply for Licenses and Permits
Apply for a sales tax permit with the Comptroller of Public Accounts (CPA) if you are thinking of selling any kind of goods. Obtain a federal Employer Identification Number (EIN) from the IRS website to be able to open a business bank account. Make sure that you have a separate business account, as it will help you maintain your finances and track the expenses. Besides this, you must check the laws and permits according to the occupation and industry.
Step 7: Check Zoning Regulations
If you are thinking of opening a physical branch, consider the zoning regulations. Consider the costs and expenses that may be involved in regulating the physical branch. Check the zoning regulations to determine if the location is ideal for you. You must also check the zoning laws even if you are operating from home.
Step 8: File and Report Taxes
Texas does not have personal income tax liabilities. Sole proprietors will have to pay federal taxes on business income, while partners will have to pay on partnership income. LLCs and Corporations are subject to the State's franchise taxes. Consult an accountant to understand the tax structure and ensure you do not miss out on important things.
Step 9: Get an Insurance
There can be multiple natural and man-made disasters that may impact the functioning of your business. To protect yourself and your business financially, consider getting business insurance. Browse the policies and go through the terms and conditions to choose the right insurance for your business.
Texas is growing at an exponential rate. There are countless opportunities that may help you start your business. Keep these things in mind and operate your business conveniently. If you are planning to expand your team, you must also check the employer requirement and workforce commission laws.