This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax and business advisors, as needed. Businesses outside of Texas will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies.
Starting a Texas business can be a great way to be your own boss and take on exciting new challenges in the world of commerce. Even though Texas is known as the Lonestar State, you won’t be alone as a business owner, as there are thousands of Texas-based businesses using Shopify to power their stores. Texas is the largest state in the contiguous United States, and there are plenty of wide open spaces for your innovative products and services. We’ve put together some resources to help you get started.
Table of Contents
1. Choose a business idea
Whether your business idea is fully formed and or still a dream in your mind, the first step on your small business in Texas checklist is to develop your idea. Taking the time to examine your idea, and yourself, can help you understand what kind of business you want to operate, what products to sell, and who is likely to buy them.
2. Name your business
Before you can start a business, you need a name for your business. Your business name is the first piece of information you’ll need to supply to most government agencies throughout the startup process.
The Shopify Business Name Generator is a quick way to find inspiration. Once you’ve made a shortlist of possible business names, do a quick online search to see if any businesses are already using them, then search the United States Patent and Trademark Office to make sure no one has already trademarked your preferred name. Lastly, consult the Shopify Domain Name Generator to make sure a corresponding web address is available.
There are some requirements for business names in Texas, which you can find at the Texas Secretary of State name filings FAQ. When you’re ready to reserve your business name, you can do it online through SOSDirect.
3. Create a business plan
The State of Texas may not require you to write a business plan. However, most bank loan officers will want to see one before granting you a business loan, and a business plan is also the ideal way to keep yourself on track, organized, and goal-oriented.
A business plan is a document that outlines:
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations plan
- Financial plan
Writing a business plan is a fairly straightforward, methodical exercise in analyzing and explaining your business idea. Shopify has business plan templates available to help you get started. For more inspiration, check out some business plan examples to see what’s possible.
4. Choose a business structure and get started
When examining how to start a business in Texas, you’re going to have to choose a business structure that complements your idea, lifestyle, and business plan. Three common types of business structures in Texas are sole proprietorships, limited liability companies (LLC), and corporations, of which each has advantages and disadvantages. We’ll take a look at the basics of each type and the first steps needed to set up your operation.
Sole Proprietorship in Texas
What is a sole proprietorship?
When looking into how to start a small business in Texas, the simplest business structure available is the sole proprietorship, an unincorporated business owned by just one person. It requires the least amount of administrative work to get started and they’re inexpensive to register. As the only owner, you’ll keep all of the profits. However, there are some other considerations:
- The income from a sole proprietorship is filed as personal income on your tax return, so you could end up paying more tax than some of the other structures.
- Your personal assets and business assets may be the same, which means that a sole proprietorship offers no legal protections from debt collectors or court proceedings.
Is a sole proprietorship right for you?
If you produce unique goods or render specialized services yourself, with no expectation of expanding your operation to include a lot of employees, a sole proprietorship may be right for you. Examples of ideal sole proprietors include artisans of handmade goods and service professionals such as financial advisors. If you’re looking into ways to start a business in Texas with no money, this can be an excellent option.
File an assumed name certificate
In Texas, in order to register a sole proprietorship, you need to file an assumed name certificate. This document lets the public know that you are conducting business under a name that is not your own and makes your contact information available in the case of legal action against you. You must file your assumed name certificate in the office of the county clerk in the county where your business is located.
Get an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a federal tax number that functions similarly to your Social Security Number (SSN), except it’s for your business. As a sole proprietor, you are not required to get an EIN from the Internal Revenue Service (IRS). However, if you plan on hiring employees, you can sign up for one using the free, interview-style registration process available online. You can also register by fax, mail, or telephone. In order to register, you will need your SSN or Individual Taxpayer Identification Number (ITIN).
Limited Liability Company (LLC) in Texas
What is an LLC?
A Limited Liability Company (LLC) is a balance between the simplicity of a sole proprietorship and the complexity of a corporation. While not as well-suited to a large enterprise with many stakeholders as a corporation may be, starting an LLC in Texas offers similar debt and liability protections that are not available to sole proprietors. LLCs can require less administrative work than a corporation, though since LLCs are subject to both state and federal taxation, they can require filling out additional paperwork.
Is an LLC right for you?
An LLC may be the right choice for you if you are planning a small to medium-sized business with some employees. An LLC might also be a good option for early-stage startups that want to get off the ground quickly, without the time and expense of setting up a corporation right away.
Get an Employer Identification Number (EIN)
While sole proprietors are not required to file for an Employer Identification Number (EIN), owners of LLCs most certainly are. An EIN acts like a Social Security Number (SSN) for your business. Be sure that you have your personal SSN or Individual Taxpayer Identification Number (ITIN) handy before starting the interview-style registration process on the IRS website or registering by fax, mail, or telephone.
Register your LLC
Once you have your EIN, you can move on to state registration of your LLC by filing a certificate of formation, which is sometimes called a statement of information. This document details the specifics of your company, such as official name, contact information, address, etc. You can file your certificate of formation online via SOSDirect; information is also available on how to file using alternate methods.
Choose a registered agent
Sometimes referred to as an agent for service of process, a registered agent is a person or corporation that you designate to receive court documents on your behalf if your LLC is subject to legal action, such as a lawsuit, or debt collection. This is one of the elements of an LLC that is meant to protect your personal assets from liabilities. In Texas, you cannot serve as your own registered agent. More information on registered agents can be found in the Texas Secretary of State Registered Agent FAQ.
Pay state tax
LLCs in Texas are required to pay an annual franchise tax levied by the Texas Comptroller of Public Accounts. This tax is calculated using a revenue threshold, so depending on how much you earn per year, you may be able to avoid paying it until your business is making a lot of sales.
The State of Texas also imposes a flat rate sales tax on most types of sales transactions, while also allowing local jurisdictions to add on a small percentage tax in addition to the state tax. Be sure that you understand how much sales tax you need to collect before you start selling.
Prepare an operating agreement
The Texas Secretary of State does not require you to submit an operating agreement, or company agreement, as part of the registration process. However, creating an operating agreement is still a good idea because it can help you to describe how your LLC will be managed, who the stakeholders are, and how profits are allocated. If you do not create one, your LLC will be subject to Texas State default laws. If you need help writing yours, operating agreement templates are available.
Corporations in Texas
What is a corporation?
The goal of a corporate business structure is to fully separate the individual owners from the business. This can protect the personal assets of owners from liabilities like lawsuits and debt collection. Texas corporations tend to enjoy a lower tax rate than LLCs or sole proprietors, and as legally separate entities, corporations also tend to be easier to sell when you’re ready to make an exit from your business.
One of the main differentiators of a corporation is the ability to issue stock, which may attract investment, bring in new leadership expertise, or attract qualified employees. These advantages are balanced by the fact that corporations are the more complicated business structure to start and maintain, with significant amounts of administrative and regulatory due diligence necessary.
Is a corporation right for you?
A Texas corporation could be right for you if:
- You plan on raising funds from investors
- You’re starting a very large operation
- Your goal is to build up a company and then sell it
- You’re especially interested in protection from liabilities
Get an Employer Identification Number (EIN)
Like LLCs, corporations are required to file for an Employer Identification Number (EIN) with the IRS. This number is important for subsequent steps in the setup process as it functions similar to your personal Social Security Number (SSN). It’s free to register and can be done online via an easy, interview-style application. You’ll need your SSN or Individual Taxpayer Identification Number (ITIN) in order to complete your application.
File Certificate of Formation
A Texas Certificate of Formation is a document that provides certain details about your corporation to the Secretary of State’s office and the public in general. Information includes:
- Your corporate business name
- Your office location, and
- Whether your operation is for-profit or non-profit
You can find more information about this document and submit it via SOSDirect.
Choose a registered agent
Another item in common with LLCs is the necessity of a registered agent, or an agent for service of process, who receives court documents on your behalf in the case of legal proceedings. This is just one of the ways a corporate business structure is built to protect your personal assets from liabilities. You cannot serve as your own registered agent in Texas. More information is available from the Secretary of State Registered Agents FAQ.
Prepare corporate bylaws
Corporate bylaws allow you to describe the structure and governance of your enterprise. Bylaws normally include:
- Annual meetings
- Quorum (minimum number of voting board members or stockholders)
- Document handling
- Stock
- Directors
- Conflicts of interest
Corporate bylaw templates are available online, if you need a starting point.
Appoint or elect directors and hold board meeting
One of the requirements of a corporation is a board of directors that helps to govern your company while providing valuable knowledge and experience. In Texas, directors can be elected, appointed, or designated according to your corporate bylaws, and you’ll need at least three people to serve on your board. Rules regarding directors are available in the Texas Business Organizations Code.
Issue stock
Stock is one of the things that makes corporations unique. By issuing stock, you are distributing ownership between stakeholders, which allows you to raise investment funds for development or operational projects while bringing potentially beneficial parties into your corporate community. Stock is usually issued at the first board meeting. The Texas Business Organizations Code provides details on how to issue stock.
Pay state tax
Corporations in Texas may be subject to a similar state tax as LLCs. The Texas Comptroller of Public Accounts administers an annual tax based on revenue thresholds to all corporations operating in the state.
Your corporation is also likely to be required to collect state sales tax from each transaction you make with customers. Depending on the location of your business, you could also be subject to additional sales tax imposed by local jurisdictions.
5. Obtain a business license and permits
No matter how your business is structured, depending on what type of business you operate and where it is located, there is a good chance that you’ll need to obtain a business license and permits. In Texas, a general business license is not required; however, licensing and permits may be required for certain industries and locations. For example, any business selling liquor needs to have a license from the Texas Alcoholic Beverage Commission.
Complete information on which industries require licenses and permits is available in the Texas Business Licenses & Permits Handbook. Licensing and permits are administered by the Texas Economic Development Business Permit Office and applications can be made through the Governor’s Small Business Resource Portal.
6. Examine insurance options in Texas
Even with the protections offered by an LLC or corporation, it’s still a good idea to have insurance for your business. The Texas Department of Insurance provides a wealth of information on your insurance options, including:
7. Understand financial considerations
No matter how you plan on starting your business in Texas, it’s a good idea to separate some of your personal and business financial interests. You may want to open a business bank account, apply for a business credit card, and consider getting a business accountant, whose expertise can help you keep your books balanced and focused on the journey toward success.
You might also need additional capital as part of your startup activities. A business loan from a bank is one option. You can also consider Shopify Capital, which may be able to help you quickly access capital.
8. Market your business
As part of your business startup activities, you should consider taking time to figure out how you’re going to showcase your new operation to customers.
Brand your business
Your brand image is often the first thing that potential customers encounter, so it’s important to build a brand that is recognizable, attractive, and that conveys the competitive difference your products and services make. Branding includes:
- Your company logo. Try Hatchful for easy logo creation.
- Official brand colors and imagery. Paletton is a great way to coordinate colors.
- A catchy slogan or tagline. Check out the Shopify Slogan Maker for inspiration.
- Official fonts or typefaces.
- Tone and voice.
- Positioning and brand persona.
Branding is an amazing opportunity to bring your personal creativity to your business. The Shopify Blog has resources to help you get started.
Build a business website
A website can be a critical element in starting your business in Texas, even if you aren’t planning on selling online. For many potential customers, it’s the first place they’ll go to learn about your company. Thanks to the evolution of web design technologies, building a website is now a streamlined process that can be accomplished without any development experience, especially if you use a platform like Shopify to launch it. In order to get started, you’ll need:
- Digital logo files in different sizes that suit your front page, footer, and anywhere else you want to brand your new website
- Brand colors, so you can personalize your website theme and match it to your products, services, print materials, and more
- Attractive product photos and imagery that engage users visually
- Coordinated fonts to create a consistent look and feel across your promotional materials
- A site map that outlines the page structure and makes it easier for you to organize all of the information you want to communicate to your customers
- Your public contact information
Promote your business
Once your brand and website are in order, it’s time to make a plan to promote your business. A marketing plan is a document that helps your products and services find an audience and keep your promotional activities on track and goal-oriented.
Marketing plans often include:
- An executive summary that summarizes your overall plan
- A mission statement that outlines your overarching goals and business philosophy
- Objectives that detail the specific things you want to achieve through your LLC
- A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis that can help you identify what you’re doing right and what needs to be refined
- Market research that helps you understand your industry, potential customers, and competitors
- A market strategy that details your plan of attack
- A budget that keeps your finances under control
For a push in the right direction, check out these marketing plan examples for inspiration.
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FAQs
How long does it take to start a business in Texas?
Registering a sole proprietorship in Texas can take as little as a few days, whereas an LLC or corporation could take upwards of several months to officially launch. Your timeline will be affected by how complex your business structure is, how many licenses and permits you need, and how quick you are at assembling the required information.
How much does it cost starting a business in Texas?
The very simplest businesses in Texas may be able to register and start operating for around $10 USD. However, more complicated business structures and enterprises that require many licenses and permits are likely to cost more than $1,000 USD to set up.
Do businesses pay taxes in Texas?
Sole proprietors in Texas pay income tax as part of their personal income. LLCs and corporations are subject to state and federal taxation separate from the personal income of their owners.
This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax and business advisors, as needed. Businesses outside of Texas will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies.
See our other state guides on How to start a business in Florida, How to start a business in California.
