Starting a Business in Texas: Here’s What You Need to Know

“No one cares about your cat’s website idea that you’ve been toiling away at for the last 2 months. They care about ideas that can make them money.”

The entire US is a marketplace, and companies compete with each other on everything from the quality of their products to a price point. When you’re starting out, it can often be hard to find customers; some websites help new entrepreneurs by sharing advice and resources for finding success in an industry. This post gives newcomers helpful tips on how to start their own business in Texas.

How to Start a Business in Texas

In Texas, the state government estimates about 65% of the population is involved in some sort of business. There are federal laws that require fair and equal treatment of business owners, and these are called “fair employment practices”. The state also has many cities and counties that have their own small business ordinances that come into play when you start a business.

Step 1: Choose the Right Business Idea

Although there are no set rules about what you must choose as a business idea, there are some things that most people consider when they start. Here are some ideas to get you started:

Money-making job:

Most people want to work for themselves, so they need a business that pays them to do something they like. Examples of money-making jobs: pet groomer, carpenter, accountant, baker.

Dress-up business:

Dressing up goods to sell is challenging, and the perceived value of the “fantasy” you create is what customers will pay for. Examples of dress-up businesses: costume shop, haberdashery.

Service business:

They’re often easy to start because they require little investment and don’t require a lot of skill. Examples of service businesses: dry cleaner, florist, tattoo parlor.

Creative venture:

Most people who are not in a competitive field start by making things. If you want to be in a competitive field, then use the techniques above.

Find the Right Business Idea for You

There are many ways to find the right business idea for you. The easiest way is to ask people in the industry you are interested in whether they have any ideas. However, sometimes these people don’t know of any ideas. One representative I know speaks with many local small business owners, and she says that many of them don’t even know about the business law or ordinances relating to their industries. For this reason, I recommend spending a lot of time on Google and searching forums until you find someone who knows about your area’s laws and ordinances.

Step 2: Plan Your Texas Business

A business plan is a written plan of your business idea that can help you start a business in Texas. The government offers some templates for you to use, like this one for Texas businesses. Business plans are written formation documents you create that communicate what your business is and how you will go about creating it.

They help readers understand the purpose of your business entity and decide whether they want to invest in it or buy from it. The first step in creating your business plan is to outline the different types of business plans, and what they’re used for.

Business Plan Types

There are numerous types of business plans you can write:

  • Analysis: An analysis of the market and how it works
  • Presentation: A sales pitch for your idea
  • Prospectus: A formal business proposal written for investors or a loan recipient
  • Proposal : An offer that includes startup costs, product or service description, and price, and has a detailed timeline/schedule to start operations.
  • Financial: An analysis of your company’s finances and projected cash flow

Name Your Business

After you have your business idea, you need to name it. Business name is important and can affect how people view your products or services. If you’re not careful, the name of your business can do more harm than good.

A lot of people make the mistake of picking a name they like or creating a clever play on words without asking themselves whether the name will help them attract customers.

A great way to decide whether a name is right for your business is to use a “reverse domain lookup” on your domain provider’s website. With this tool, you can see if the domain you’re thinking of already exists, and look at the number of times a month it gets searched. You want a name that no one else has thought of and that consumers will want to search for.

Conduct Market Research

You should do market research before you create your business. Research tells you what consumers want and how much they are willing to pay for what you offer. Houstonian Jonathan Cohan calls this “gathering intelligence” on potential customers, partners, or investors.

Once you know what your competition is like, and how they’re doing in their business, it will be easier for you to focus on the right aspects of your business idea and make sure that you don’t compete with them.

Step 3: Get Funding

The first thing you should know about starting any business is that it requires capital. You can’t start a business without money, and most of the time, you need a lot of it.

To address this concern, you should get advice about funding your business from a financial professional before you spend any of your own money. If you’re not sure where to start looking for one, check the website It’s a site with lots of resources to help small business owners find banks and financial professionals.

Explore Business Funding Options

You have several options for funding your business:

1. Private Money

If you own the land on which your business is located and have made at least one year’s worth of payments on a commercial mortgage note, you may be able to obtain financing through real estate investment trusts (REITs).

However, even though it allows you to get started quickly, commercial mortgages are costly. If you plan on selling your business or refinancing within a few years, consider using CD- or online-based real estate investment trusts (such as CSE ).

2. Small Business Administration (SBA ) Loans

If you’re into starting a service business and don’t want to sell it or refinance it within a few years, you may be able to get some funding from the SBA. SBA loans take longer to obtain than traditional small business loans, and as a result, you may need more money than if this was your final option for capital. Your best bet is to contact an office in your state’s agency of financial institutions.

3. Personal Savings

You could also use your own money as a source of funding for your business. However, it’s important to note that you should only use your savings as a last resort when there are no other alternatives available, and you’ve run through all the options above.

4. Business Loans

Texas offers many options for business loans:

I. The State of Texas Loan Program:

This program offers low-interest loans to businesses with no collateral requirement or personal guarantee needed. You can get up to $50,000 through this program.

II. The Texas Emerging Technology Fund:

The state of Texas created this fund to help new startup business structures get started and succeed. All you need is at least one employee, a business plan, and you can borrow up to $500,000.

III. The Texas Enterprise Fund: This program was created by the state legislature in 2003 and is designed to create jobs and stimulate the economy by funding various projects.

Step 4: Choose a Business Structure

As a small business owner, one of the first things you’ll need to decide is what type of organization structure you want to use. There are five types of structures:

1. Sole Proprietorship

A sole proprietorship is a business owned by one person. Because it’s your business, you can make any decisions you’d like to and there are no limitations on how much money you make. You will need to get a registered business license with the state and a Federal Employer Identification Number (FEIN) from the U.S. Internal Revenue Service (IRS) before you can register your business as a sole proprietorship.

2. Partnerships

A partnership is a business owned by two or more individuals. Each partner owns an equal share of the company’s assets and liabilities but also has fiduciary responsibility for the other partners’ actions. All the points are described in the partnership agreement.

3. Corporations

A corporation is a business owned by its stockholders. Owners of a corporation have limited liability for company debts and actions.

4. Limited Liability Company (LLC)

An LLC in Texas is a business owned by its members. Members control the company’s profits and share in its losses.

As a small business owner, you’ll need to decide which of these structures will best suit your needs and choose the right one for your business.

5. Nonprofits

If you are a nonprofit, you cannot run a for-profit business. However, there is no prohibition against making money from your non-profit. The IRS does not require nonprofits to issue any reports or pay any taxes on their revenues or profits. In addition, a small number of state governments have laws that allow you to operate some types of for-profit activities within your non-profit organization.

Step 5: Register Your Texas Business

After you’ve determined your business structure and have your funding, you’ll need to register your business with the state.

Although registering your business is free, you will have to pay a fee when you apply for a business license with the state.

Step 6: Set up Business Banking, Credit Cards, and Accounting

After you’ve registered your business, you’ll need to set up business banking and obtain a tax ID number from the IRS. You can do this by completing form SS-4 and submitting it along with form W-9 to the IRS office in Austin (or the appropriate office for your region).

1. Opening a business bank account:

If your business will have a checking and savings account, you’ll want to open one with a bank that is familiar to you. Many banks in Texas offer special business accounts that allow you to open either a personal account or a business checking and savings account under the same name.

Other banks may also offer other types of business banking options such as electronic deposits for invoice payments or automatic bill payments for recurring bills.

2. Getting a business credit card:

You should also obtain a business American Express card to use for business travel and any other expenses that your business may have, such as operating expenses or miscellaneous sales. Requesting an American Express card is easy and most applicants can receive one in less than a week.

Remember that because you are the owner of the business, you will be responsible for all charges on your credit card; so it’s important to keep track of the dates and amounts spent on the card.

Step 7: Get Insured

Once your business is up and running, you’ll need to purchase some type of business insurance. You can find a list of the different types of insurance available from the Texas Department of Insurance by visiting the agency’s website.

There are several different types of insurance that should be considered for any smaller business owner. These include:

  1. General Liability Protection: This covers losses that you, your employees, or anyone else working with your company may incur as a result of someone else’s negligence or actions (such as bodily injury).
  2. Auto: This covers any vehicles that you or your employees may use while on company business.
  3. Work Comp: This covers any employees of your company if they are injured at work, or become ill from their work.
  4. Business Property: It’s important to protect the physical business location where your business is located as well as any equipment you use to conduct business.
  5. Employment Practices: This provides coverage for sexual harassment, wrongful termination, or discrimination against an employee in a workplace environment.
  6. Workers’ Compensation: This covers medical and other benefits your employee may receive if they become injured on the job.

Step 8: Obtain Business Licenses and Permits

In Texas, there are a number of different types of permits and state licenses that you will need to obtain in order to run your business legally. These include:

1. Business License:

Every business needs a license to operate. If you plan on doing business out-of-state, you’ll also need a registered agent license from the state in which you are running your business (Texas does not require a registered agent).

2. Bonding:

When purchasing a bond for your business, keep in mind that the amount is not determined by state law. Instead, it’s determined by the amount of liability insurance that you carry in your business. You should also obtain a Texas surety bond if your company will be working with the state or federal government.

3. Tax Permit:

In order to collect sales tax on services or products sold by your business, you need to apply for a sales tax permit from the state comptroller. If your company provides services in one state and maintains an office in another, you’ll also need a sales tax permit from both states.

Step 9: Hire Employees

In order for your business to remain in operation, you’ll need to hire some type of staff. There are three types of employees that can be hired for your business:

  • Full-time employees work more than 40 hours per week, and average at least 35 hours worked per week. The term “full-time” is determined by the employer but is generally considered to be 40 hours per week or more for one month of the year (the month in which the taxes are filed).
  • Part-time employees work less than 40 hours per week, and average at least 35 hours worked per week for at least one month of the year.
  • Temporary employees work under the direction of your business in some capacity. The term temporary can range from 1 day to a few months, depending on the type of job required.

In order to hire any type of employee in Texas, you’ll need to register with Workforce Solutions of Texas – Tx (WSOT). After you’ve registered, you’ll need to complete the Employment Applications and pay both the application filing fee and the required business tax obligations.

You can be fined for not filing a franchise tax report if you have been registered with the Secretary of State. To help you manage your business, the Secretary of State offers a number of business forms online.

The basic steps for hiring an employee will be:

I. Establishing that you have a need for employees. A few possible situations include:

a) Your company may not receive enough work because of seasonal or temporary trends in your industry, or your company may be seasonal and needs workers during certain times of the year.

b) You may need new employees because of a change in your business. For example, you may hire additional employees to handle the increased production or workload as a result of a project.

II. Identifying the job and qualifications needed for that position. Here are some common positions for your business:

a) Salespeople: Salespeople have to be able to sell your product or service on their own. They also need to be able to identify potential customers and approach them to convince them of the benefits your business can offer.

b) Customer Service: A customer service representative’s job is to serve your existing customers and respond to any questions they may have. They also handle customer complaints.

c) Customer Service Representative: Your customer service representative needs to have a knowledge of your products or services, as well as some customer support skills in order to help customers with issues they may be having with their purchase.

d) Customer Rep Supervisor: A supervisor will often be in charge of hiring, monitoring the work, and providing direction to customer representatives.

Promoting Your Texas Business

One of the most important aspects of running an effective business is promoting it. You can start by advertising through print or online media. Once you’ve established your presence online, consider adding additional services such as social networking sites such as Facebook or Twitter, or coupons and special offers to local newspapers.


Working through the steps above can help you get started and manage your new business. There are many other details that will be needed to properly run your company. As you move forward, keep in mind that you will have to file various forms throughout the year to maintain a license for your business (such as an annual report).

It is also important to note that there are additional requirements for businesses that hire children, or if you will be accepting W-2 forms from your employees.

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