How to Start a Business in Texas
Texas is home to more than 3.1 million small businesses, representing 99.8% of all businesses in the state.
In This Article
The Complete Guide
How to Start a Business in Texas — 12 Steps
This is a full walkthrough: entity selection, state registration, federal tax IDs, licenses, banking, insurance, and ongoing compliance. Every step includes the official Texas links, fees, and timelines.
Cost depends on your structure. A sole proprietorship may cost nothing to start. An LLC costs $300 to file online. A corporation costs $300. Step 3 walks through every option.
Texas: Key Business Facts
Updated: Feb 2026- LLC Filing Fee (Online)
- $300
- Sole Proprietorship / DBA
- $25
- Corporation Filing
- $300
- Processing Time
- 10-12 business days
- Expedited Option
- Same-day / additional fee
- State Income Tax
- None
- Sales Tax Rate
- 6.25%
- Gross Receipts Tax
- No
- Franchise / Annual Tax
- 0.375%-0.75% of taxable margin (no…*
- Filed With
- Texas Secretary of State
- State Business License
- Not required (check local)
- Last Verified
- February 24, 2026
* Franchise / Annual Tax: 0.375%-0.75% of taxable margin (no tax due if revenue under $2,650,000)
Local licenses: Texas does not require a general state business license. Most cities and counties require their own permits, so check with your local city hall or county clerk before opening.
What It Takes to Start a Business in Texas
Forming a business in Texas requires filing with the Texas Secretary of State and registering for franchise tax with the Texas Comptroller of Public Accounts. Most LLCs can file online through SOSDirect and receive approval within 10 to 12 business days.
Texas does not impose a state income tax on individuals, and over 90% of LLCs owe zero franchise tax because they fall below the $2,650,000 no-tax-due threshold. This guide walks you through every step from idea validation to ongoing compliance.
Validate Your Business Idea in Texas
Test your concept against the industries that drive the Texas economy. The state's largest sectors include:
- Oil, gas, and energy
- Technology (Austin, Dallas, Houston corridors)
- Healthcare and biomedical research
Contact the Texas SBDC Network for free one-on-one consulting and market research assistance. Their advisors can help you evaluate demand, pricing, and competitive positioning before you invest a dollar.
Pro Tip
Write a Business Plan
Draft a plan that covers your target market, revenue model, startup costs, and 12-month financial projections. Banks and SBA lenders require a written business plan before approving any loan application.
Follow StartupOwl's step-by-step business plan guide to build one in a weekend. Focus on the financial section first, since Texas investors and lenders want to see clear numbers.
Pro Tip
Choose Your Business Structure in Texas
Most founders in Texas choose an LLC because it combines personal liability protection with pass-through taxation and zero state income tax. Filing an LLC costs $300 at the Texas Secretary of State.
The four main structures are sole proprietorship, LLC, S-Corp, and C-Corp. See the full comparison below, or read our Texas LLC formation guide for a deeper breakdown.
Pro Tip
Business Structure Comparison — Texas
Full comparison guide| Structure | Texas Filing Cost | Personal Liability | How You're Taxed | Best For |
|---|---|---|---|---|
| Sole Proprietorship | $25 (DBA) | ❌ None | Personal income tax. No separate return. | Freelancers, consultants, side hustles testing an idea with no employees. |
| LLC Most Common | $300 online | ✅ Personal assets protected | Pass-through by default. Elect S-Corp when profitable. | Most small businesses. Best balance of liability protection, flexibility, and tax options. |
| S-Corporation | ~$300 + IRS election | ✅ Personal assets protected | Pass-through. Owners pay themselves a salary — can reduce self-employment tax. | Profitable businesses (typically $50K+ net) where payroll tax savings justify the complexity. |
| C-Corporation | $300 | ✅ Personal assets protected | Corporate tax rate (21% federal). Double taxation on dividends. | Startups planning to raise VC funding, issue stock options, or eventually go public. |
| General Partnership | Free / No State Filing | ❌ None — all partners personally liable | Pass-through. Each partner reports share on personal return. | Two or more owners who trust each other and don't need liability protection. |
Which should you choose? Most first-time founders in Texas pick an LLC — it protects your personal assets without the complexity of a corporation. If you're not sure, consult a CPA or business attorney before filing. Read the full Texas LLC guide →
Choose and Register Your Business Name in Texas
Search the Texas Comptroller's entity search to confirm your desired name is available. Your LLC name must include "LLC" or "Limited Liability Company" as a designator.
Reserve the name for 120 days by filing a name reservation with the Secretary of State for $40. If you plan to operate under a different name, file an assumed name certificate (DBA) for $25 at the state level or at your county clerk's office.
Pro Tip
Check Texas Business Name Availability
Search the official Texas Secretary of State database before you file.
Register Your Business with the Texas Secretary of State
File your Certificate of Formation (Form 205 for LLCs) through SOSDirect for $300. Standard processing takes 10 to 12 business days when filed online.
You must designate a registered agent with a physical street address in Texas. See our Texas registered agent guide for affordable options starting at $0 to $125 per year.
After approval, you will receive a stamped Certificate of Formation, which serves as your official proof of existence. Veterans are exempt from the $300 filing fee and can file at no cost.
Pro Tip
Important
File Online with Texas Secretary of State
Official Texas business registration portal. Standard processing: 10-12 business days.
Get Your Federal EIN from the IRS
Apply for a free Employer Identification Number (EIN) directly at the IRS online application portal. The process takes about 10 minutes, and you will receive your EIN instantly upon completion.
You need an EIN to open a business bank account, hire employees, and file federal taxes. Even single-member LLCs benefit from having an EIN to keep their Social Security number off business documents.
Pro Tip
Important
Get Your Texas Licenses and Permits
Requirements vary by industry, but most Texas businesses need:
- Sales Tax Permit — required if selling taxable goods or services; register free at the Texas Comptroller's office
- Local Business Permits — Texas has no general state business license, but most cities (Houston, Dallas, Austin, San Antonio) require local operating permits through their city clerk or permitting office
- Professional License — required for contractors, electricians, healthcare providers, real estate agents, and other regulated fields through the Texas Department of Licensing and Regulation (TDLR)
- Employer Registration — required before hiring; register with the Texas Workforce Commission (TWC) for unemployment insurance
Pro Tip
Open a Business Bank Account
Bring your EIN confirmation letter, Certificate of Formation, government-issued ID, and your LLC operating agreement to the bank. Separating personal and business finances is essential for maintaining your LLC's liability protection.
Compare options in our best business bank accounts guide. Many Texas-based banks and credit unions offer free business checking with no minimum balance requirement.
Pro Tip
Set Up Accounting and Understand Texas Taxes
Texas has no personal state income tax, which means your LLC's pass-through profits are not taxed at the state level. However, the state imposes a franchise tax on entities with total revenue above $2,650,000, at rates of 0.375% (wholesale/retail) or 0.75% (other industries) of taxable margin.
Over 90% of Texas LLCs fall below the no-tax-due threshold and simply file a No Tax Due Report and Public Information Report with the Texas Comptroller. You are still responsible for federal estimated tax payments, due quarterly to the IRS.
Set up cloud accounting software from day one. See our best accounting software comparison to find the right fit for your business size.
Pro Tip
Get Business Insurance in Texas
Texas does not require most private employers to carry workers' compensation insurance, but going without it exposes you to unlimited personal liability for workplace injuries. General liability insurance is the baseline policy every Texas business should carry.
Compare quotes and coverage types in our best business insurance guide. Many Texas insurers offer bundled Business Owner's Policies (BOP) that combine general liability with property coverage at a discount.
Pro Tip
Build Your Online Presence
Claim your free Google Business Profile to appear in local search results across Texas. This single step can drive your first customers before you even build a website.
When you are ready for a full site, check our best website builders comparison for options that include built-in SEO tools and e-commerce functionality.
Pro Tip
Stay Compliant After Forming Your Texas Business
After forming, keep your Texas business in good standing by meeting these ongoing requirements:
- Franchise Tax Report — due May 15 each year to the Texas Comptroller; no filing fee for the report itself, but taxes apply if revenue exceeds $2,650,000 (file at the Comptroller's site)
- Public Information Report — filed alongside the franchise tax report annually by May 15; required even if you owe no tax
- No Annual Report to the Secretary of State — Texas does not require a separate annual report filing or fee with the SOS
- Registered Agent — maintain a registered agent with a physical Texas address at all times
- Local Licenses — renew city and county permits annually as required by your municipality
Missing the May 15 franchise tax deadline results in penalties, interest, and potential forfeiture of your right to do business in Texas. Track all deadlines with StartupOwl's compliance calendar.
Pro Tip
Important
Texas Business Background & Context
State-specific data to help you plan — taxes, economy, funding, and what to expect after you form.
Frequently Asked Questions
What to Do Next
Once you've registered your Texas business, take these steps to set up for success.
Form Your Texas LLC
File your Certificate of Formation online for $300 and get approved in 10 to 12 business days.
Start Your LLC →
Get a Texas Registered Agent
Compare registered agent services starting at $0 per year to meet your state filing requirement.
Compare Agents →
Open a Business Bank Account
Separate your finances and protect your LLC status with a dedicated business checking account.
See Top Banks →
Connect with the Texas SBDC
Get free consulting, market research, and loan packaging help from your nearest SBDC center.
Find Your SBDC →
Understand Texas Franchise Tax
Learn whether your business owes franchise tax and how to file your annual report by May 15.
Check Tax Rules →
Disclaimer: This guide is for informational purposes only and does not constitute legal or tax advice. Requirements change — always verify current fees and requirements directly with Texas Secretary of State and the IRS before filing.
Ready to Form?
Get your Texas business registered with ZenBusiness — choose your structure, file the paperwork, and stay compliant from day one.
About the Author
Director of Entrepreneurial Strategy
Jennifer is a former founder who built and sold a boutique B2B logistics company in her thirties. She understands the emotional and strategic toll of building a business from the ground up without a massive safety net. She is deeply connected to the Atlanta startup ecosystem and is passionate about equitable funding.
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