It was no surprise for Texan entrepreneurs when their home was named the top U.S. state for businesses in 2018. So naturally there are lots of us who are trying to figure out how to register to do business in the State of Texas.
The economy has been thriving, and now is the perfect opportunity for budding innovators to take advantage. Of course, this involves a bit of paperwork. Whether you’re looking to get your company started in The Lone Star State or want to expand from your current geographic region, registering to do business in Texas is your first step.
Register to Do Business in The State of Texas
Choose the Optimal Business Structure
Before registering a business in Texas, you must decide on the best business structure for your specific needs. The most common legal structures are as follows:
- Sole proprietorship
- Limited liability company (LLC)
Each of these legal structures has their own benefits and drawbacks. Sole proprietorships and partnerships typically don’t have to be registered in Texas. These options could be advantageous, but many people looking to do business in the state choose between an LLC or corporation.
The differences between an LLC and corporation include ownership, management and taxation. Regardless of which you choose, you should also know that there are special structures (e.g. S corporations, limited partnerships) that may also serve your needs.
Make sure you research all your options thoroughly. This decision will affect your company for the foreseeable future.
Choosing a Name
If you aren’t already doing business under a registered name, you’ll have to come up with this identifier before moving ahead. Partnerships and solo proprietors don’t have to do this if they’re conducting business under their own names. If they choose to come up with a company name, they only have to visit their county clerk and fill out an Assumed Name Certificate.
It’s best to come up with a few unique and distinct names before moving forward. This is because you’ll need to ensure they’re not already taken. You can do this and register your business name on the SOSDirect website. It’s also smart to run the name through the U.S. Patent and Trademark Office to ensure no trademark issues come up later.
Registering Your Business in Texas
Once you’ve decided on a legal structure and name, you can finally register your business in Texas. Since sole proprietors and partnership agreements typically don’t have to register, these instructions will focus on LLCs and corporations. Fortunately, the registration process is similar for both.
The first step is to visit the Texas Secretary of State website and download the appropriate Certificate of Formation (Forms 201-207). Some companies then opt to hire a registered agent, but this professional simply receives mail and accepts service of process. If you can handle this on your own, hiring an agent shouldn’t be necessary.
You should also consider creating an operating agreement for LLCs or bylaws for corporations. Neither is mandatory in Texas, but both will set concrete rules on the operation of your company.
Getting Your Taxes Right
Before you can start doing business, you need to apply for a sales tax permit. This is done through the Texas Comptroller of Public Accounts, and it can be completed online. You also need to file for a federal Employer Identification Number (EIN).
An EIN isn’t mandatory, but it is required to open bank accounts. Your business-to-business (B2B) relationships may also want your EIN before processing payments. This process can also be completed online.
Apply for Business Licenses and Permits
Texas prides itself on being business-friendly, and this is why there’s no mandated state general business license. Many cities have followed suit. You’ll need to check with yourcity or county clerk to see which licenses and permits your business may require. Here are a few of the areas that may require permits:
- Health and safety
- Building and construction
Expanding into The Lone Star State
Thanks to modern technology, it’s very simple to do business in multiple states. If you already have a corporation in California, for instance, only a few steps are required to hire employees and set up shop in Texas. If your business was formed or subject to laws outside of Texas jurisdiction, you’ll need to file as a foreign entity.
Not all business-related activities, however, create a situation where you’re acting as a foreign entity. While there are some nuances to the rules, you generally only have to worry about this step if engaged in any of the following on Texas soil:
- Opening a physical store
- Operating a warehouse
- Running an office
- Employing a sales representative
If your business practices fall into any of these categories, you’ll likely need to complete a foreign entity application for registration. The specific form can vary depending on whether you’re nonprofit, for-profit, registered as an LLC or corporation.
Each of these forms (Forms 301-309) can be found on the Secretary of State website and is required before operating or processing payroll in Texas.
Consider Getting Insurance
While it’s not exactly a step in registering your business in Texas, it’s smart to consider getting business insurance. If you’re in the legal or medical field, you likely already know you need professional liability insurance. And while The Lone Star State doesn’t require many forms of insurance – most notably workers’ compensation – you should still consider getting insured.
This will no doubt be an additional upfront cost, but it could save your business in the future. Just take a look at the various forms of business insurance and see if any make sense to you.
It’s Smooth Sailing from Here on Out
Once you’ve completed these steps, you’re ready to do business in the great state of Texas. The process might sound arduous, but it’s typical of registering a company in most states. While not all these steps are mandatory, failure to skip even one can create hurdles later down the road. If you stay committed and focus on doing things right the first time, though, you’ll soon become part of the economic boom that Texas businesses have been experiencing.