How to Start a Business Legally in Texas, USA: Business Law Guide

Start a Business Legally in Texas with this step-by-step guide. Learn LLC formation, permits, taxes & compliance for 2024. Get started today.

LawyerSoulsJune 17, 2025

2 5 minutes read

Starting a Business Legally in Texas requires careful planning and strict adherence to state regulations. Texas is known for its business-friendly environment, offering advantages like no personal income tax and a streamlined registration process. However, entrepreneurs must navigate legal requirements, including business structure selection, registration, licensing, and tax compliance. This guide provides a step-by-step roadmap to help you establish a Business Legally compliant in Texas, ensuring long-term success while avoiding costly mistakes.

Whether you’re forming an LLC, corporation, or sole proprietorship, understanding Texas Business Legally is essential. From choosing a unique business name to securing necessary permits, each step plays a crucial role in building a strong legal foundation. This guide covers everything from initial setup to ongoing compliance, helping you launch and grow your Texas-based business with confidence.

How to Start a Business Legally in Texas, USA

Choose the Right Business Structure

Selecting the proper business entity is crucial as it impacts taxes, liability, and operations. In Texas, common structures include sole proprietorships (simple but unlimited liability), partnerships (shared ownership), LLCs (flexible with liability protection), and corporations (strong protection but complex). Each structure has different tax implications – LLCs and S-corps offer pass-through taxation while C-corps face double taxation. Consider your business goals, risk tolerance, and growth plans when choosing, as changing structures later can be costly.

Register Your Business Name

In Business Legally Texas, registering a business name is mandatory unless operating under your legal name. For LLCs and corporations, the name must be unique and comply with the Texas Secretary of State naming rules. You can check name availability using the Texas Comptroller’s website. If you plan to use a trade name (DBA – Doing Business As), you must file an Assumed Name Certificate with the county clerk. Registering a trademark with the USPTO provides additional protection against infringement.

File Formation Documents with the Texas Secretary of State

To Business Legally establish your business entity in Texas, you must file formal formation documents with the Texas Secretary of State. For LLCs, this means submitting a Certificate of Formation (Form 205) along with the $300 filing fee, while corporations file a similar Certificate of Formation (Form 201). These documents officially create your business as a legal entity and include key details like your business name, registered agent, and management structure. Processing typically takes 5-7 business days for online filings, though expedited service is available for an additional fee.

Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) from the IRS is required for hiring employees, opening a business bank account, and filing taxes. Sole proprietors without employees may use their Social Security Number (SSN), but an EIN adds credibility and privacy. Applying for an EIN is free via the IRS website, and you’ll receive it instantly upon completion.

Register for Texas State Taxes and Permits

Texas may not have a state income tax, but most businesses still need to register for various state tax obligations and obtain necessary permits. All businesses selling taxable goods or services must apply for a Sales Tax Permit through the Texas Comptroller’s office, which allows you to collect and remit sales tax. If your business is structured as an LLC, corporation, or partnership with annual revenue exceeding $2.47 million (2024 threshold), you’ll also need to file an annual Franchise Tax Report, even if no tax is due.Certain industries like food service, childcare, or construction require specialized state licenses.

Comply with Employment Laws

If your Texas Business Legally hires employees, you must adhere to federal and state employment regulations, beginning with verifying work eligibility through Form I-9 and reporting new hires to the Texas Workforce Commission within 20 days. You’ll need to obtain workers’ compensation insurance (optional for most private employers but highly recommended), withhold federal and state payroll taxes. Texas employers must also comply with minimum wage laws (currently $7.25/hour, matching federal standards), overtime rules under the Fair Labor Standards Act (FLSA), and anti-discrimination laws enforced by the Equal Employment Opportunity Commission (EEOC).

Open a Business Bank Account

Opening a dedicated business bank account is a critical step to separate your personal and business finances, which is essential for maintaining limited liability protection (especially for LLCs and corporations). Most banks require your Employer Identification Number (EIN), filed formation documents (like your Certificate of Formation), and business license to open an account. Choose a bank that offers business-friendly features like low fees, online banking, merchant services, and good customer support. A separate Business Legally account helps with clean financial records, simplifies tax reporting, and presents a more professional image to clients and vendors.

Protect Your Business with Insurance

While Texas doesn’t Business Legally require most businesses to carry general liability insurance, securing proper coverage is essential for risk management and financial protection. At minimum, consider general liability insurance to cover third-party injuries or property damage, and professional liability insurance (errors & omissions) if you provide services or advice. If you have employees, workers’ compensation insurance (though not mandatory for most private employers) protects against workplace injury claims. Commercial property insurance safeguards your physical assets, while cyber liability coverage is increasingly important for data protection.

Maintain Ongoing Compliance

To keep your Texas Business Legally in good standing, you must stay current with annual reporting requirements corporations and LLCs must file periodic reports with the Texas Secretary of State. Monitor franchise tax obligations, as most entities must file annual reports with the Texas Comptroller, even if no tax is due (current threshold: $2.47 million in revenue). Keep all necessary licenses and permits renewed, as expiration can lead to penalties or business suspension. Maintain proper corporate formalities like annual meetings (for corporations) and updated operating agreements (for LLCs), as failure to do so could jeopardize your liability protection. Track important deadlines through a compliance calendar.

Conclusion

Starting a Business Legally in Texas is an achievable goal when you follow the proper steps and comply with all state regulations. From selecting the right business structure to obtaining necessary licenses and tax IDs, each phase of the setup process contributes to building a strong legal foundation for your company. By taking the time to understand and fulfill these requirements, you position your Business Legally for long-term success while minimizing legal risks.

Texas offers entrepreneurs a thriving economy with favorable tax policies and a streamlined Business Legally system. Whether you’re launching a small local shop or a growing corporation, ensuring full compliance with Texas business laws from day one will save you time, money, and potential legal complications down the road. With careful planning and the right guidance, your new Texas Business Legally can flourish in this dynamic and business-friendly state.