Texas is known for being a business-friendly state. It has a relatively low tax burden and more than one million minority-owned businesses. While the state does not require a general business license, Texas business owners must make sure they apply for the right local and state permits based on the type of business they plan to open.
TL;DR (Too Long; Didn't Read)
There is no general license needed to start a business in Texas, but you may need a permit, depending on the type of business you are planning to open.
Decide on a Business Structure and Name
Before applying for a business permit in Texas, business owners should decide on the best structure for their business. Some common business structures include sole proprietorship, when a single person owns and operates a business; partnership, when multiple people are responsible for the business; and corporation, when multiple people form a separate entity for a business.
Once you’ve decided on the best structure for your business, you may need to register your business name with the secretary of state. You'll need to choose a unique name and you may also need to file for an assumed name certificate. These certificates are filed at the county level.
Register a Business in Texas
Some specialized occupations require a specific license from the Texas Department of Licensing and Regulation. These occupations include behavior analysts, cosmetologists, dieticians and midwives. You may also need a Texas sales tax permit from the Texas Comptroller Office if you plan to sell or lease property, or to sell taxable services.
Businesses typically also need a federal tax identification number, or EIN, which you can obtain through the Internal Revenue Service. You may also need to file property taxes in your local area. In Austin, for example, you will need to file taxes with the Travis County Appraisal District.
Depending on where you operate your business, you may also need a zoning permit. If you’re leasing or buying business space, you may also need a certificate of occupancy. For a food-related business, you may need a food-handling permit from your local municipal government. Food-related businesses in Dallas, for example, must be approved by the City of Dallas Food and Commercial Services Division.
Starting a Business in Texas
If you are going to employ others in your business, you may also be required to pay unemployment tax. These taxes go to the Texas Unemployment Compensation Fund, which pays unemployment benefits to those who lose their jobs through no fault of their own. Whether you need to pay unemployment taxes depends on the type of business and the number of employees you have.
You may also want to consider whether you want to carry workers’ compensation insurance. Workers’ compensation insurance is not required in Texas, but it does provide your employees with a valuable benefit. Carrying the insurance also limits your liability in many cases if an employee sues you for damages.
- U.S. Small Business Administration Office of Advocacy: Small Business Profile
- Go Big in Texas: Start a Business
- Comptroller.Texas.Gov: Texas Online Tax Registration Application
- TDLR: Programs Licensed and Regulated by TDLR
- Texas Workforce Commission: Unemployment Tax Basics
- Texas Department of Insurance: Employer Resources
- As an employer, you must stay on top of all state and federal taxes, or you may incur steep penalties.
Melinda Hill Sineriz is a freelance writer with over a decade of experience. She specializes in business, personal finance, and career content. She has worked in sales and has managed her own business for more than a decade. She has also written content for businesses in various industries, including restaurants, law firms, dental offices, and e-commerce companies. Learn more about her and her work at thatmelinda.com.