The Lone Star state attracts entrepreneurs because of its business-friendly environment, minimal tax burden, reasonable cost of living, robust infrastructure, and other factors. If you’ve been wondering how to start a small business in Texas, this article will walk you through some of the most important steps.
As you explore entrepreneurship opportunities in Texas, make sure you seek the legal, accounting, and tax advice you need from licensed professionals. This article is for informational purposes only and is not meant as legal, tax, or financial guidance
Section 1: Why you should register your business name in Texas
One of the main advantages of registering your business name in Texas is the fact that it creates a legal trademark that can be legally enforced to prevent others from using your trademarked business name without your permission. Although the Texas legislature has made it more difficult to register a trademark in the past few years, it remains one of the easiest places to protect your trademark.
If you don’t register your business name in Texas, another trademark holder could be able to use the exact same or a similar name and profit off of it without offering any source or details about their name. This can be very frustrating and disruptive to your business growth and growth of your brand.
What is a “doing business as” name?
A “doing business as” (DBA) is a name used in the State of Texas for a business name.
There is no shortage of creative DBA names. Many entrepreneurs get creative by adopting names from TV shows and movies like “I Used to Be Fat”, “She Loves Me, Don’t Judge”, “Flash”, and “Pine Gap.”
Not sure how to create a DBA? You can learn how in this article from the Texas Secretary of State.
How to Register Your Business Name in Texas
Here are six easy steps you can take to register your business name in Texas. You’ll need to file the appropriate forms at the Texas Department of Licensing and Regulation’s (TDLR) Small Business Services (SBBS) website. If you don’t know where to start, try our handy guide.
How to register your business name in Texas
The Texas Secretary of State offers a number of different business forms for companies, organizations, partnerships, sole proprietorships, limited liability companies, or businesses owned by individuals.
To register a business name in Texas, you’ll need a Texas business license, which you’ll be required to pay in addition to the cost of the registrar, which we’ll detail in the following steps.
Many business owners have problems with registering a name. Although many business forms require a name or initials, many name registries in Texas require the use of your full legal name as the registrar’s first point of contact. While this may be convenient for some, it may not be practical, depending on your geographic location, career, and personal situation.
Legal Considerations for Your Business Name
First, you must acquire a business name and incorporate it as a limited liability company or a corporation. The state does not require your state of incorporation to change your name if you want to make the switch.
Generally, you can name your business anything you want, but you can’t have any obscene or suggestive terms or terms that are otherwise considered illegal. For example, you can’t name your business “Adult Playground” or “Adult Motel.”
After registering your name, you can register your trademark through the Department of Licensing and Regulation (DOLR). In order to do so, you must fill out a trademark registration application.
Since you’ll be filing your trademark in Texas, you’ll need to learn about registering your trademarks in Texas.
How to Register with the IRS
Since it’s not possible to be a Texas state resident without tax liability, many people chose to incorporate a business to avoid paying federal tax. One of the most basic tax forms required for a company to operate is Form 709, Schedule C for corporations. It provides details on an owner’s rights and responsibilities.
But don’t take out your Passport just yet. After getting your business incorporated, you’ll still need to file IRS forms. Form 709 is one of them. To incorporate a business, you’ll need to file IRS Form 8388 for a sole proprietorship, which is necessary if you intend to run the business on a full-time basis. This is known as an S-Corporation, which is a highly favored type of corporation in Texas, where the federal tax rate is 0%.
Forming a Corporation in Texas
Although forming a corporation is a personal decision, it does not have to be complex. There are a couple of small steps you should take before you get started.
Pick a Limited Liability Company
Texas law allows a married couple or other qualified individuals to form a limited liability company (LLC). To set up an LLC, you need two forms of identification: a photocopy of your driver’s license or state identification card and a notarized statement of company ownership. Both forms of identification must include your signature.
1. The Company Forms
Obtain two forms of identification: a copy of your driver’s license or state identification card and a notarized statement of ownership from the Secretary of State’s office.
Forming an LLC in Texas
One of the easiest ways to start a business in Texas is through an LLC. LLCs are commercial enterprises that let you incorporate your business without owning the assets of your business. An LLC is a company that runs on behalf of a group of owners. By using an LLC, you are protected from creditors while you are starting a business in Texas. You cannot be sued or arrested for operating your business and you are protected from your company’s assets being seized in the event of your death or conviction. In Texas, an individual may file an affidavit and an application for an LLC with the Texas Secretary of State.
Registering with the Secretary of State
The first step in starting a business in Texas is registering with the Secretary of State. According to the Secretary of State’s office, you must register to do business with them. Businesses need to be registered in order to be recognized by state and federal agencies.
“Business Registration is a step on the road to creating a business here in Texas, but it’s a really important step,” stated Ivey Landrum, manager of the Business & Licensing Division at the Texas Secretary of State’s Office. “Starting a business is exciting, but a legal entity is necessary to operate legally in Texas. We want to make sure entrepreneurs know about the benefits of registering their business in Texas, so they can start operating legally as soon as possible.
Registering with the Tax Office
When registering your business in Texas, you need to keep a few things in mind.
First, you should register as an individual. Although many jurisdictions now allow a married couple to file a joint tax return, doing so could jeopardize your business’s eligibility for certain grants and loans.
Second, you should choose an entity that’s appropriate for your operation. For instance, if you own a restaurant and plan to hold your business meetings at the location, you may choose to register as a corporation.
There’s also a small business section if you’re looking to start a company, or a sole proprietorship if you just want to run your business without hiring employees.
Third, if you own an LLC, you’ll need to file tax forms at the end of the year.
Registration of a business name in Texas is complicated and time-consuming. Entrepreneurs should contact an expert who is experienced in providing legal, accounting, and tax advice. You can also review our guides to the legal, accounting, and tax aspects of starting and maintaining a small business.
Do you have any other questions regarding the legal, accounting, and tax aspects of starting a business in Texas? Do you know of an expert you can consult? Let us know in the comments.
For more tips on how to start and run a small business in Texas, check out our other articles.
Asking the Right Questions Will Ensure You’re Successful
Andi Gray is President of Strategy Leaders Inc., StrategyLeaders.