Whether you are intent on disrupting the tech industry or dream of making pastries next to a bookshop, starting a business can be an exciting and rewarding venture. It is especially important to understand the process of forming a company in the Lone Star State.
According to the Census Bureau, there were over 600,000 employer establishments in Texas in 2021. As more businesses pop up in the state, you need to know how to start your company so that you can start competing with your surrounding businesses and start building capital.
Choose a business structure
The first step in forming a company in Texas is to determine the most suitable business structure for your enterprise. Common options include a sole proprietorship, partnership limited liability company (LLC), or corporation. Each structure has its own advantages and considerations in terms of liability, taxation, and management. Research and consider consulting with a professional to help you make an informed decision based on your specific needs and goals.
Register your business name
Once you have chosen a business structure, the next step is to select and register your business name. Ensure that your chosen name complies with the naming rules set by the Texas Secretary of State. Conduct a search to check if the desired name is available and not already in use by another entity. You can reserve a name for up to 120 days by filing a Name Reservation Application with the Secretary of State’s office.
File formation documents
To legally establish your company, you need to file formation documents with the Texas Secretary of State. The specific documents required depend on the business structure you have chosen. For example, if you are forming an LLC, you will need to file a Certificate of Formation, while a corporation requires filing Articles of Incorporation. These documents typically include information about the company’s name, registered agent, management structure and other relevant details.
Obtain federal and state tax IDs
Most businesses in Texas must obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN serves as a unique identifier for tax purposes. You can apply for an EIN online through the IRS website. Additionally, depending on the nature of your business, you may need to register for state-specific tax IDs, such as the Texas Sales and Use Tax Permit.
Starting a company in Texas can be an exciting journey, and with proper planning and execution, you can set yourself up for success in the Lone Star State.
